Asian Fixed Income/Frontier Market Research

Bondcritic

Bondcritic, established in 2009, is designed to be an independent credit research voice that helps investors gain insights and unbiased analyses on Asian fixed income market. Our mission is to discover deep-value Asian high-yield and distressed bonds with a bottom-up approach, together with the help of our proprietary ESG (Environmental, Social Development, and Governance) model. At the same time, we focus on bringing investment cases of unrated and unloved issuers to the general public.

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TRACKING TRAFFIC/Container Shipping: Shortage of Empties Creates Surprisingly Tight Conditions

Neptune Orient Lines: Redemption Ahead of Iceberg

Independent Asian Credit Research, Bondcritic

Warut Promboon

Independent Asian Credit Research

Credit

<p style="text-align: justify;">Since our last report ( <a href="https://www.smartkarma.com/insights/neptune-orient-lines-redemption-ahead-of-iceberg" target="_blank" data-smartkarma-citation="insights:39552" rel="noopener">Neptune Orient Lines: Redemption Ahead of Iceberg</a> ), <a href="https://www.smartkarma.com/entities/neptune-orient-lines-ltd" target="_blank" data-smartkarma-citation="entities:415:1" rel="noopener">Neptune Orient Lines (NOL SP)</a>'s  NOLSP complex (in SGD) has outperformed as COVID-19 situation improved in many countries as well as the announcement of <a href="https://www.smartkarma.com/entities/cma-cgm-sa" target="_blank" data-smartkarma-citation="entities:23994:1" rel="noopener">CMA CGM SA (144898Z FP)</a>’s 1Q’20 results on 5-June. CMA CGA is NOL's parent company. The outperformance of NOLSP 4.65% 9/20s was within our prediction. At 4.7% yield-to-maturity (YTM) (Ask) at the time of this report, we believe any further upside will be limited as we see the bonds unattractive relative to peers. We also think the bonds’ 3 months to maturity will make it very difficult to take profit with reliable quotes. As such, we revised our recommendation on NOLSP 9/20s to NEUTRAL from OVERWEIGHT.</p><p style="text-align: justify;">CMA CGM’s 1Q’20 shipping EBITDA (which increased 31.7% yoy) surprised us on how well management could control its cost and that leads us to adjust our EBITDA forecast for FY2020. We are confident after seeing the 1Q’20 results that NOL will have sufficient liquidity to redeem its NOLSP 4.4% 6/21s at the maturity date next June. Despite the bond’s recent rally, we still believe the bonds offer an attractive carry at 16.6% YTM for a credit we consider as “B+”. As such, we took the first opportunity to revise our recommendation to OVERWEIGHT from UNDERWEIGHT.</p>

Since our last report ( Neptune Orient Lines: Redemption Ahead of Iceberg ), Neptune Orient Lines (NOL SP)'s  NOLSP complex (in SGD) has outperformed as COVID-19 situation improved in many countries as well as the announcement of CMA CGM SA (144898Z FP)’s 1Q’20 results on 5-June. CMA CGA is NOL's parent company. The outperformance of NOLSP 4.65% 9/20s was within our prediction. At 4.7% yield-to-maturity (YTM) (Ask) at the time of this report, we believe any further upside will be limited as we see the bonds unattractive relative to peers. We also think the bonds’ 3 months to maturity will make it very difficult to take profit with reliable quotes. As such, we revised our recommendation on NOLSP 9/20s to NEUTRAL from OVERWEIGHT.CMA CGM’s 1Q’20 shipping EBITDA (which increased 31.7% yoy) surprised us on how well management could control its cost and that leads us to adjust our EBITDA forecast for FY2020. We are confident after seeing the 1Q’20 results that NOL will have sufficient liquidity to redeem its NOLSP 4.4% 6/21s at the maturity date next June. Despite the bond’s recent rally, we still believe the bonds offer an attractive carry at 16.6% YTM for a credit we consider as “B+”. As such, we took the first opportunity to revise our recommendation to OVERWEIGHT from UNDERWEIGHT.

Neptune Orient Lines: Cost Control Confidence