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.

China Evergrande: The Case of Rising Leverage and Lower Margins

Sunac China Holdings: Attractive Transformer

Analyst, Credit & Emerging Markets, Bondcritic

Robin Puah

Analyst, Credit & Emerging Markets

Credit

<p>For this report, we seek to provide a periodic operational update on our covered name – <a href="https://www.smartkarma.com/entities/sunac-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:240:1" rel="noopener">Sunac China Holdings (1918 HK)</a>, while comparing the monthly contracted sales figures against their peers, <a href="https://www.smartkarma.com/entities/evergrande-real-estate-group-limited" target="_blank" data-smartkarma-citation="entities:479:1" rel="noopener">Evergrande Real Estate Group (3333 HK)</a> and <a href="https://www.smartkarma.com/entities/country-garden-holdings-co" target="_blank" data-smartkarma-citation="entities:5225:1" rel="noopener">Country Garden Holdings Co (2007 HK)</a>.</p><p><a href="http://www.sunac.com.cn/upload/file/2019-06-12/6aaeb42f-167f-49e9-951a-9f1b97b4a22f.pdf" target="_blank" rel="noopener">The latest issued bond from Sunac 14 June 2022</a> is currently traded at 101.0/ 101.5, with a YTM of 8.262%/ 8.096%.  The spread differential between the Sunac and its peer - Country Garden (YTM 5.315%/ 4.922%) was trading closer to 200-bp a month ago, but today a ~317 bps pick-up from Country Garden’s 2022 bond is considered to be cheap in our perspective, and recommend first time investors to consider allocating some resources to Sunac, given the entity has a relatively short duration and yields eight percent.</p><p>The recently published <a href="http://www.sunac.com.cn/upload/file/2019-08-05/753f8671-37ae-496f-a673-301582c39fc5.pdf" target="_blank" rel="noopener">July 2019 contracted sales figures for Sunac</a> supports our positive outlook for the company, as they continue to report good growth rates on both monthly and cumulative YTD basis. We maintain our OVERWEIGHT recommendation on the SUNAC complex (EXHIBIT 1), as recent operational data reveals the company continues to report positive growth in contracted sales, implying an increased likelihood of higher profitability in the future.</p><div class="content-caption">
<strong><strong>Exhibit 1: Sunac outstanding USD bonds</strong></strong><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/096/002/original/Exhibit%201.png?1565969449" class="editor-image img-responsive" data-smartkarma-image-id="96002"></figure><div class="content-caption">Source: Bondsupermart</div>
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For this report, we seek to provide a periodic operational update on our covered name – Sunac China Holdings (1918 HK), while comparing the monthly contracted sales figures against their peers, Evergrande Real Estate Group (3333 HK) and Country Garden Holdings Co (2007 HK).The latest issued bond from Sunac 14 June 2022 is currently traded at 101.0/ 101.5, with a YTM of 8.262%/ 8.096%.  The spread differential between the Sunac and its peer - Country Garden (YTM 5.315%/ 4.922%) was trading closer to 200-bp a month ago, but today a ~317 bps pick-up from Country Garden’s 2022 bond is considered to be cheap in our perspective, and recommend first time investors to consider allocating some resources to Sunac, given the entity has a relatively short duration and yields eight percent.The recently published July 2019 contracted sales figures for Sunac supports our positive outlook for the company, as they continue to report good growth rates on both monthly and cumulative YTD basis. We maintain our OVERWEIGHT recommendation on the SUNAC complex (EXHIBIT 1), as recent operational data reveals the company continues to report positive growth in contracted sales, implying an increased likelihood of higher profitability in the future.
Exhibit 1: Sunac outstanding USD bondsSource: Bondsupermart



Sunac China Holdings: All's Well in Summertime