20220823-招银国际-Fixed_Income_Daily_Market_Update_6页_929kb

CMBI Credit Commentary Summary

Core Content Overview

This document provides a comprehensive market update and analysis for fixed income instruments, focusing on Chinese and Indonesian corporate bonds. It includes market sentiment, price movements, macroeconomic developments, and credit analysis for key issuers.

Market Sentiment and Price Movements

• Chinese IG/LGFV/AT1: Two-way flows were observed, with positive sentiment. HRINTHs rebounded 0.5-4pts, offsetting yesterday's decline due to short covering.
• Indonesian HY (INDYIJs): Maintained a decent risk-return profile, with a recommendation to "buy INDYIJs" and a preference for INDYIJ '25 due to a 270bps yield pick-up.
• PBOC Policy: Proposed to stabilize credit growth and support real estate developers' financing needs following a rate cut of 5bps for one-year LPR and 15bps for five-year LPR.
• Market Performance:
  • Top Performers: FUTLAN 6.15 '23 (up 6.7pts), WESCHI 4.95 '26 (up 5.6pts), SINOCE 3.8 '25 (up 5.6pts), CIFIHG 6.45 '24 (up 5.5pts), CIFIHG 6 '25 (up 5.4pts).
  • Top Underperformers: SHXREG 13 '23 (down -5.6pts), JZCITY (down -4.4pts), HRINTHs (down -4.4pts across the curve).

Macroeconomic News

• U.S. Markets: Stock indexes fell due to fears of a sharp Fed rate hike in September 2022. U.S. Treasury yields rose, with the 10Yr yield surpassing 3%.
• PBOC Meeting: Emphasized supporting real estate developers and enhancing financial support for platform economy.

Credit Analysis for Indika (INDYIJs)

• Financial Performance: Indika's revenue and EBITDA rose by 66.5% and 149.6% in 1H22, respectively. EBITDA margin widened to 32% from 28% in FY21.
• Coal Price Impact: Kideco's ASP increased significantly, offsetting a 5.9% yoy decline in sales volume. ASP is expected to moderate in the coming years.
• Tax and Regulatory Changes: Expected impact of higher royalty rates (14%-28%) and lower profit tax rate (45% to 22%) could reduce operating cash flow by 10%.
• Diversification and ESG Initiatives: Indika is gradually diversifying from coal into solar, biomass, and gold mining. Targets to generate 50% of revenue from non-coal businesses by 2025 and achieve net-zero emissions by 2025.
• Credit Ratios: Debt/EBITDA, net debt/EBITDA, and EBITDA/int improved to 1.2x, 0.4x, and 12.6x in 1H22, respectively. Expected to remain solid over the next 2-3 years.

Onshore Primary Issuances

• Yesterday: 79 credit bonds issued totaling RMB71bn.
• Month-to-Date: 1150 credit bonds issued, raising RMB1147bn, representing a 14.3% yoy decrease.

New Issue and Pipeline

• Priced New Issue: Chengdu Jianjiang Investment Group issued a RMB93mn 3-year bond with a 5.3% coupon and yield.
• Pipeline: No offshore Asia new issues scheduled today.

Key Events and Developments

• Hangzhou Bail-out Fund: REDD reported Hangzhou is establishing a RMB2bn bail-out fund for local developers.
• AGILE Repurchase: AGILE repurchased USD39.57mn of its own bonds.
• Beijing Enterprises Water: Expected profit drop to RMB600mn in 1H22 due to disposal loss.
• China Aoyuan: Seeking a one-year extension for its RMB1.5bn bond due 2023.
• Jinmao: Signed a framework agreement for loans from Xingqian Real Estate.
• S&P Downgrade: Seazen's long-term credit rating downgraded to BB with negative outlook.
• Youngo: Expected RMB700-950mn loss in 1H22, down from RMB161mn in 1H21.
• Jiayuan: Mandated advisors for an exchange offer on its offshore bonds.
• KWGPRO and PWRLNG: Unit bondholders exercised put options, leading to bond resale.
• ReNew Power: 1Q23 revenue up 49% yoy, adjusted EBITDA up 50% yoy, and cash flow to equity up 104% yoy.
• Shinsun and Skyfame: Both reported losses in 1H22, with Shinsun down to RMB500-700mn and Skyfame down to RMB150-170mn.

Disclaimer and Risk Warnings

• The report is not investment advice and is for informational purposes only.
• CMBIS does not guarantee the accuracy or completeness of the information.
• The report may include conflicts of interest due to potential market-making activities.
• The information is subject to change without notice.
• Distribution is restricted to specific investors, including major U.S. institutional investors, and is not available to others without prior consent.

Contact Information

• CMBI Fixed Income Department:
  Tel: (852) 3657 6235 / (852) 3761 8867
  Email: fis@cmbi.com.hk
• Author Certification: The author certifies that all views reflect personal opinions and has no financial interest in the securities discussed.

Conclusion

The market remains cautiously optimistic with positive sentiment towards Chinese HY and Indonesian HY instruments. Indika's credit profile is seen as solid, supported by strong financial performance, strategic diversification, and ESG initiatives. However, investors should be aware of the risks and uncertainties associated with the market and seek independent financial advice before making investment decisions.