20230627-招银国际-NWD__Privatization_help_mobilizing_liquidity_within_the_group_3页_418kb

Fixed Income Commentary Summary: Asian G3 Bonds and Perpetuals

Key Recommendations

• Maintain Buy rating on NWDEVL4125 Perp, NWDEVL615 Perp, and NWSZF575 Perp.
• Prices: $688.93 for NWDEVL4125 Perp, $379.89 for NWDEVL615 Perp, $798.90 for NWSZF575 Perp.
• Yield-to-call (YTC): 13.3% for NWDEVL4125 Perp, 103% for NWDEVL615 Perp, 77% for NWSZF575 Perp.
• Call dates: 3/10/2028, 3/16/2025, and 1/31/2024 respectively.

Rationale for Buy Recommendation

• Privatization efforts by CTFH (parent company) aim to strengthen financials:
  • NWD (45.2% owned by CTFH) receiving HKD 21.8bn (cUSD 2.9bn) cash via share offer, with cUSD 23bn (HKD 30bn) net cash after special dividend.
  • Enhanced financial flexibility, refinancing capabilities, and redemption of perpetuals.
  • NWS (60.9% stake in NWD) has strong liquidity, low gearing, and is expected to maintain credit profile due to solid financials and regulatory filings.
  • Market impact: Holdings will call reset after 5 or 3 years based on UST rates (5% and 201% respectively), with step-ups of 300 or 300 basis points.

Market Performance

• NWD debt appreciated 25-375 points, NWS notes up 0.75 points this morning.
• Privatization expected to improve pro-forma cash positions: NWD cash to HKD 56.8bn from HKD 39.0bn, ST debt/cash ratio from 1.0x to 1.4x.

Context

• Commentary on Asian G3 bonds benchmark, emphasizing value-add from privatization and bond market insights.
• Offer and strategic implications for liquidity and information flow, with NWS maintaining reporting requirements post-potential delisting.

Note

• Appreciation for support through polls related to the benchmark review; thank you for engagement on sell-side analyst insights and service elevation aims.