Senior Credit Analyst, Lucror Analytics

Trung Nguyen

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

<ul>
<li>In today's Morning Views publication we comment on developments of the following high yield issuers: Greenko Energy, New World Development</li>
<li>UST yields fell 2-3 bps yesterday, following the release of weaker than expected November ADP payrolls data. The yield on the 2Y and 10Y UST declined 2 bps to 3.49% and 4.06%, respectively. Equities rose, as the labour market slowdown reinforced market expectations for a Fed rate cut this month. The S&amp;P 500 advanced 0.3% to 6,850, while the Nasdaq was up 0.2% at 23,454.</li>
<li>In the US, the ADP employment report showed that private-sector payrolls declined by 32 k in November (10 k e / 47 k revised p), with payrolls having fallen in four of the past six months. Hiring has been choppy of late, as employers weather cautious consumers and an uncertain macroeconomic environment, according to ADP chief economist Nela Richardson. While the November slowdown was broad-based, it was led by a pullback among small businesses.</li>
</ul>


In today's Morning Views publication we comment on developments of the following high yield issuers: Greenko Energy, New World Development
UST yields fell 2-3 bps yesterday, following the release of weaker than expected November ADP payrolls data. The yield on the 2Y and 10Y UST declined 2 bps to 3.49% and 4.06%, respectively. Equities rose, as the labour market slowdown reinforced market expectations for a Fed rate cut this month. The S&amp;P 500 advanced 0.3% to 6,850, while the Nasdaq was up 0.2% at 23,454.
In the US, the ADP employment report showed that private-sector payrolls declined by 32 k in November (10 k e / 47 k revised p), with payrolls having fallen in four of the past six months. Hiring has been choppy of late, as employers weather cautious consumers and an uncertain macroeconomic environment, according to ADP chief economist Nela Richardson. While the November slowdown was broad-based, it was led by a pullback among small businesses.


Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>This "rescue package" announcement late last month came as no surprise, as the alternative situation (liquidation/bankruptcy) for <a href="https://www.smartkarma.com/entities/new-world-development" target="_blank" data-smartkarma-citation="entities:7037:1" rel="noopener">New World Development (17 HK)</a>, and the ensuing optics were not great.</li>
<li>Media reports are now coming in that NWD is reportedly seeking to sell - or accelerate the sale - of its real estate projects in China. </li>
<li>That makes sense. The refinancing afforded NWD some breathing space. However, to strengthen/bolster its balance sheet, NWD needs to offload assets. Yet pinning down a "fair" valuation will take time. </li>
</ul>


This "rescue package" announcement late last month came as no surprise, as the alternative situation (liquidation/bankruptcy) for New World Development (17 HK), and the ensuing optics were not great.
Media reports are now coming in that NWD is reportedly seeking to sell - or accelerate the sale - of its real estate projects in China. 
That makes sense. The refinancing afforded NWD some breathing space. However, to strengthen/bolster its balance sheet, NWD needs to offload assets. Yet pinning down a "fair" valuation will take time. 


NWD (17 HK): The Strings Attached To Latest Debt Financing

<ul>
<li>0.052x P/B! That's <a href="https://www.smartkarma.com/entities/new-world-development" target="_blank" data-smartkarma-citation="entities:7037:1" rel="noopener">New World Development (17 HK)</a>'s current trailing  P/B ratio; roughly a quarter of the next comparable real estate peer.</li>
<li>
What's new? The latest decline followed an announcement on the 30th May that it would defer payments on its perpetual bonds.</li>
<li>NWD's 6.15% and 4.8% perpetuals fell to 23 cents and 15.5 cents on the dollar on 2nd June, suggesting the market is pricing in the possibility of a bust.</li>
</ul>


0.052x P/B! That's New World Development (17 HK)'s current trailing  P/B ratio; roughly a quarter of the next comparable real estate peer.

What's new? The latest decline followed an announcement on the 30th May that it would defer payments on its perpetual bonds.
NWD's 6.15% and 4.8% perpetuals fell to 23 cents and 15.5 cents on the dollar on 2nd June, suggesting the market is pricing in the possibility of a bust.


Equity Bottom-Up

<ul>
<li>
0.08x P/B. That's where <a href="https://www.smartkarma.com/entities/new-world-development" target="_blank" data-smartkarma-citation="entities:7037:1" rel="noopener">New World Development (17 HK)</a> is currently trading. Less than half the P/B of the next comparable real estate peer.</li>
<li>
So, what's going on? Announcing an expected <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2024/0830/2024083003082.pdf" target="_blank" rel="noopener">HK$19-20bn loss for FY24 </a>last week didn't help matters. Shares are down 14% this week and 85% since Covid.</li>
<li>Landlords need to drastically cut rents to jumpstart the retail sector. That translates to further impairment losses for property developers. </li>
</ul>



0.08x P/B. That's where New World Development (17 HK) is currently trading. Less than half the P/B of the next comparable real estate peer.

So, what's going on? Announcing an expected HK$19-20bn loss for FY24 last week didn't help matters. Shares are down 14% this week and 85% since Covid.
Landlords need to drastically cut rents to jumpstart the retail sector. That translates to further impairment losses for property developers. 


Listed Real Estate Asia, KT Capital Group

Jacob Cheng

Listed Real Estate Asia

KT Capital Group

Principal investments and advisory firm that focuses on connecting the CIS countries with East Asia.

Principal investments and advisory firm

<ul>
<li>NWD has the highest gearing among all HK real estate names.  It has significantly underperformed since the rate hike cycle begun.  Now it has the biggest potential to rebound</li>
<li>The stock is trading at attractive valuation, 0.27x P/B, like a distressed Chinese developer.  The major market concerns are potential earnings downgrade and dividend cut</li>
<li>I am quite convicted on the stock for rebound given 1) company has clear de-leveraging plan 2) no plans for equity-raise 3) lots of corporate actions ahead to unlock value</li>
</ul>


NWD has the highest gearing among all HK real estate names.  It has significantly underperformed since the rate hike cycle begun.  Now it has the biggest potential to rebound
The stock is trading at attractive valuation, 0.27x P/B, like a distressed Chinese developer.  The major market concerns are potential earnings downgrade and dividend cut
I am quite convicted on the stock for rebound given 1) company has clear de-leveraging plan 2) no plans for equity-raise 3) lots of corporate actions ahead to unlock value


New World Development(17 HK):High Leverage in HKRE but Likely the First to Rebound if Rate Peaks Out

Hong Kong

New World Development Company Limited, through its subsidiaries, develops and invests in properties, provides contracting services, property management, and transportation services.  The Company also operates infrastructure business, telecommunication services, department stores, hotels and restaurants, and media and technology business.

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New World Development (17 HK)

Lucror Analytics - Morning Views Asia

In today's Morning Views publication we comment on developments of the following high yield issuers: Greenko Energy, New World Development

Lucror Analytics

NWD (17 HK): The Strings Attached To Latest Debt Financing

Landlords need to materially reduce rents to kickstart the retail/F&B sector, translating to lower yields, lower implied property valuations, and...

David Blennerhassett

NWD (17 HK): Markets Pricing In A Bust

0.05x P/B says it all. Conversely, NWD is so beaten up here, it's probably worth a punt if you think it will be rescued and/or perpetually supported.

David Blennerhassett

We Need To Talk About New World (17 HK)

Avoid NWD. Landlords need to materially reduce rents to kickstart the retail sector. That translates to more impairment losses. And further woes...

David Blennerhassett

New World Development(17 HK):High Leverage in HKRE but Likely the First to Rebound if Rate Peaks Out

New World Development has the highest gearing among HK real estate companies. Valuation is attractive. Despite of some concerns, it also has the...

Jacob Cheng

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