Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

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: Melco Resorts, Tata Steel, Tata Motors</li>
<li>US President Donald Trump wrote in a Truth Social post on Sunday hat the US had “a very good meeting with China in Switzerland”, with “great progress made”. Meanwhile, US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer described "substantial progress", adding that further details would be announced today.</li>
<li>Chinese Vice-Premier He Lifeng highlighted that the talks were "candid, in-depth and constructive" on issues of concern to both countries, adding that the meeting “achieved substantial progress” and “reached important consensus”.</li>
</ul>


In today's Morning Views publication we comment on developments of the following high yield issuers: Melco Resorts, Tata Steel, Tata Motors
US President Donald Trump wrote in a Truth Social post on Sunday hat the US had “a very good meeting with China in Switzerland”, with “great progress made”. Meanwhile, US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer described "substantial progress", adding that further details would be announced today.
Chinese Vice-Premier He Lifeng highlighted that the talks were "candid, in-depth and constructive" on issues of concern to both countries, adding that the meeting “achieved substantial progress” and “reached important consensus”.


<ul>
<li>Melco Resorts and Entertainment's Q4/24 results remained soft, owing to a decline in the EBITDA margin, and despite GGR outperforming that of peers.</li>
<li>In addition, the company's debt reduction and deleveraging continued to lag peers, as FCF generation was constrained by the soft earnings, ongoing share repurchases, as well as capex requirements (including for the development project in Sri Lanka).</li>
</ul>


Melco Resorts and Entertainment's Q4/24 results remained soft, owing to a decline in the EBITDA margin, and despite GGR outperforming that of peers.
In addition, the company's debt reduction and deleveraging continued to lag peers, as FCF generation was constrained by the soft earnings, ongoing share repurchases, as well as capex requirements (including for the development project in Sri Lanka).


Melco Resorts - Earnings Flash - FY 2024 Results - Lucror Analytics

Melco Resorts' (MLCO) Q2/24 results were soft, but in line with expectations. The company’s earnings improved sequentially in Q2, though the pace of its earnings recovery (relative to pre-pandemic levels) and debt reduction have continued to lag peers. During H1/24, MLCO’s net gross debt was down by just 1% from FYE 2023. Hence, the company’s leverage remained weaker than peers, with Net Debt/LTM Adjusted Property EBITDA of 5.1x (vs. 3.9x for Wynn Macau, 2.5x for Sands China and an estimated 2.1x for MGM China). Going forward, we expect MLCO to continue generating small positive FCF and deleverage gradually, with the extent of its FCF generation likely tempered by ongoing share repurchases.

  Melco Resorts' (MLCO) Q2/24 results were soft, but in line with expectations. The company’s earnings improved sequentially in Q2, though the pace of its earnings recovery (relative to pre-pandemic levels) and debt reduction have continued to lag peers.   During H1/24, MLCO’s net gross debt was down by just 1% from FYE 2023. Hence, the company’s leverage remained weaker than peers, with Net Debt/LTM Adjusted Property EBITDA of 5.1x (vs. 3.9x for Wynn Macau, 2.5x for Sands China and an estimated 2.1x for MGM China).   Going forward, we expect MLCO to continue generating small positive FCF and deleverage gradually, with the extent of its FCF generation likely tempered by ongoing share repurchases. 

Melco Resorts - Earnings Flash - H1 FY 2024 Results - Lucror Analytics

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Melco International Development / Event-Driven

<ul>
<li>In my stub monitor flagged in <a href="https://skr.ma/1yPGR" target="_blank" rel="noopener">StubWorld: Toyota Industries/Motors, GMO Internet</a>, I see <a href="https://www.smartkarma.com/entities/melco-international-development-ltd" target="_blank" data-smartkarma-citation="entities:809:1" rel="noopener">Melco International Development (200 HK)</a> is trading "cheap" to <a href="https://www.smartkarma.com/entities/melco-crown-entertainme-adr" target="_blank" data-smartkarma-citation="entities:810:1" rel="noopener">Melco Resorts &amp; Entertainment (MLCO US)</a>.</li>
<li>Last month, Melco proposed one new rights share for two existing shares at a subscription price of HK$1.0286/share, a 72.93% discount to undisturbed, and a 64.28% discount to the TERP.</li>
<li>Lawrence Ho will backstop ~54% of the rights, if need be. Depending on the level of support for the rights, expect Lawrence to further chip away against minorities.</li>
</ul>


In my stub monitor flagged in StubWorld: Toyota Industries/Motors, GMO Internet, I see Melco International Development (200 HK) is trading "cheap" to Melco Resorts &amp; Entertainment (MLCO US).
Last month, Melco proposed one new rights share for two existing shares at a subscription price of HK$1.0286/share, a 72.93% discount to undisturbed, and a 64.28% discount to the TERP.
Lawrence Ho will backstop ~54% of the rights, if need be. Depending on the level of support for the rights, expect Lawrence to further chip away against minorities.


Melco (200 HK) Trading "Cheap" Into Rights Issue

<ul>
<li>Winner winner chicken dinner.  A Nikke article suggests a bid higher than ¥6tn for <a href="https://www.smartkarma.com/entities/toyota-industries-corp" target="_blank" data-smartkarma-citation="entities:4500:1" rel="noopener">Toyota Industries (6201 JP)</a>. In addition, people  thinking about ¥18,400/share are going about this incorrectly. </li>
<li>
<a href="https://www.smartkarma.com/entities/contemporary-amperex-technology-catl-co-limited" target="_blank" data-smartkarma-citation="entities:45179:1" rel="noopener">Contemporary Amperex Technology (CATL) (3750 HK)</a> pops on its IPO debut. The HKEx has issued a high concentration warning</li>
<li>
<a href="https://www.smartkarma.com/entities/mitsubishi-logisnext-co-ltd" target="_blank" data-smartkarma-citation="entities:11662:1" rel="noopener">Mitsubishi Logisnext Co., Ltd. (7105 JP)</a> is still ragingly cheap given the move to delist dual parent/sub listings and having a global footprint. Own it here and now.</li>
</ul>


Winner winner chicken dinner.  A Nikke article suggests a bid higher than ¥6tn for Toyota Industries (6201 JP). In addition, people  thinking about ¥18,400/share are going about this incorrectly. 

Contemporary Amperex Technology (CATL) (3750 HK) pops on its IPO debut. The HKEx has issued a high concentration warning

Mitsubishi Logisnext Co., Ltd. (7105 JP) is still ragingly cheap given the move to delist dual parent/sub listings and having a global footprint. Own it here and now.


Last Week in Event SPACE: Toyota Industries, CATL, Mitsubishi Logisnext, Mayne Pharma, Melco

Hong Kong

Melco Resorts & Entertainment Limited develops, owns, and operates casinos. The Company offers casino gaming, restaurants, bars, and resorts facilities. Melco Resorts & Entertainment serves customers in Asia.

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Melco Resorts & Entertainment (MLCO US)

Lucror Analytics - Morning Views Asia

In today's Morning Views publication we comment on developments of the following high yield issuers: Melco Resorts, Tata Steel, Tata Motors

Lucror Analytics

Melco Resorts - Earnings Flash - FY 2024 Results - Lucror Analytics

Melco Resorts and Entertainment's Q4/24 results remained soft, owing to a decline in the EBITDA margin, and despite GGR outperforming that of...

Lucror Analytics

Melco Resorts - Earnings Flash - H1 FY 2024 Results - Lucror Analytics

Melco Resorts' (MLCO) Q2/24 results were soft, but in line with expectations. The company’s earnings improved sequentially in Q2, though the pace...

Lucror Analytics

Melco (200 HK) Trading "Cheap" Into Rights Issue

The nil-paid rights are trading at HK$2.21. The subscription price is HK$1.0286/share. Or HK$3.2386 all in. Against HK$3.35 for the current price...

David Blennerhassett

Last Week in Event SPACE: Toyota Industries, CATL, Mitsubishi Logisnext, Mayne Pharma, Melco

It’s Sunday! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed during the...

David Blennerhassett

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