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: Longfor Group, Logan Group, Vedanta Resources, Sunny Optical</li>
<li>In the US, the December 2024 nonfarm payrolls unexpectedly jumped to 256 k (165 k e / 212 k revised p), with November’s data adjusted downwards by 15 k. Average hourly earnings edged down to 0.3% m-o-m (0.3% e / 0.4% p) and 3.9% y-o-y (4.0% e / 4.0% p), while the unemployment rate declined to 4.1% (4.2% e / 4.2% p).</li>
<li>Separately, the January 2025 (preliminary) University of Michigan consumer sentiment index fell to 73.2 (74.0 e / 74.0 p). The one-year inflation expectation among consumers soared to 3.3% (2.8% e / 2.8% p), the highest since May 2024 and above the 2.3-3.0% range seen in the two years prior to the COVID-19 pandemic.</li>
</ul>


In today's Morning Views publication we comment on developments of the following high yield issuers: Longfor Group, Logan Group, Vedanta Resources, Sunny Optical
In the US, the December 2024 nonfarm payrolls unexpectedly jumped to 256 k (165 k e / 212 k revised p), with November’s data adjusted downwards by 15 k. Average hourly earnings edged down to 0.3% m-o-m (0.3% e / 0.4% p) and 3.9% y-o-y (4.0% e / 4.0% p), while the unemployment rate declined to 4.1% (4.2% e / 4.2% p).
Separately, the January 2025 (preliminary) University of Michigan consumer sentiment index fell to 73.2 (74.0 e / 74.0 p). The one-year inflation expectation among consumers soared to 3.3% (2.8% e / 2.8% p), the highest since May 2024 and above the 2.3-3.0% range seen in the two years prior to the COVID-19 pandemic.


Longfor's H1/23 results were weaker than expected, with y-o-y declines of 35% in overall revenue to CNY 65 bn and 40% in revenue from property development to CNY 50 bn. That said, recurring income rose 10.4% to CNY 12.2 bn, which is becoming a meaningful annuity-like cash flow. This will be helpful in underpinning Longfor's financial risk profile should there be a prolonged downturn in the property sector. The company appears to have healthy access to bank funding, and should have sufficient liquidity to meet near-term debt maturities. That said, we highlight the risk of a potential reduction in the liquidity buffer, due to weak contracted sales and higher ST debt. Longfor recorded contracted sales of only CNY 7.6 bn in July 2023, compared to an average of CNY 11 bn per month in H1. ST debt surged 75% to c. CNY 39 bn, from c. CNY 22 bn at FYE 2022. We maintain our "Hold" recommendation on the LNGFOR curve. The various notes appear to offer good value at current yields of 15-21%. That said, market technicals are very poor for private developers, with even the bonds of solid names such as Longfor experiencing volatility.

  Longfor's H1/23 results were weaker than expected, with y-o-y declines of 35% in overall revenue to CNY 65 bn and 40% in revenue from property development to CNY 50 bn. That said, recurring income rose 10.4% to CNY 12.2 bn, which is becoming a meaningful annuity-like cash flow. This will be helpful in underpinning Longfor's financial risk profile should there be a prolonged downturn in the property sector.   The company appears to have healthy access to bank funding, and should have sufficient liquidity to meet near-term debt maturities. That said, we highlight the risk of a potential reduction in the liquidity buffer, due to weak contracted sales and higher ST debt. Longfor recorded contracted sales of only CNY 7.6 bn in July 2023, compared to an average of CNY 11 bn per month in H1. ST debt surged 75% to c. CNY 39 bn, from c. CNY 22 bn at FYE 2022.   We maintain our "Hold" recommendation on the LNGFOR curve. The various notes appear to offer good value at current yields of 15-21%. That said, market technicals are very poor for private developers, with even the bonds of solid names such as Longfor experiencing volatility. 

Longfor Group - Earnings Flash - H1 FY 2023 Results - Lucror Analytics

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>
<a href="https://www.smartkarma.com/entities/picc-property-casualty-h" target="_blank" data-smartkarma-citation="entities:350:1" rel="noopener">PICC Property &amp; Casualty H (2328 HK)</a> inclusion and <a href="https://www.smartkarma.com/entities/longfor-properties" target="_blank" data-smartkarma-citation="entities:8149:1" rel="noopener">Longfor Properties (960 HK)</a> deletion are high probability changes for the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a> in December.</li>
<li>There is a lower probability of <a href="https://www.smartkarma.com/entities/china-resources-power-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:5385:1" rel="noopener">China Resources Power (836 HK)</a> being added and of <a href="https://www.smartkarma.com/entities/sino-biopharmaceutical" target="_blank" data-smartkarma-citation="entities:230:1" rel="noopener">Sino Biopharmaceutical (1177 HK)</a> being deleted at the rebalance.</li>
<li>There has been big short covering in <a href="https://www.smartkarma.com/entities/picc-property-casualty-h" target="_blank" data-smartkarma-citation="entities:350:1" rel="noopener">PICC Property &amp; Casualty (2328 HK)</a> over the last couple of months while shorts would have covered <a href="https://www.smartkarma.com/entities/longfor-properties" target="_blank" data-smartkarma-citation="entities:8149:1" rel="noopener">Longfor Properties (960 HK)</a> recently.</li>
</ul>



PICC Property &amp; Casualty H (2328 HK) inclusion and Longfor Properties (960 HK) deletion are high probability changes for the Hang Seng China Enterprises Index (HSCEI INDEX) in December.
There is a lower probability of China Resources Power (836 HK) being added and of Sino Biopharmaceutical (1177 HK) being deleted at the rebalance.
There has been big short covering in PICC Property &amp; Casualty (2328 HK) over the last couple of months while shorts would have covered Longfor Properties (960 HK) recently.


HSCEI Index Rebalance Preview: High & Low Probability Changes

Index Rebal Trades & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal Trades & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

<ul>
<li>The HSCEI serves as a benchmark to reflect the overall performance of the top 50 "Mainland China" securities listed in Hong Kong.</li>
<li>In this insight, we take a look at the potential index changes and the resultant capping flows for HSCEI index rebal event in December 2024.</li>
<li>At present, we see two ADDs/DELs based on the latest available data but the rankings can change until 30th September 2024.</li>
</ul>


The HSCEI serves as a benchmark to reflect the overall performance of the top 50 "Mainland China" securities listed in Hong Kong.
In this insight, we take a look at the potential index changes and the resultant capping flows for HSCEI index rebal event in December 2024.
At present, we see two ADDs/DELs based on the latest available data but the rankings can change until 30th September 2024.


Quiddity Leaderboard HSCEI Dec 24: Two Changes Possible; US$265mn Capping Flows One-Way

Longfor Group’s H1/24 results were acceptable. Earnings declined in line with expectations, driven by lower revenue and margins in the Property Development segment. That said, earnings growth from rentals and services remained robust, with LTM profit from recurring income covering interest expense by 1.6x (FY 2023: 1.4x). Negatively, net debt increased marginally in H1/24, even though total debt declined. Going forward, we expect the company to continue reducing debt using OCF and refinance its maturing debt using additional operating loans backed by its investment properties. Overall, we believe near-term default risk for Longfor remains low, as the company's pipeline of new malls should continue to support its access to secured bank loans for refinancing.

  Longfor Group’s H1/24 results were acceptable. Earnings declined in line with expectations, driven by lower revenue and margins in the Property Development segment. That said, earnings growth from rentals and services remained robust, with LTM profit from recurring income covering interest expense by 1.6x (FY 2023: 1.4x).   Negatively, net debt increased marginally in H1/24, even though total debt declined. Going forward, we expect the company to continue reducing debt using OCF and refinance its maturing debt using additional operating loans backed by its investment properties. Overall, we believe near-term default risk for Longfor remains low, as the company's pipeline of new malls should continue to support its access to secured bank loans for refinancing. 

Longfor Group - Earnings Flash - H1 FY 2024 Results - Lucror Analytics

China

Longfor Properties Co. Ltd. operates in the property development, property investment and property management businesses in China.

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Longfor Properties (960 HK)

Lucror Analytics - Morning Views Asia

In today's Morning Views publication we comment on developments of the following high yield issuers: Longfor Group, Logan Group, Vedanta Resources,...

Lucror Analytics

Longfor Group - Earnings Flash - H1 FY 2023 Results - Lucror Analytics

Longfor's H1/23 results were weaker than expected, with y-o-y declines of 35% in overall revenue to CNY 65 bn and 40% in revenue from property...

Lucror Analytics

HSCEI Index Rebalance Preview: High & Low Probability Changes

There is one high probability change and one low probability change for the HSCEI in Dec. Estimated one-way turnover at the rebalance is 3.5%...

Brian Freitas

Quiddity Leaderboard HSCEI Dec 24: Two Changes Possible; US$265mn Capping Flows One-Way

PICC Property & Casualty H (2328 HK) and Innovent Biologics Inc (1801 HK) could replace Longfor Properties (960 HK) and Sino Biopharmaceutical...

Janaghan Jeyakumar, CFA

Longfor Group - Earnings Flash - H1 FY 2024 Results - Lucror Analytics

Longfor Group’s H1/24 results were acceptable. Earnings declined in line with expectations, driven by lower revenue and margins in the Property...

Lucror Analytics

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