Global Special Situations & Strategy, SR Services Ltd

David Lepper

Global Special Situations & Strategy

SR Services Ltd

SR Services provides Strategic Knowledge and Solutions services for Family Offices and Corporate Business. 

We deliver this via advisory services, strategic planning, opportunity analysis/sourcing, as well as solution implementation. 

Whilst, we create intellectual discipline and operational leverage for your projects or daily activities, our ultimate objective is to empower whilst enhancing your decision making. 

Strategic Knowledge and Solutions

Cross Asset Strategy

<p>Q2 2020’s selection delivered an average return increase of 54% v’s the MSCI Asia Pacific Index 37.4% over the same period. The GARP-based screen uses a combination of growth and value metrics to identify shares where brokers are forecasting high earnings growth, but which are currently valued at a price that is low relative to their forecast outlook. Whilst Central Banks are providing additional liquidity favouring growth names, our value-based screen is key to delivering positive gains as tapering begins. </p><p>Q2 2021's screen provides 16 key suggestions.  What makes the current selection interesting is the bias towards Taiwan and India on a country basis and Industrials and Healthcare on a sector basis. Also of particular note, Singapore presents one name on this screen.</p>

Q2 2020’s selection delivered an average return increase of 54% v’s the MSCI Asia Pacific Index 37.4% over the same period. The GARP-based screen uses a combination of growth and value metrics to identify shares where brokers are forecasting high earnings growth, but which are currently valued at a price that is low relative to their forecast outlook. Whilst Central Banks are providing additional liquidity favouring growth names, our value-based screen is key to delivering positive gains as tapering begins. Q2 2021's screen provides 16 key suggestions.  What makes the current selection interesting is the bias towards Taiwan and India on a country basis and Industrials and Healthcare on a sector basis. Also of particular note, Singapore presents one name on this screen.

Screening the Silk Road: Q2-2021 All Cap GARP (Zulu Warrior Screening)

<p>Growth as a style has been the “norm” for years, is the “norm” about to end? The continued strategies by Central Bank’s towards a “<em>lower for longer stance around interest rates</em>”, extended the underperformance of value for most of 2020. However, with the value/growth investment style ratio at 20-year lows, we present 27 names which hold characteristics worthy of further review. </p>

Growth as a style has been the “norm” for years, is the “norm” about to end? The continued strategies by Central Bank’s towards a “lower for longer stance around interest rates”, extended the underperformance of value for most of 2020. However, with the value/growth investment style ratio at 20-year lows, we present 27 names which hold characteristics worthy of further review. 

Screening the Silk Road: Q1 2021 All Cap Screening - Free Cashflow (FCF)

Asia Fixed Income Analyst

Derek Silva

Credit

<p>Since their introduction less than a decade ago, there has been much discussion and little evidence about the enforceability of the ‘keepwell’ deed in many Chinese USD corporate bonds. And, given that the biggest issuer of keepwell bonds in 2020 is Evergrande’s Hengda Real Estate, it remains as relevant as ever. Until recently, the structure had yet to be put to the test in any prominent distressed cases.  </p><p>A high-profile case in 2020 seemed to have changed that. In recent months, investors and analysts have closely followed the situation with PKFounder, a distressed issuer with a keepwell bond. And it didn’t look good for keepwell bondholders: The<a href="https://www.reuters.com/article/china-bond-keepwell/administrator-for-chinas-pufg-rejects-keepwell-deed-for-300-mln-bond-redd-idINL4N2FP01J" target="_blank" rel="noopener"> judgement rejected the bondholders' claims</a>, seemingly solidifying the argument for those who said the structure was little more than a gentleman’s agreement and provided a false sense of security.  </p><p>But now there’s been a new legal decision from a smaller case that contradicts the PKFounder decision. Which brings to mind something important to remember: the concept of <em>legal precedent</em> is not as powerful in China as it is elsewhere. In the other case, Mainland company CEFC had an offshore subsidiary which also issued keepwell bonds and, this month, the Shanghai Financial Court ordered the company to pay a bondholder on account of the keepwell deed. </p><p>In the following sections, we take a closer look at the specifics. And, while there is no firm conclusion about the enforceability of a keepwell deed, the latest news shows that the situation is not cut-and-dry and the keepwell feature in bonds might not be worthless after all.</p><section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/171/416/original/Screenshot%202020-11-14%20at%2011.21.07.png?1605330171" class="editor-image img-responsive" data-smartkarma-image-id="171416"></figure><div class="content-caption">Source: https://events.debtwire.com/apchart-of-the-week-keepwells-back-19-of-chinese-hy-bonds-ytd-while-pkfounder-cefc-bring-structure-on-focus</div></section><p></p></section>

Since their introduction less than a decade ago, there has been much discussion and little evidence about the enforceability of the ‘keepwell’ deed in many Chinese USD corporate bonds. And, given that the biggest issuer of keepwell bonds in 2020 is Evergrande’s Hengda Real Estate, it remains as relevant as ever. Until recently, the structure had yet to be put to the test in any prominent distressed cases.  A high-profile case in 2020 seemed to have changed that. In recent months, investors and analysts have closely followed the situation with PKFounder, a distressed issuer with a keepwell bond. And it didn’t look good for keepwell bondholders: The judgement rejected the bondholders' claims, seemingly solidifying the argument for those who said the structure was little more than a gentleman’s agreement and provided a false sense of security.  But now there’s been a new legal decision from a smaller case that contradicts the PKFounder decision. Which brings to mind something important to remember: the concept of legal precedent is not as powerful in China as it is elsewhere. In the other case, Mainland company CEFC had an offshore subsidiary which also issued keepwell bonds and, this month, the Shanghai Financial Court ordered the company to pay a bondholder on account of the keepwell deed. In the following sections, we take a closer look at the specifics. And, while there is no firm conclusion about the enforceability of a keepwell deed, the latest news shows that the situation is not cut-and-dry and the keepwell feature in bonds might not be worthless after all.Source: https://events.debtwire.com/apchart-of-the-week-keepwells-back-19-of-chinese-hy-bonds-ytd-while-pkfounder-cefc-bring-structure-on-focus

Keepwells: Not Dead Yet - There Might Be Some Protection After All?

Lakshmi Iyer, CFA

<p>We rate the <a href="https://www.smartkarma.com/entities/oue-ltd" target="_blank" data-smartkarma-citation="entities:9984:1" rel="noopener">OUE Ltd (OUE SP)</a> SGD bond due 2023 "Hold" at current levels, although they have not participated meaningfully in the recent rally in credit markets.  The upcoming debt repayments at the OUE level are manageable, in our view. However, given the large amounts of debt coming due at OUE-CREIT, we prefer to remain cautious. We would suggest investors in OUE bonds keep an eye on the progress of debt refinancing at the REIT level.</p><div class="content-highlight"><p><em>Fundamental credit research focused on Asian high yield, including coverage of areas which are generally overlooked such as Indian finance companies and non-USD denominated credit (SGD).  Sector agnostic. Research process consists of rigorous bottom-up company analysis combined with spotting market dislocations to provide trade ideas.</em></p></div>

We rate the OUE Ltd (OUE SP) SGD bond due 2023 "Hold" at current levels, although they have not participated meaningfully in the recent rally in credit markets.  The upcoming debt repayments at the OUE level are manageable, in our view. However, given the large amounts of debt coming due at OUE-CREIT, we prefer to remain cautious. We would suggest investors in OUE bonds keep an eye on the progress of debt refinancing at the REIT level.Fundamental credit research focused on Asian high yield, including coverage of areas which are generally overlooked such as Indian finance companies and non-USD denominated credit (SGD).  Sector agnostic. Research process consists of rigorous bottom-up company analysis combined with spotting market dislocations to provide trade ideas.

<p>Growth as an investment style has remained prominent over the COVID-19 period, reinforcing its decade long dominance over the value. The key question remains:  with earnings and value set to be a key theme over H2 2020 when exactly is the value style expected to reverse its underperformance trend? Our data suggest a greater than 66% chance of reversal shortly. As the value style reversal looks increasingly assured, exposure to GARP style investing and the underlying stocks are set to become even more important as we move into the second half of 2020. We highlight 17 stocks who fit the criteria in Q2 2020.</p>

Growth as an investment style has remained prominent over the COVID-19 period, reinforcing its decade long dominance over the value. The key question remains:  with earnings and value set to be a key theme over H2 2020 when exactly is the value style expected to reverse its underperformance trend? Our data suggest a greater than 66% chance of reversal shortly. As the value style reversal looks increasingly assured, exposure to GARP style investing and the underlying stocks are set to become even more important as we move into the second half of 2020. We highlight 17 stocks who fit the criteria in Q2 2020.

Screening the Silk Road: Q2-2020 Small-Mid Cap GARP (Zulu Warrior Screening)

Hong Kong

Gemdale Properties and Investment Corporation Limited, through its subsidiaries, invests in, develops, and manages properties. The Company also develops and manages business parks, invests in info-communications and education projects, and provides technology services.

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Gemdale Properties And Inv Corp (535 HK)

Screening the Silk Road: Q2-2021 All Cap GARP (Zulu Warrior Screening)

GARP selection, held for 12 mths for good reason. The list delivered an average return of 54% v’s the MSCI Asia Pac Index 37.4% over the same...

David Lepper

Screening the Silk Road: Q1 2021 All Cap Screening - Free Cashflow (FCF)

With the value/growth investment style ratio at 20-year lows, we present 27 names which hold characteristics worthy of further review.

David Lepper

Keepwells: Not Dead Yet - There Might Be Some Protection After All?

Investors increasingly believe Keepwell deeds are worthless after the PKFounder legal decision this year. But a more recent case seems to...

Derek Silva

OUE Ltd. - Bonds Not Joining the Party

We rate the OUE Ltd (OUE SP) SGD bond due 2023 "Hold" at current levels, although they have not participated meaningfully in the recent rally in...

Lakshmi Iyer, CFA

Screening the Silk Road: Q2-2020 Small-Mid Cap GARP (Zulu Warrior Screening)

Growth as an investment style has remained prominent over the COVID-19 period, reinforcing its decade long dominance over the value. The key...

David Lepper

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