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

Indika Energy’s FY 2023 numbers were soft as projected, owing to lower coal prices and the impact of the new licence for 91%-owned PT Kideco Jaya Agung. While Indika's financial risk profile deteriorated significantly, the credit metrics remained robust within the rating category. Liquidity stayed sound. The company should have a more difficult year in FY 2024, with decreased selling prices, revenue and earnings expected. That said, we still believe Indika can generate positive FCF, given its low-cost position. The company is set to redeem the c. USD 294 mn outstanding USD 5.875% 11/24 notes on May 3rd at par. While the redemption will be leverage neutral, we view the move as credit positive. Indika will only have the USD 2025 bonds remaining after the 2024 notes redemption, and these can be almost fully funded by the holdco's cash position.

  Indika Energy’s FY 2023 numbers were soft as projected, owing to lower coal prices and the impact of the new licence for 91%-owned PT Kideco Jaya Agung. While Indika's financial risk profile deteriorated significantly, the credit metrics remained robust within the rating category. Liquidity stayed sound.   The company should have a more difficult year in FY 2024, with decreased selling prices, revenue and earnings expected. That said, we still believe Indika can generate positive FCF, given its low-cost position.   The company is set to redeem the c. USD 294 mn outstanding USD 5.875% 11/24 notes on May 3rd at par. While the redemption will be leverage neutral, we view the move as credit positive. Indika will only have the USD 2025 bonds remaining after the 2024 notes redemption, and these can be almost fully funded by the holdco's cash position. 

Indika Energy - Earnings Flash - FY 2023 Results - Lucror Analytics

In our view, Indika Energy's 9M/23 results were weaker than expected due to a sharp decline in Kideco's production and sales volume in Q3, lower-than-expected profitability at Kideco (which accounts for 90% of Indika's EBITDA) and negative OCF, which came as a surprise. The balance sheet turned to a net debt position, after a few quarters of net cash. Liquidity remains sound, with a large (albeit fast shrinking) cash position. OCF and FCF were negative, which was surprising as Indika has previously managed to generate positive FCF even when coal prices were lower than current levels. The last time the company generated negative FCF was in 2015, during a major coal downturn. We believe that the negative OCF may be due to the new businesses, which are ramping up. Indika's key business strategy in the medium term is to diversify away from and reduce its reliance on coal-related activities, with the company aiming to derive 50% of its revenue from non-coal sources by 2025. The new businesses include a gold mine, renewable energy solutions (mainly solar power), electric scooters and several digital technology businesses.

  In our view, Indika Energy's 9M/23 results were weaker than expected due to a sharp decline in Kideco's production and sales volume in Q3, lower-than-expected profitability at Kideco (which accounts for 90% of Indika's EBITDA) and negative OCF, which came as a surprise. The balance sheet turned to a net debt position, after a few quarters of net cash. Liquidity remains sound, with a large (albeit fast shrinking) cash position.   OCF and FCF were negative, which was surprising as Indika has previously managed to generate positive FCF even when coal prices were lower than current levels. The last time the company generated negative FCF was in 2015, during a major coal downturn. We believe that the negative OCF may be due to the new businesses, which are ramping up. Indika's key business strategy in the medium term is to diversify away from and reduce its reliance on coal-related activities, with the company aiming to derive 50% of its revenue from non-coal sources by 2025. The new businesses include a gold mine, renewable energy solutions (mainly solar power), electric scooters and several digital technology businesses. 

Indika Energy - Earnings Flash - 9M FY 2023 Results - Lucror Analytics

Lucror Analytics' ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable). We view Indika Energy’s ESG as "Adequate", in line with its Environmental, Social and Governance scores. Controversies are "Immaterial" and Disclosure is “Adequate”.

Lucror Analytics' ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).  We view Indika Energy’s ESG as "Adequate", in line with its Environmental, Social and Governance scores. Controversies are "Immaterial" and Disclosure is “Adequate”. 

Indika Energy - ESG Report - Lucror Analytics

Leonard Law, CFA

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.<ul><li><a href='#lucror-entity-1776'>Indika Energy</a></li><li><a href='#lucror-entity-2979'>Tata Steel Thailand</a></li></ul>

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.Indika EnergyTata Steel Thailand

Morning Views Asia: Indika Energy, Tata Steel Thailand

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Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.In this Insight:Softbank GroupChina HongqiaoChina Jinmao HoldingsGeely AutoFirst Pacific Coand more...

Indonesia

PT Indika Energy Tbk is an energy company. The Company provides energy services, energy resources and infrastructure, primarily in the areas of coal production, engineering, procurement and construction services and power generation services.

Indika Energy (INDY IJ)

Indika Energy - Earnings Flash - FY 2023 Results - Lucror Analytics

Indika Energy’s FY 2023 numbers were soft as projected, owing to lower coal prices and the impact of the new licence for 91%-owned PT Kideco Jaya...

Lucror Analytics

Indika Energy - Earnings Flash - 9M FY 2023 Results - Lucror Analytics

In our view, Indika Energy's 9M/23 results were weaker than expected due to a sharp decline in Kideco's production and sales volume in Q3,...

Lucror Analytics

Indika Energy - ESG Report - Lucror Analytics

Lucror Analytics' ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable). We view Indika Energy’s ESG as...

Lucror Analytics

Morning Views Asia: Indika Energy, Tata Steel Thailand

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region,...

Lucror Analytics

Weekly Wrap - 25 Aug 2023

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and...

Lucror Analytics