Independent Asian Credit Research, Bondcritic

Warut Promboon

Independent Asian Credit Research

Asian Fixed Income/Frontier Market Research

Bondcritic

Bondcritic, established in 2009, is designed to be an independent credit research voice that helps investors gain insights and unbiased analyses on Asian fixed income market. Our mission is to discover deep-value Asian high-yield and distressed bonds with a bottom-up approach, together with the help of our proprietary ESG (Environmental, Social Development, and Governance) model. At the same time, we focus on bringing investment cases of unrated and unloved issuers to the general public.

Credit

One good news since we last wrote about Parkway Pantai ( <a href="https://www.smartkarma.com/entities/parkway-pantai-ltd" target="_blank" data-smartkarma-citation="entities:29218:1" rel="noopener">Parkway Pantai Ltd (0794727D SP)</a>) this July ( <a href="https://www.smartkarma.com/insights/parkway-pantai-good-brand-with-limited-upside" target="_blank" data-smartkarma-citation="insights:41759" rel="noopener">Parkway Pantai: Good Brand with Limited Upside</a> ) is that the first COVID19 vaccine by <a href="https://www.smartkarma.com/entities/pfizer-inc" target="_blank" data-smartkarma-citation="entities:1131:1" rel="noopener">Pfizer Inc (PFE US)</a>  has been rolled out at the time of this writing and several potential candidates in the final phases of testing are also waiting to be approved for mass production. Although we have seen spikes of new mutated COVID19 cases in the UK and South Africa, Pfizer  believes the efficacy of its vaccine should still be more than 90% effective against the more contagious variation. The company’s claim that it could come up with a new effective vaccine for this variation in 6 weeks lends comfort to investors that there is light at the end of the tunnel.
Parkway Pantai’s hospital operations have in fact been less affected than what we had originally expected. Its key Singapore and Malaysian markets have seen occupancy rebounding to above 50% in 3Q20. However, Indonesia, its biggest market for its Singapore operation, is still closed due to COVID19 as the country is still struggling to control the outbreak there. Malaysia has also seen a resurgent of COVID19 cases after 3Q but management is confident that the impact will not be as bad as in 2Q.
PARKPT 4.25% 7/22c traded at an attractive YTM of 5.58% at the time of writing compared to other local Healthcare bonds. We believe the perpetual will likely be called on 27 July 2022 as global interest rates will stay low at least in the short and medium tenor, in our opinion, as mass vaccination to countries worldwide is a “Herculean” task that requires massive logistical co-ordination for the worldwide vaccine distribution and production. Normalcy may not return to the world till the end of 2022, in our view, when everyone gets vaccinated. As for Parkway Pantai, based on its clientele profile which is mainly the higher income group, getting themselves first to be vaccinated should not be a problem as long as they are willing to pay, in our opinion.
As a “BB” credit, in our view, PARKPT 4.25% Perp (7/22c)’s fair YTC should be c.4.0% versus its current YTC of 5.58%, showing a near-term upside of 158bp, at time of writing. With vaccination on the horizon, we see normalcy returning towards the end of 2021 and see asymmetric upside for the bonds on improving operational performance and value proposition versus peers. As such, we revise our recommendation on the bonds from NEUTRAL to OVERWEIGHT.

One good news since we last wrote about Parkway Pantai ( Parkway Pantai Ltd (0794727D SP)) this July ( Parkway Pantai: Good Brand with Limited Upside ) is that the first COVID19 vaccine by Pfizer Inc (PFE US)  has been rolled out at the time of this writing and several potential candidates in the final phases of testing are also waiting to be approved for mass production. Although we have seen spikes of new mutated COVID19 cases in the UK and South Africa, Pfizer  believes the efficacy of its vaccine should still be more than 90% effective against the more contagious variation. The company’s claim that it could come up with a new effective vaccine for this variation in 6 weeks lends comfort to investors that there is light at the end of the tunnel.
Parkway Pantai’s hospital operations have in fact been less affected than what we had originally expected. Its key Singapore and Malaysian markets have seen occupancy rebounding to above 50% in 3Q20. However, Indonesia, its biggest market for its Singapore operation, is still closed due to COVID19 as the country is still struggling to control the outbreak there. Malaysia has also seen a resurgent of COVID19 cases after 3Q but management is confident that the impact will not be as bad as in 2Q.
PARKPT 4.25% 7/22c traded at an attractive YTM of 5.58% at the time of writing compared to other local Healthcare bonds. We believe the perpetual will likely be called on 27 July 2022 as global interest rates will stay low at least in the short and medium tenor, in our opinion, as mass vaccination to countries worldwide is a “Herculean” task that requires massive logistical co-ordination for the worldwide vaccine distribution and production. Normalcy may not return to the world till the end of 2022, in our view, when everyone gets vaccinated. As for Parkway Pantai, based on its clientele profile which is mainly the higher income group, getting themselves first to be vaccinated should not be a problem as long as they are willing to pay, in our opinion.
As a “BB” credit, in our view, PARKPT 4.25% Perp (7/22c)’s fair YTC should be c.4.0% versus its current YTC of 5.58%, showing a near-term upside of 158bp, at time of writing. With vaccination on the horizon, we see normalcy returning towards the end of 2021 and see asymmetric upside for the bonds on improving operational performance and value proposition versus peers. As such, we revise our recommendation on the bonds from NEUTRAL to OVERWEIGHT.

Parkway Pantai: Attraction from Vaccination

We initiate our coverage of <a href="https://www.smartkarma.com/entities/parkway-pantai-ltd" target="_blank" data-smartkarma-citation="entities:29218:1" rel="noopener">Parkway Pantai Ltd (0794727D SP)</a> (Parkway Pantai), a wholly-owned subsidiary of <a href="https://www.smartkarma.com/entities/ihh-healthcare-bhd" target="_blank" data-smartkarma-citation="entities:876:1" rel="noopener">IHH Healthcare (IHH MK)</a> of which major shareholders include A3-rated Japanese conglomerate <a href="https://www.smartkarma.com/entities/mitsui-co-ltd" target="_blank" data-smartkarma-citation="entities:20799:1" rel="noopener">Mitsui &amp; Co Ltd (8031 JP)</a> and Khazanah Nasional Bhd, Malaysia’s sovereign wealth fund.
1Q20 operating numbers were down and we expect April and May to be worse hit by the COVID19 lockdowns (which began in March). Non-urgent procedures had been postponed while supply chains were disrupted. We believe Singapore and Malaysia have seen their worst, while the worst is not yet over for India, Indonesia, and the Philippines. Other Asian countries like HK, Australia, and Japan are seeing higher COVID19 daily infections after reopening of their borders.
Medical tourists account for only 1/4 of Parkway Pantai’s Singapore revenue (with Indonesians accounting for the bulk of these medical tourists) and 6% for its Malaysia revenue. Semi-electives procedures have already picked up, according to management, despite borders still being closed. Elective procedures are also likely to return soon as there are no major communal spreads of virus in both Singapore and Malaysia, Parkway Pantai’s two key markets. We predict continuation of startup losses, albeit smaller, in Greater China. The possibility of finding a vaccine, hopefully by 1H2021 according to the WHO, may however spell some hope to the end of the havoc caused by the pandemic, but it may still take up till end-2021 or even 2022 to ensure sufficient supply to meet global demand.
We do not doubt Parkway Pantai’s ability to call PARKPT 4.25% Perp (7/22c) due in July 2022 on its financials and shareholders’ backing. The higher reset coupon should incentivize the Company to call, in our view. Based on 4.73% YTC at time of writing, PARKPT 4.25% Perp (7/22c) traded between a “B+” and a “BB-“credit, in our judgment. PARKPT 4.25% Perp deserves at least a “BB” rating, in our view,  on its financials and shareholders’ support which we believe will give the Perp at least a 73-bp upside. While there is an upside to be had, a high-yield perp such as PARKPT 4.25% Perp (7/22c) with a 4.7% yield to call should warrant a NEUTRAL recommendation, in our judgment.

We initiate our coverage of Parkway Pantai Ltd (0794727D SP) (Parkway Pantai), a wholly-owned subsidiary of IHH Healthcare (IHH MK) of which major shareholders include A3-rated Japanese conglomerate Mitsui &amp; Co Ltd (8031 JP) and Khazanah Nasional Bhd, Malaysia’s sovereign wealth fund.
1Q20 operating numbers were down and we expect April and May to be worse hit by the COVID19 lockdowns (which began in March). Non-urgent procedures had been postponed while supply chains were disrupted. We believe Singapore and Malaysia have seen their worst, while the worst is not yet over for India, Indonesia, and the Philippines. Other Asian countries like HK, Australia, and Japan are seeing higher COVID19 daily infections after reopening of their borders.
Medical tourists account for only 1/4 of Parkway Pantai’s Singapore revenue (with Indonesians accounting for the bulk of these medical tourists) and 6% for its Malaysia revenue. Semi-electives procedures have already picked up, according to management, despite borders still being closed. Elective procedures are also likely to return soon as there are no major communal spreads of virus in both Singapore and Malaysia, Parkway Pantai’s two key markets. We predict continuation of startup losses, albeit smaller, in Greater China. The possibility of finding a vaccine, hopefully by 1H2021 according to the WHO, may however spell some hope to the end of the havoc caused by the pandemic, but it may still take up till end-2021 or even 2022 to ensure sufficient supply to meet global demand.
We do not doubt Parkway Pantai’s ability to call PARKPT 4.25% Perp (7/22c) due in July 2022 on its financials and shareholders’ backing. The higher reset coupon should incentivize the Company to call, in our view. Based on 4.73% YTC at time of writing, PARKPT 4.25% Perp (7/22c) traded between a “B+” and a “BB-“credit, in our judgment. PARKPT 4.25% Perp deserves at least a “BB” rating, in our view,  on its financials and shareholders’ support which we believe will give the Perp at least a 73-bp upside. While there is an upside to be had, a high-yield perp such as PARKPT 4.25% Perp (7/22c) with a 4.7% yield to call should warrant a NEUTRAL recommendation, in our judgment.

Parkway Pantai: Good Brand with Limited Upside

Singapore

Parkway Pantai Limited provides health care services. The Company offers medical care, rediology, pathology, liver transplant, orthopaedic surgery, and rehabilitation services. Parkway Pantai serves patients worldwide.

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Parkway Pantai Ltd (0794727D SP)

Parkway Pantai: Attraction from Vaccination

Attractive valuation in expectation of a call in July 2022 and vaccination effects on the hospital visits across the border from Indonesia

Bondcritic

Parkway Pantai: Good Brand with Limited Upside

We initiate our coverage of Parkway Pantai Ltd (0794727D SP) (Parkway Pantai), a wholly-owned subsidiary of IHH Healthcare (IHH MK) of which major...

Bondcritic

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