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

In this month’s “In-Focus” section, we provide an update to our 2018 analysis of returns and volatility for unrated Chinese issuers. Since our first report, the number of such issuers has increased notably. At the same time, with the Lucror Chinese Industrial index having run since 1 January 2018, we can now better compare the unrated issuers' performance relative to peers. The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.

  In this month’s “In-Focus” section, we provide an update to our 2018 analysis of returns and volatility for unrated Chinese issuers. Since our first report, the number of such issuers has increased notably. At the same time, with the Lucror Chinese Industrial index having run since 1 January 2018, we can now better compare the unrated issuers' performance relative to peers.   The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.  

Asia HY Monthly - Returns And Volatility For Unrated Chinese Issuers (2020) - Lucror Analytics

The Asia HY Trade Book for the month of October includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative value charts and lists of the bonds in the Lucror Asia HY index.

  The Asia HY Trade Book for the month of October includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative value charts and lists of the bonds in the Lucror Asia HY index. 

Asia HY Trade Book - October 2020 - Lucror Analytics

ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

A call with <a href="https://www.smartkarma.com/entities/bank-mandiri-persero-tbk-pt" target="_blank" data-smartkarma-citation="entities:441:1" rel="noopener">Bank Mandiri Persero (BMRI IJ)</a> revealed a relatively positive message on a number of fronts, which came as a rare positive surprise. 
The bank has made good progress on asset quality, with growth in restructured loans flattening out with no change since the end of 2Q2020. There was no resurgence of problem loans since new PSBB measures were imposed and we have now just returned to the new normal. 
<a href="https://www.smartkarma.com/entities/bank-mandiri-persero-tbk-pt" target="_blank" data-smartkarma-citation="entities:441:1" rel="noopener">Bank Mandiri Persero (BMRI IJ)</a> remains confident that credit costs are like to come in at the lower end of its FY2020 guidance at 2.5%.
Loan growth between June-August has been weak with a declining balance due to early repayments in the corporate segment, with some SOEs receiving funding from the government, which they have used to repay loans with banks.  
Retail lending has been quiet although there has been some pick up in mortgages and some improvement in auto loans. 
The bank has significantly reduced its time deposit rates to around 3.5% with a 200bp reduction, which will feed through to higher net interest income, especially in 4Q2020. 
We also look at the potential listing for the bank's Syariah business in the not too distant future. 
<div class="content-highlight">
<a href="https://www.smartkarma.com/entities/bank-mandiri-persero-tbk-pt" target="_blank" data-smartkarma-citation="entities:441:1" rel="noopener">Bank Mandiri Persero (BMRI IJ)</a> is trading on 1.3x FY2020E PBV versus its 5-year average of 1.8x, with its ROE forecast to recover to 12.7% in FY21E on the back of a +61.8% EPS growth. The announcement of the new management team and its 3Q2020, will both provide positive catalysts over the next month. The fact that credit costs are under control should be a further positive catalyst for the bank. 
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A call with Bank Mandiri Persero (BMRI IJ) revealed a relatively positive message on a number of fronts, which came as a rare positive surprise. 
The bank has made good progress on asset quality, with growth in restructured loans flattening out with no change since the end of 2Q2020. There was no resurgence of problem loans since new PSBB measures were imposed and we have now just returned to the new normal. 
Bank Mandiri Persero (BMRI IJ) remains confident that credit costs are like to come in at the lower end of its FY2020 guidance at 2.5%.
Loan growth between June-August has been weak with a declining balance due to early repayments in the corporate segment, with some SOEs receiving funding from the government, which they have used to repay loans with banks.  
Retail lending has been quiet although there has been some pick up in mortgages and some improvement in auto loans. 
The bank has significantly reduced its time deposit rates to around 3.5% with a 200bp reduction, which will feed through to higher net interest income, especially in 4Q2020. 
We also look at the potential listing for the bank's Syariah business in the not too distant future. 

Bank Mandiri Persero (BMRI IJ) is trading on 1.3x FY2020E PBV versus its 5-year average of 1.8x, with its ROE forecast to recover to 12.7% in FY21E on the back of a +61.8% EPS growth. The announcement of the new management team and its 3Q2020, will both provide positive catalysts over the next month. The fact that credit costs are under control should be a further positive catalyst for the bank. 


Bank Mandiri Persero (BMRI IJ) - A Plethora of Good News

Asia Fixed Income Analyst

Derek Silva

A classic book of the Tibetan Dzogchen tradition, The Flight of the Garuda, uses the sacred eagle which can immediately take flight upon leaving the egg as a symbol of its practitioners also being able to break free. Just as the bird is ready as soon as the egg splits open, Indonesia’s Garuda Airlines is eager for travel restrictions to crack and open up the skies again.  The timing of Covid-19 was particularly brutal for Garuda, as it was making preparations at the turn of the year to launch a new bond issue to refinance the 5-year bond which was maturing in June 2020. It had made a nice turnaround to a small net profit in FY 2019 after loss the prior two years and its EBITDA also had a strong rebound.But instead of a new bond to replace the old one, Garuda had to cancel the bond sale and was forced to amend and extend its bond by three years to 2023. It could be worse: just this week, Malaysia Airlines <a href="https://www.reuters.com/article/idUSKBN26N0UQ" target="_blank" rel="noopener">reportedly sent a letter</a> to lessors that the group is unlikely to be able to make payments owed after November unless it receives more State funding.Garuda is counting on a rebound in domestic travel to come to the rescue. And, speaking of rescue, the government has already agreed to provide financial help, with more details coming in the next month. So, with the bonds priced well below par in the 68-area and a yield-to-maturity (2023) at around 23%, it’s tempting to take a punt, right? Not quite. While Garuda isn't heading for a full-blown default like Thai Airways, there are still enough risks to keep us on the sidelines. It looks fairly priced for the risks that remain.

A classic book of the Tibetan Dzogchen tradition, The Flight of the Garuda, uses the sacred eagle which can immediately take flight upon leaving the egg as a symbol of its practitioners also being able to break free. Just as the bird is ready as soon as the egg splits open, Indonesia’s Garuda Airlines is eager for travel restrictions to crack and open up the skies again.  The timing of Covid-19 was particularly brutal for Garuda, as it was making preparations at the turn of the year to launch a new bond issue to refinance the 5-year bond which was maturing in June 2020. It had made a nice turnaround to a small net profit in FY 2019 after loss the prior two years and its EBITDA also had a strong rebound.But instead of a new bond to replace the old one, Garuda had to cancel the bond sale and was forced to amend and extend its bond by three years to 2023. It could be worse: just this week, Malaysia Airlines reportedly sent a letter to lessors that the group is unlikely to be able to make payments owed after November unless it receives more State funding.Garuda is counting on a rebound in domestic travel to come to the rescue. And, speaking of rescue, the government has already agreed to provide financial help, with more details coming in the next month. So, with the bonds priced well below par in the 68-area and a yield-to-maturity (2023) at around 23%, it’s tempting to take a punt, right? Not quite. While Garuda isn't heading for a full-blown default like Thai Airways, there are still enough risks to keep us on the sidelines. It looks fairly priced for the risks that remain.

In this month’s “In-Focus” section, we consider China’s new Three Red Lines leverage guidelines for developers, which have been rolled out on a limited basis. We also look at the context for the policy’s introduction and its implications on credit access for industry players at large.  The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.

  In this month’s “In-Focus” section, we consider China’s new Three Red Lines leverage guidelines for developers, which have been rolled out on a limited basis. We also look at the context for the policy’s introduction and its implications on credit access for industry players at large.    The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.  

Asia HY Monthly - China's Three Red Lines - Lucror Analytics

Indonesia

Garuda Indonesia is the flag carrier of Indonesia, providing full-service passenger and cargo air transportation across domestic and international routes. Its services also include aircraft maintenance and overhaul, catering, ground handling, and information system services. The company is headquartered in Jakarta, Indonesia, and was founded in 1949.

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Garuda Indonesia (GIAA IJ)

Asia HY Monthly - Returns And Volatility For Unrated Chinese Issuers (2020) - Lucror Analytics

In this month’s “In-Focus” section, we provide an update to our 2018 analysis of returns and volatility for unrated Chinese issuers. Since our...

Lucror Analytics

Asia HY Trade Book - October 2020 - Lucror Analytics

The Asia HY Trade Book for the month of October includes a summary of our recommendations, as well as our high-conviction ideas. The report also...

Lucror Analytics

Bank Mandiri Persero (BMRI IJ) - A Plethora of Good News

Bank Mandiri management has revealed better than expected progress on loan restructuring plus a number of other positives including rapidly falling...

Angus Mackintosh

The Plight of the Garuda

A classic book of the Tibetan Dzogchen tradition, The Flight of the Garuda, uses the sacred eagle which can immediately take flight upon leaving...

Derek Silva

Asia HY Monthly - China's Three Red Lines - Lucror Analytics

In this month’s “In-Focus” section, we consider China’s new Three Red Lines leverage guidelines for developers, which have been rolled out on a...

Lucror Analytics

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