FW: RHB FIC Credit Market Update - 12/8/14

12 August 2014

Credit Market Update

Range-bound Credit; Value on CTX 8/17

REGIONAL                      

¨      Asian credit on range-bound; Net selling in long-dated Chinese O&G. JACI Composite widened by 1bp (to 253.5bps) led by the IG (+1.5bps to 184.7bps) while the HY tightened by 1.1bps (to 482.8bps). The China space saw general marginal yield tightening though net selling in the SOE/Oil space led by long-dated CNOOC papers was observed. In Hong Kong, broad two-way flows were led by profit-taking in mid-to-long HUWHY papers. In the Singapore USD space, we also saw mixed flows, with buying in long-dated UOBSP, OCBCSP and DBSSP while selling in similar short-dated Bank/FI papers. The 10y UST marginally broadened by 0.7bps to 2.42% amid speculation by investors on whether the turmoil in Ukraine might escalate

¨      SGD swaps curve retraced higher (+2bps to +3bps) amid softer safe-haven demand while the 3y/5y spread steepened to 62.6bps (from 61.8bps). In the credit space, we saw interest in short-dated high yield papers, like EZRASP 15 and SWIBSP 16.

MALAYSIA

¨      MYR secondary credit active on GRE. Corporate spaces recorded another day of vigorous activities with MYR671m trading volumes. Transactions were focused in mid-long duration. We saw GRE names led yesterday activities (43% of total volumes) – Prasarana 5/18 and 3/19 closing at 3.885% (-6.4bps) and 3.969% (+0.2bps) respectively on combined trades of MYR135m; while Khazanah saw MYR40m changed hands realigned 41.6bps upwards to 4.416% since last traded on 3-Jul-12. A series of Kimanis 8/23-8/26 traded downward to end the day at 4.801%-4.999% although we also saw Kimanis 8/21 inched 20bps upward to 4.675% with cumulative MYR116m reportedly done.

TRADE IDEA: MYR

Bond	Celcom Networks (CTX) 8/17 (RAM: AAA) (Last Traded: 08-Aug-14; Price: 98.55; Yield: 4.111%; 3y-MGS+c.65bps)
Comparable(s)	Cagamas 9/17 (RAM: AAA) (Last Traded: 11-Jul-14; Price: 98.78; Yield: 4.015%; 3y-MGS+c.55bps) TNBNE 5/17 (MARC: AAA) (Last Traded: 14-Jul-14; Price: 98.96; Yield: 3.936%; 3y-MGS+c.48bps)
Relative Value	We initiate a call on CTX 8/17 which offers c.13bps above the BNM indicative yield curve (BNM AAA 3y: 3.984%) and c.65bps pickup relative to 3y-MGS. Supported by its strong fundamental, we opine that the paper was traded cheaply relative to the AAA space and for its sweet and nice duration play.
Fundamentals	From credit perspective, Celcom possesses solid fundamentals: 1)   Dominant market shares within the domestic market with 13.3m subscribers in Mar 2014 exceeded Maxis and Digi subscribers of 12.4m and 11.0m respectively. 2)   Robust debt repayment capability supported by its stable and strong revenue generation on EBITDA of MYR3.56bn, coupled with comfortable debt-to-EBITDA of 1.4x in FY13 (compared to Maxis’ 1.7x and DiGi’s 0.3x) 3)   Strong ultimate shareholder as Khazanah owns 38.88% of Axiata in 2013.