19 August 2015
Credit Market Update
Weaker
Credits Before FOMC Minutes; Strong Demand for New OCBC SGD AT1; ANZ B3T2
3/24c19 to be Boosted by Rights Issue
APAC USD CREDIT MARKETS
¨
Weakness in IG
& HY space ahead of FOMC minutes. The
iTraxx AxJ IG crept up over 1bp to 118.6 reflected by the high volatility
in the Chinese equities markets yesterday. Meanwhile, the UST yields increased
as the 10y added 4bps to c.2.20% on the better housing market in July as
housing starts of 1.21m (consensus: 1.18m ;prior: 1.17m).
¨
In the
secondary markets, IG and HY yields widen 2-15bps to 3.24% and 9.7%
respectively. We continue to see
sustained weaknesses in IG and HY commodities names like Noble 18-20, CNOOC
35-43, Sinopec 45, CNPC 25, Vedanta Resources 16-23, Yingde Gases 18, China
Hongqiao 17, Indo Energy 23 and MIEHOL 19. Separately, we observed that yields
of Noble 18-20s widen as much as 2pp on news that it may consider selling its
core assets.
¨
In the primaries,
ICTSI (NR) received USD1.8bn orders for its USD450m Perp, priced
at 5.5% (IPT: 5.75%). Similarly, BOCOM (A2/A-/A, Sta) priced its USD 5y
bond at T+165bp (IPT: +190bp) with a BTC of 4.4x, mainly taken up by Banks
(66%) and Fund Managers (18%). Lastly, SMC Global Power (NR) may price
its USD Perp NC5.5 with an IPT of 6.75%.
¨
On key economic
data releases, all eyes will be on tonight’s FOMC meeting minutes and the CPI
(consensus: 0.2% m-o-m) data.
¨
SGD CREDIT MARKETS
¨ Risk-off sentiment as China & commodity concerns
dominate headlines. We observed a parallel
decline in the short-to-mid SOR curve, with the 2y and 5y dropping by 2.5bps to
1.68% and 2.27% respectively, after mostly widening since last week
post-surprise CNY devaluation. There were more sellers in the O&G space on
names like NCLSP, MIOAU and EZRASP which traded wider by over 10bps as
commodity prices tumbled further (Brent closing at c.USD49/bbl) and headwinds
to the Chinese economy, with the Shanghai Composite Index losing around 6%
yesterday. Correspondingly, safe-haven flows were seen with HDBSP 19-22’s
yields tightening by 3-5bps. In the primaries, Aspial Corp (NR), a
jeweler cum property developer, is printing a SGD5y at initial guidance of
5.25% while OCBC (AA1/AA-/AA-, Sta) printed its SGD500m AT1 Pnc5
at a final price of 3.8%, 20bps inside initial guidance with 4.0x
oversubscription.
MYR
CREDIT MARKETS
¨
Short-term
credit yields rose. Better flows of
MYR737m in the corporate space yesterday fueled by short-tenure papers which
generally settled the day on widening trend. Notably, AA1-rated CIMB Group
Holdings 12/15 saw MYR210m exchanged hands at 4.125% (+7bps). Elsewhere, KLIA
1/16 widened 22bps to 3.74% while Tanjung BP 8/19 increased 14bps to 4.568%.
¨
MGS market
ended mixed on tightening bias along
with recuperating Ringgit. We saw the 5y and 10y benchmarks slipped 3bps to
4.02% and 4.28% respectively; although the 7y-MGS closed higher than the 10y
yield at 4.29% (+6bps). Muted activity on the 3y-MGS which ended the day at
3.62% (-2bps).
¨
TRADE IDEA: USD
|
Bond(s)
|
ANZ B3T2 4.5% 3/24 (A3/BBB+/A+)(Price:
101.67, YTM: 4.265%; z+219bps)(Amount O/S: USD800m)
|
|
Comparable(s)
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OCBCSP B3T2 4.25%
6/24
(A2/BBB+/A+)(Price: 102.03, YTM: 3.974%; Z+188bps)(Amount O/S: USD1.0bn)
|
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Relative Value
|
We see value ANZ
B3T2 3/24 which offer attractive 29bps pickup over OCBCSP B3T2 6/24,
rated similarly by both S&P and Fitch. In addition, ANZ B3T2 offers
better PONV premium of 90bps over its B2T2 (vs. OCBC’s PONV premium of
45bps).
|
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Fundamentals
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ANZ recently
announced a AUD3bn capital raising plan, in order to strengthen its capital
amid the higher risk weight for residential mortgage from 16% to 25% by
Jul-16, which would reduce ANZ’s CET1 by 0.56%, estimated based on AUD271bn
housing loan as at FY14. We view that the AUD3bn capital raising is estimated
to increase the CET1 by 0.78%, sufficient to offset the impact from the
stricter capital requirement.
Fundamentally, ANZ
possesses a healthy credit profile supported by:
1)
Strong domestic presence with estimated loan
market shares of c.16%;
2)
Healthy asset quality with NPL of 0.44% and LLC of 163%;
3)
Strong capitalization with CET1, T1 and RWCAR of 8.7%,
10.6% and 12.6% based on APRA stricter definition. Adjusting to international
comparison, CET1, T1 and RWCAR stood at 12.4%, 14.7% and 17.1%
respectively. In addition, ANZ capitalization to strengthen further with the
recently announced AUD3bn right issue plan, estimated to +78bps to CET1).
However,
4)
LDR is still high at 103%, where 33% of
funding are from wholesale funding. Nevertheless, liquidity
coverage ratio remain comfortable at 119%.
5) Low commodity prices could pose
pressure to ANZ’s asset quality where the group exposures in the
agricultural/forestry/fishing and mining sector consist of c.6% of the loan
book in FY14.
*all data as of Mar-15.
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¨
CREDIT UPDATE
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Company/Issuer
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Sector
|
Country
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Update
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RHB FIC View
|
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Swiber
Ltd (NR)
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Oil
& gas services
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SG
|
The O&G player
saw its 2Q2015 revenue fall by 8.7% to USD200.2m while registering a net
loss of USD3.2m (from a USD10.1m net profit in 2Q2014, though if one-off
gains such as disposal of associate and forex gains are stripped away, it
would come in a net loss of USD2m).
|
Underweight on
credit. Swiber’s
liquidity position continues to be precarious, with its cash balances
(USD122.3m) insufficient to cover its ST borrowings (USD246.6m). It’s most
looming paper is its SGD76.5m outstanding perpetual with a call-date on
25-Sept-2015. If not called, it will be slapped with coupon step up of SOR3y
(c.1.9%) +12.035%, a c.420bps step-up from the current 9.75% coupon. It is
currently trading at prices of around 93.95/96.05. Nevertheless, Swiber’s
position is buffeted somewhat by its strong orderbook of USD1.7bn, though it
is understood that profit margins will be tight as it bid quite aggressively
for its contract wins this year (some contracts understood to be close to
30% lower than the next lowest bid).
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