Weekly bond recommendations. Blackfort.

Transcription

1 Weekly bond recommendations. Blackfort.

2 Global slowdown but Latin America should recover in 2019 and 2020 Before the opening of the WEF the IMF used to global platform to update its global growth outlook. It is the 2 nd time in three months that the global growth forecast was reduced by 0.2%. Globally GDP is expected to grow at around 3.5% in 2019 which is still a good pace but lower than in The good news for emerging market bond investors is that Emerging markets will continue to growth at around 4.5% outpacing the rest of the world. While China grew 6.4% in Q4 and continues to slow down South America is expected to recover over the next two years. From a low GDP growth of 1.1 percent in 2018 to 2.0 percent in 2019 and 2.5 percent in These are compared with Asia low figures, but compared to its recent history this is good news for the economy and for corporates. Over the last month we have seen in Latin America a spread tightening which resulted in positive returns for bond investors. We expect that bonds from South American companies will continue to perform well in South American bonds are up in January 2019 around 2-3% IMF expects weaker global growth, but Latin America recovers in 2019 an 2020 Generally speaking the negative IMF global growth outlook is good news for Emerging Market hard currency bonds. It forces the FED to be cautions with further rate hikes, which puts pressure on the overvalued US dollar. We expect that the dollar will depreciate over the coming months which comes as a tailwind for emerging market economies. The biggest risk to this positive outlook comes from the political side. Trade war, Brexit, protest in France, a fiscal deficit in Italy are just some of them. We still believe that the ECB and the FED might if needed flood the market with liquidity, i.e. a Powell and Draghi put. Fiscal stimulus is another source for positive surprises. China has decided to help the economy with public spending, the UK might be forced to do similar things in spring and the American president will as well try to stimulate the economy with further tax reductions. Overall this will hinder rates from rising and therefore we can collect attractive coupons which the market offers at the moment. 2

3 New Issue: UniCredit S.p.A. Investment Grade Corporate Bond Parameters: Country: Italy Industry: Banks Rating (Moody s): Baa3 / positive outlook Coupon: 6.572% Maturity: Indicative Bid-Ask: Yield to Maturity: 6.21% Issue Size: mln LTV: 70% Price Development: Company Profile: UniCredit is a global Italian banking and financial service company with total asset of EUR 834 billion as of September The offered services are consumer credit, mortgages, life insurance, business loan, investment banking, asset management and other services. Around 33% of its business is done in Italy. Germany, Austria and the rest of the European Union count for about 45% of the business volume. Around 20% comes from Eastern Europe. Financial Indicators: Total Assets: $ mln (H1 2018); $ mln (2017) Problem Loans/Gross Loans: 8.4% (H1 2018); 10.2% (2017) Net Interest Income: mln (H1 2018); mln (2017) Net Interest Margin: 1.33% (H1 2018); 1.3% (2017) Cost Income Ratio: 62.2% (H1 2018); 69.7% (2017) Tier 1 Capital Ratio: 12.4% (H1 2018); 13.0% (2017) Full version is available for clients and partners of Blackfort Capital. If interested, please Investment use the Rationale: conatcts form. At 13 November Moody s changes its credit outlook from a stable to a positive outlook. This upgrade is based on a sound capital buffer, a reduction in problem loans and its geographical global diversification. The problem loans in % of gross loans stood in 2015 at 15.4%. At the end of H the ratio was reduced to 8.4% and Moody s expect that in 2019 the ratio decreases to 7.5%. UniCredit is one of the largest European banks and one of the 30 global systemically important banks. In terms of loans it is the 2 nd largest bank in Italy behind Intesa Sanpaolo and has a market share of 12%. It is likely that the Italian government would support the bank in a credit crisis. Nevertheless Moody s stresses that there is no uplift in rating as Italy s Baa3 rating is already below UniCredit s. Equity analysts expect that the share price could rise around 50% based on a positive growth outlook and the expected further improvements in the balance sheet. We therefore consider this bond as a good way to invest in a investment grade bond with a higher yield. The equity buffer (tier 1 at 12.4%) and the expected earnings increase will be more than sufficient to fulfill the expected regulatory changes to hold more equity. 3

4 Update: Atento Luxco 1 Speculative / Emerging Market Bond Parameters: Country: Luxemburg Industry: Business and Consumer Service Rating (Moody s): Ba3 / stable Coupon: 6.125% Maturity: Indicative Bid-Ask: Yield to Maturity: 6.98% Issue Size: 400 mln LTV: 50% Price Development: Company Profile: Atento Luxco 1 is the market leader in business process outsourcing in Latin America and one of the leading outsourcing companies in the world in terms of revenue. The Company offers customer care, telesales and other back office outsourced services mainly to telecom operators and financial organizations globally. Financial Indicators: Revenues: $ mln (Q3 2018); $ mln (2017) EBITDA: $ 157 mln (Q3 2018) $ 162 mln (2017) EBITDA Margin: 8.4% (Q3 2018); 8.9%% (2017) Debt: $ mln (Q3 2018); $ mln (2017) Debt / EBITDA: 2.8x (Q3 2018); 2.7x (2017) Full version is available for clients and partners of Blackfort Capital. Investment Rationale: Atento is the largest business process outsourcing (BPO) and customer relationship management (CRM) provider in Latin America and it is one of the global leaders in this field. Almost 50% of its revenue is generated in Basil, where the company has a market share of around 30%. The company has a leading position in all markets where its active. The company kept its margin stable over the last three years although South America was in a downturn. The Brazilian operations have recovered in 2018 and will continue to grow over the next two years. The EBITDA margin improved slightly in 2018 and will further improve over the next two years. There is a service agreement with Telefonica in place which is valid until the end of 2023 and covers Brazil and Spain. Originally 50% of its net revenue was dependent on Telefonica. At the end of September 2018 the Telefonica revenue share was reduced to 38%, which shows that the global diversification strategy is working and the dependency of just one large client is decreasing. If interested, please use the conatcts form. 4

5 Update: Credito Real Speculative / Emerging Market Bond Parameters: Country: Mexico Industry: Banking Rating (S&P / Fitch): BB+ / BB+ stable Coupon: 7.25% Maturity: (Call ) Indicative Bid-Ask: Yield to Maturity: 7.08% Issue Size: 625 mln LTV: 40-50% Price Development: Company Profile: Credito Real is a leading Mexican credit bank. Its main activities are payroll loans (66% of portfolio), private loans through instant credits (16%), car loans (10%), loans for small and medium businesses (6%) and other services (2%). Credito Real basically serves the middle and low income segments of the population. The company also operates in the USA, Costa Rica, Panama and Nicaragua. Financial Indicators: Total Assets: $ mln (Q3 2018); $ mln (2017) Problem Loans / Performing Loans: 1.91% (Q3 2018) 2.36% (2017) Interest Income: $ 131 mln (Q3 2018); $ 105 mln (2017) Net Income Margin: 24.6% (Q3 2018); 19.6% mln (2017) Common Equity: 25.8% (Q3 2018); 34.9% (2017) Full version is available for clients and partners of Blackfort Capital. Investment Rationale: The company increased in 2018 its credit portfolio at around 30% until the end of Q3. All divisions were increasing but the main driver of this strong growth was a new pure leasing product. The financial revenue rose in the same period 27.4% while the net income margin increased from below 20% to almost 25%. Remarkable is that the default rate improved in almost all business segment. This is as well reflected in the problem loans to performing loans ratio which decrease to below 2%. We expect that due to the positive GDP growth outlook for Mexico and other Latin American markets the default rate of credit will continue to improve slightly. Compared to its competitors Credito Real has a good quality loan portfolio, a high level of capitalization and one of the highest profitability margin. If interested, please use the conatcts form. 5

6 Update: Tecnoglass Inc. Speculative / Emerging Market Bond Parameters: Country: Columbia Industry: Manufacturing Rating (Moody s): Ba3 / stable outlook Coupon: 8.2% Maturity: Indicative Bid-Ask: Yield to Maturity: 6.89% Issue Size: 210 mln LTV: 50% Price Development: Company Profile: Tecnoglass Inc. (TGLS) is a Colombian company, which manufactures and sells high-specification architectural glass and windows for both commercial and residential markets. The company offers its products throughout North, Central and South America. The company operates a large state-of-the art plant in Barranquilla Colombia, which is a strategically position to efficiently cover Colombia and the rest of the American continent. Financial Indicators: Revenues: $ 314 mln (2017); $ 305 mln (2016) EBITDA: $ 60.1 mln (2017) $ 70.9 mln (2016) EBITDA Margin: 19.1% (2017); 23.2% (2016) Net Debt: $ 191 mln (2017); $ 177 mln (2016) Net Debt / EBITDA: 3.1x (2017); 2.5x (2016) Full version is available for clients and partners of Blackfort Capital. Investment Rationale: TGLS not only has a competitive advantage in terms of labor costs but it is also operates a very innovative enterprise which offers high quality services and products. This manifests in a leading position in all the markets in which it operates. TGLS announced on January 11 that it has agreed to form a joint venture with Saint- Gobain SA (Baa2 stable) through a minority interest in Saint-Gobain s Vidrio Andino. Rating analysts expect that this has a positive impact on the credit outlook. Through the transaction TGLS will further strengthen its vertical integration by adding additional products to the value chain. The joint venture plans to build an additional factory to increase production capacity as the existing plant of Vidrio Andino is at full capacity. In 2017 the result was negatively impacted by the hurricanes, which resulted in a lower EBITDA and a higher leverage. In the first three quarter of 2018 in each quarter the revenue was significantly up. Over 3 quarter it increased from USD 230 mln to USD 271 mln. Analysts expect that with the revenue growth the EBITDA margin will as well increase to levels seen in The new joint venture adds an estimated sales of around USD 100 mln. 25% of it belongs to Tecnoglass and will be consolidated (equity method) in If interested, please use the conatcts form. 6

7 Contacts Blackfort Capital AG Freigutstrasse Zürich Switzerland Tel Fax info@blackfort.ch 7

8 Disclaimer These Bond Recommendations (hereafter «BR») are provided for information purposes only and for the use by the recipient. This document was produced by Blackfort Capital AG (hereafter «BF») with the greatest of care and to the best of its knowledge and belief. Although information and data contained in this document originate from sources that are deemed to be reliable, no guarantee is offered regarding the accuracy or completeness. Therefore, BF does not accept any liability for losses that might occur through the use of this information. The BR does not purport to contain all of the information that may be required to evaluate all of the fac tors that would be relevant to a recipient considering entering into any transaction and any recipient hereof should conduct its own investigation and analysis. In addition, the BR includes certain projections and forward-looking statements. Such projections and forward-looking statements are subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control. Accordingly, there can be no assurance that such projections and forward-looking statements will be realised. The actual results may vary from the anticipated results and such variations may be material. No representations or warranties are made as to the accuracy or reasonableness of such assumptions or the projections or forward-looking statements based thereon. This document is expressly not intended for persons who, due to their nationality or place of residence, are not permitted access to such information under local law. It may not be reproduced either in part or in full without the written permission of BF. Blackfort Capital AG. All Rights reserved. 8