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1、Global 10 December 2012 Emerging Market Corporates Weekly Monitor: Flow while cash coverage remains weak at 0.2x though the company was recently upgraded to IG by Moodys. DEWAs AED3.2bn sukuk is due Jun-13 which has reduced liquidity and increased new supply risks, though this is more a consideratio
2、n for 2013 in our view. The company has unutilised committed lines available which we estimate at USD1bn. We see most value in the DEWA 7.375% 2020s due to their relative underperformance vs. the rest of the curve and Dubai sovereign bonds. Following the full recovery of negative capital in 2011, AL
3、B continued its improving fundamental trend in 1H12. Steadily growing core revenues, recovering NIM and adequate liquidity underpin our Positive outlook for this credit. We view potential merger with Temirbank and possible entry of EBRD as a new shareholder as future additional positive catalysts fo
4、r the story. We believe that notwithstanding the news, the improving performance of the “good“ bank and gradual fading of the “bad“ bank in ALLIBKs structure would provide a boost to the bonds valuations. We maintain ALLIBK 10.5% 17 senior notes as our Buy pick. Downside risks: further deterioration
5、 of the asset quality resulting in prolonged loss-making, default of its ultimate parent, acquisition by a weaker rated player, stand-alone rating downgrade. AlfaBankAlfaBank We view Alfa-Bank (AB) as a flagship financial institution amongst the Russian private banks universe, with well established
6、corporate banking franchise, growing SME business and considerable retail deposit base. We believe that AB has done relatively better versus even larger state-owned peers in reducing its bad loan exposures over the past two years and is on a strong footing to maintain in-line-to-slightly-above secto
7、r average growth rates in 2012 despite potential pressure on CAR. Despite the rally following an upgrade to IG, we still see value in ALFARU 7.875% 17 and 7.75% 21 and recommend Buying, while we keep the 8.5% 15, to Hold, 9.25% 13 and sub-notes 7.5% 19 on Hold. Downside risks: sharper than expected
8、CAR deterioration, spike in related party exposures and NPLs, significant reduction of NIM and prolonged RUB weakness. Upside risks: partial LLP reversal, merger with a top-30 bank in Russia, faster than expected retail loans growth, improvement in loans/deposits ratio. We believe that fundamentally
9、, ATF Bank has the relatively stronger potential to recover its bad loans and turnaround its balance sheet in 2H12 amongst top-ranked peers. In our view the fact that ATFBPs bond displays the highest yield across CEEMEA “BB“ universe is appealing. We believe that the recent capital injection would a
10、llow the bank to ramp up its LLP levels as it continues with NPL work-out efforts, which should ultimately gain more weight in positively affecting the bond valuations. We favour ATFBP 9.25% 14 on an RV basis vs. domestic peers. Our Stable credit view of Avangard is underpinned by the companys succe
11、ssful operating track-record, robust leverage metrics, sufficient cash generation to cover its near-term capex needs. The company has one of the strongest liquidity ratios amongst the entire HY corpoate universe in CEEMEA. This is contingent though on the development of the macroeconomic conditions
12、in Ukraine and potential softening of the domestic food prices. Having said that we believe that following the steep rally in Jun-Nov-12 AVINPU 10% 15 has recently visibly undererformed vs. Ukraine corporate bonds. We consider this as a buying opportunity in light of the stabilisation of sovereign s
13、preads after the new government bond issue on 19- Nov. Though BBVA Bancomers 3Q12 reflected what we believe could be early signs of renewed operating momentum, with net interest income (NII) from the banking operation increasing 4.6% qoq and 10.6% yoy to MXN18,741m in 3Q12 driven mainly by higher lo
14、an volumes. Banking net interest margin (NIM) declined slightly to 6.0% but was improved from 5.9% a year ago. Pre-provision income grew 4.3% qoq and by 12.2% yoy to MXN 15,346. Loan loss provisions increased by a large 14.2% qoq and by 8.1% yoy, potentially setting the stage for improved net income
15、 in the coming quarters. With NPL/total loans at 3.5%, a CAR at 15.9%, loans/deposits at 100.9% with very healthy coverage ratios and with a NIM of in the 6% range and ROE of 20% range, and a very low FRR, Mexicos premier bank franchise remains among the most solid banks in our universe. We believe
16、that the agreement in the EU to recapitalize Spanish banks and create a pan-EU bank oversight function have removed an external impediment for spread tightening. As such, we believe the spread compression for Bancomers subordinated notes that has been taking place since Sep should continue. Bicbanco
17、 reported 3Q12 results below market expectations on still rising NPLs and low profitability. Despite the disappointing figures, the bank has continued to register robust capital adequacy as well as liquidity profile. In addition, we believe it will be a matter of time before the bank presents health
18、ier credit metrics. Hence, we maintain our Buy recommendation on the 20s as we continue to believe they trade too wide in relation to other similarly rated Brazilian mid-sized banks. Source: Deutsche Bank 10 December 2012 IG Multi Sector Emerging Market Corporates Page 6 Deutsche Bank AG/London Figu
19、re 7: Rationale and risks factors to our recommendations (cont.) DP World Evraz Gerdau Halyk Bank Hyva JBS Kazkommertsbank Lukoil Metinvest DP World Evraz Gerdau Halyk Bank Hyva JBS Kazkommertsbank Lukoil Metinvest Risks for JBSs sell recommendation include: a faster than expected reduction in grain
20、 prices and increased cattle and hog availability in the US over the short, medium and long term resulting in higher than expected margins and cash generation and better credit metrics than we expect. Since JBS consolidates its Australian and US operations without separate disclosures, it can be dif
21、ficult to predict operating and financial trends. We view the fundamental outlook over the next 6-12months as negative for Metinvest, though this would be expected by the market for the sector as a whole, due to the challenging price/demand back-drop for its products. Net leverage could rise to 2.0x
22、 by year- end (from 1.3x in 1H12), in our view, on weaker profitability and cash generation as cost pressures are not likely to subside. We have assigned a Sell recommendation on the METINV 10.75% 2015s due to their relative richness in price and spread vs. Ukrainian peers. KKB has disappointed us w
23、ith its lacklustre 3Q12 results, which indicate that there have been no significant improvements in the banks underlying performance for the past year. Additionally, we were alarmed with NPLs reaching the highest level in three years and balance sheet liquidity remaining the weakest amongst top-5 ba
24、nks in the country. In our view, the recent outperformance on KKB curve is fundamentally unjustified and we recommend taking profits (SELL) on KKB senior $ notes 7.875% 14, 8% 15, 7.5% 16 and 8.5% 18. Hyvas geographically diversified revenue base gives us comfort in times of weakness in the macro ec
25、onomy. Improvement in the credit ratios should be gradual, in our view, and is likely to happen over a multi-year period driven by operational performance. We do not expect any notable debt additions to its balance sheet in the medium term given that its annual capex budget of c.US$5-10mn can be man
26、aged by operating cash flow and constraints under its FCCR covenant. Key downside risks include: 1) weaker revenue contributions from China leading to a deterioration in credit metrics and 2) management not being able to reverse WC cash outflows. Gerdau reported disappointing 3Q12 results reflecting
27、 weak operations in all its business units, with the exception of Brazil. This poor operational performance resulted in declining margins, higher leverage and tightening liquidity in the quarter. In addition, the company announced it has ceased its efforts to identify a strategic partner for its iro
28、n ore assets. While this might be positive in the longer run, we believe possible higher capex requirements might weigh on the companys leverage and liquidity in the short-term. Gerdau 21s trade significantly tighter than similarly rated peers such as CSN and we do not see any credit fundamental rea
29、son that could support this spread divergence. In addition, Gerdaus curve is inverted with the 21s trading tighter than the 20s and 17s. We expect this distortion to be corrected over time and believe Gerdau 21s should trade at similar levels as CSN 20s. Risks for Gerdaus 21 sell recommendation incl
30、ude: better-than- expected results beyond our expectations; significantly lower-than- expected capex requirements for the development of Gerdaus mining operations; better-than-expected improvement of the US and Brazilian economies. Upside risks: sale of a sizeable NPL portfolio, acceleration of grow
31、th in lending, ratings upgrade, improvement in investor sentiment relating to the European debt crisis. DP World has displayed continued improvement in fundamentals over the recent quarters, which resulted in the visible strengthening of its business case and creditworthiness. Rising capacity utiliz
32、ation rates and stable EBITDA margin have been driven by capacity expansion and increasing cost efficiencies. The recent reduction of ST debt to below 5%, together with improving FRR, supports our expectation of sustainable future cash flows and sufficient room for the company to absorb any potentia
33、l new borrowing needs. We believe that the recent relative outperformance of DPWDU 6.25% 17 vs. sovereign bonds of similar maturity would continue making the bonds look attractive, while we keep DPWDU 6.85% due 2037 on Hold. Downside risks include: slower than expected recovery of US and European ec
34、onomies, inability to improve self-sufficiency in coking coal, negative shifts in global commodity prices and ramp- up of capex programme. Evraz has successfully increased and maintained its cash coverage of ST debt above 1x since the start of 2011; eliminating near-term refi risks. Evraz less aggre
35、ssive capex programme provides them with a strong ability, in our opinion, to generate FCF growth in 2H12. We believe therefore that Evraz bonds offer value in the long-end over Severstals and view the current spread premium and underperformance as overdone. The EVRAZ 7.4% 2017 offer a good entry po
36、int for investors; hence our top Buy pick. The nature of Evraz product mix and sales channels allows it to benefit most from any boost in domestic construction activity and should help shield the company from the challenging global pricing environment. Downside risks to our recommendation include es
37、calation of geopolitics in MENA region, sharper than expected global economic slowdown, delays with the projects nearing completion, spikes in leverage. Upside risks: increase in the international trade flows, faster recovery of Dubais economy and real estate sector, improving investor sentiment tow
38、ards Dubai- based government related entities. During 2012, JBS operating performance was hindered by results in its US division. The unit has struggled with raw material cost increases though this drag on cash generation has been partially offset by much more favorable operating conditions from JBS
39、 Mercosul, accounting for almost 60% of consolidated EBITDA (only roughly of revenues). We believe that the cost and availability scenario will remain challenging for the core US operations in the coming quarters and with LTM net leverage already at 4.27x and cash/ST debt of only 1.1x, JBSs bonds ap
40、pear expensive relative to HY sector peers in our view. Main upside risks: improved cash balances, reduction in steel sector investments, significant rise in price/demand for steel products from export markets and larger than anticipated (+10%) UAH devaluation reducing cost pressures. The main upsid
41、e risks arise from material growth of Brent oil prices, deceleration of fears of UST correction together with intensified search for yield in GEM. Downside risks include: deterioration of taxation regime for O particularly as in 3Q the company benefited from a WC release which is unlikely to be repe
42、ated in 4Q. By the end of FY13, we estimate cash on B/S would be a lesser cUSD1bn and we anticipate this level of liquidity to be maintained in the long-term. This means that the companys historic strong cash buffer will be reduced, eliminating its edge over peers; though 2014 and 2015 repayments ar
43、e small in size. Upside risks include: (i) use of internal cash for ST debt repayments and deleveraging, (ii) a revival of steel product demand in Southern Europe/China helping boost export revenues and (iii) reduction in capex programmes boosting FCF. Upside risks: significant improvement of the ba
44、nks earnings that could result in rating upgrades, further capitalization measures from the its main shareholders, positive regulatory changes from Brazils Central Bank. Reliance Industries (RILIN) is a leading integrated energy company in the areas of oil and gas, petroleum refining and petrochemic
45、al manufacturing. We see RILIN as a strong BBB credit which offers value as being the widest BBB-rated integrated energy credit currently. More specifically for RILIN, we believe the credit offers investors some shelter against the uncertain macro/political backdrop in India for the following reason
46、s: a) we think the risk of an India sovereign downgrade is more or less priced in, b) RILINs strong stand alone credit standing and c) our expectation that RILIN will be able to maintain its current rating even if India is to be downgraded by a notch. The turnaround of Panamericanos results has been
47、 taking longer than expected and the bank continues to report losses as well as high NPLs (the banks NPL ratio overdue by more than 90 days stood at 6.2% in 3Q12). The notes, nonetheless, have been trading based on the banks strong shareholder structure with BTG Pactual and Caixa Economica Federal a
48、s Panamericanos main shareholders. Following a strong performance YTD, we believe there is little tightening potential for BCOPAN 8.5% notes due in 2020 at this stage, hence we maintain our Sell recommendation. Moreover, we believe there is currently more attractive opportunities within the Brazilia
49、n mid-sized banking industry. MTS continues to demonstrate its operational excellence and ability to withstand intensifying competition and challenges it is still facing in Uzbekistan. We believe the market pricing of MOBTEL 8.625% 20 has not yet reflected increasing financing needs of the company and the bond continues to outperform those of other Russia-based credits with similar maturities, even those that are higher-rated. At the same time, we believe that heightened financing needs of the company should start to filter through to bond valu