Tuesday 13 March 2018 by FIIG Research Company updates

Company updates – Axsesstoday, Bristow, CML, Dicker Data, Emirates NBD, Frontier, Genworth, IMF Bentham, Mallinckrodt, Pioneer, PMP

This week, CML raises AUD136m via institutional placement, Dicker Data FY18 guidance, Emirates NBD opens up to foreign investors, Frontier downgraded and USD1.6bn tender offer, Genworth on banks’ watch list, new DirectBonds from Bristow, JCP and Commbank, and results from Axsesstoday, IMF Bentham, Mallinckrodt and PMP. The latest new issue bond is from Pioneer Credit with a AUD40m floating rate note offering

Please note all indicated prices are accurate as of 13 March 2018, subject to change.

Axsesstoday half year results

We have provided a research report on Axsesstoday Group (Axsess) 1H18 results and reiterate our recommendation on Axsess’ 7.50% bond due 2021 and BBSW+6.50% bond due 2022.

Key points:

  • Axsess reported strong 1H18 earnings supported by robust growth in receivables balance. Net receivables increased to AUD256.7m at 31 December 2017 from AUD167.5m at 30 June 2017, representing a 53% increase
  • The 1H18 reported net profit after tax was AUD3.2m, which is a significant increase from AUD1.6m net profit after tax reported in 1H17
  • The company has provided preliminary earnings guidance for FY18 of AUD7.0m
  • Axsess has built strong customer relationships, which is evident through its recurring income figures. Recurring income refers to revenue generated through repeat customer business

Please see the full report on the FIIG website available to wholesale clients only. The Axsess 7.5% bond and BBSW+6.5% bond is available at yield to worsts of 2.59%pa and 2.04%pa, respectively.

Read our Axsesstoday research compendium report*

CML capital raising

On 6 March 2018, CML Group (CML) announced that the company has raised AUD13m (before costs) via a placement of 26m shares to institutional and sophisticated investors. The new shares were issued at 50 cents, which is a very small discount to the closing price a week prior of 51 cents. We believe that this shows investors believe in CML’s growth prospects.

According to the company, the proceeds from the placement will be used to strengthen its balance sheet following acquisition of Thorn Groups’ Trade and Debtor Finance business and working capital for the company 

Read our CML research compendium report here*

Dicker Data FY18 guidance

On 5 March 2013, Dicker Data provided full year to December 2018 guidance as below:

Source: company reports

Dicker Data 2018 figures are in line with FIIG’s forecasts of AUD1.36bn and AUD39.5m revenue and net profit after tax (NPAT), respectively.

Read our Dicker Data research compendium report here*

Emirates NBD to open up for more foreign shareholders

On 11 March 2018, Bloomberg reported Emirates NBD PJSC (Emirates) plans to open up for more foreign shareholders as it prepares a bid for Turkey’s DenizBank AS.

In a released statement, Emirates is seeking shareholder approval to boost its foreign ownership limit to 20 percent from 5 percent. It also plans to raise capital by about USD2bn from an issue of new shares at no less than a 10 per cent discount to the market price.

The Emirates NBD 4.75% February 2028 bond, rated A3 by S&P, is available at a yield to worst of 4.52%pa.

Frontier downgrade and tender offer

On 7 March 2018, Moody’s Investors Service (Moody’s) affirmed Frontier Communications Corporation’s (Frontier) B3 corporate family rating, B3-PD probability of default rating, and B2 senior secured rating.

Moody’s also assigned a B3 (LGD4) rating to Frontier’s proposed USD1.6bn of second lien secured notes. The rating agency downgraded Frontier’s unsecured rating to Caa1 from B3 as a result of the introduction of the second lien creditor class and the resulting incremental subordination. The company’s unsecured notes include bonds traded at FIIG as listed below.

Moody’s also changed Frontier’s outlook to stable as a result of this refinancing transaction, which in conjunction with the recent dividend cut, improve Frontier’s liquidity relative to its debt maturity profile. In its update, Moody’s notes that, ‘Frontier has meaningfully reduced refinance risk by eliminating its dividend and extending its maturity runway as a result of its second lien debt raise and ongoing bond tender. These actions have created flexibility and more time to focus on improving the underlying operations”.

On 12 March 2018, holders of the following Frontier senior notes should have received an email regarding Frontier’s offer to purchase and consent solicitation. The listed bonds are all rated B- by S&P.

  • 6.250% notes due 2021 – YTW 9.25%pa
  • 9.250% notes due 2021 – YTW 9.62%pa
  • 8.500% notes due 2020 – YTW 8.21%pa
  • 7.125% notes due 2023 – YTW 17.31%pa

Frontier is offering to purchase various bond securities including the above notes at a premium, up to a maximum aggregate consideration of USD1.6bn. Frontier intends to buy back its securities, particularly targeting its 2020 and 2021 maturities. The purpose is to address maturities and reduce the company’s current overall interest expense.  

For more information about this offer, please contact your relationship manager.

Genworth Mortgage Insurance on banks’ watch list

On 8 March 2018, the Australian Financial Review reported that Genworth Mortgage Insurance (Genworth) is on bankers’ block trade watch list. US listed Genworth Financial is reportedly “in the crosshairs of local equity capital markets bankers, with an eye on its controlling stake in local offshoot Genworth Mortgage Insurance Australia.”

Furthermore, “a block trade would facilitate a sell down by the parent, which has a large parcel of debt coming up for refinancing in several months. The situation is exacerbated by the fact the US target is yet to receive word from regulators on the status of its USD2.7bn buyout by China Oceanwide Holdings Group Co.” 

Please click here for our full research report on Genworth*

IMF Bentham half year results research update

We have provided a research update on IMF Bentham’s (IMF) 1H18 results, and reiterate our recommendation on its 7.40% notes due 2020.

Key points:

  • IMF experienced a decrease in revenue over 1H18 (half year ended 31 December 2017) due a lower completion rate and lower margins. 1H18 total revenue decreased to AUD12.8m from AUD36.5m reported in 1H17
  • 1H18 income from litigation contracts was AUD48.8m, down 27% from 1H17. The majority of the income was generated from two cases which concluded during 1H18
  • At 31 December 2017, IMF’s case portfolio stood at AUD2.3bn of estimated claim value across 77 matters

Please see the full report on the FIIG website available to wholesale clients only. The IMF Bentham 7.40% June 2020 bond is available at a yield to worst of 4.34%pa.

Please see our IMF Bentham research compendium report*

Mallinkrodt full year results

On 2 February 2018, Mallinkrodt (MNK) reported its full year 2017 results.

Key points:

  • Net sales of USD3.22bn, down from USD3.38bn in FY16
  • Gross profit of USD1.66bn, down from USD1.86bn in FY16
  • Operating income of USD420m, down from USD617m in FY16
  • Total assets of USD15.28bn, down from USD15.5bn in FY16

We have provided a summary of the report here. The following MNK bonds, rated BB- (S&P) are traded at FIIG:

  • MNK 4.88% due 2020 – YTW of 5.72%pa
  • MNK 5.63% due 2023 – YTW of 8.68%pa
  • MNK 5.75% due 2022 – YTW of 8.27%pa

New DirectBonds

We have added the following bonds to the DirectBonds list:

  • Bristow USD 8.75% March 2023 senior secured notes available at a yield to worst of 7.58%pa. Factsheet*
  • JC Penney USD 8.625% March 2025 second lien notes available at a yield to worst of 8.01%pa. Factsheet*
  • Medallion Trust Series 2017-2 issued by the Commonwealth Bank of Australia. 

New issue from Pioneer Credit

Pioneer Credit (Pioneer) has come to market with a new AUD40m secured and subordinated floating rate note which is expected to issue on 22 March 2018. The four year note is expected to have a coupon of 90 day BBSW+5.25%, which is subject to final pricing. The notes are available to wholesale clients at a minimum investment of AUD50,000. Please see the research Factsheet here*.

Pioneer is an ASX listed financial services provider with 180,000 customers across Australia and New Zealand. Headquartered in Perth, Pioneer specialises in acquiring and servicing unsecured retail debt portfolios as well as introducing brokered personal credit and loan products.

To find out more, please call your FIIG relationship representative or email newissue@fiig.com.au

PMP half year results

We have provided a research report on PMP Ltd 1H18 results and reiterate our recommendation on PMP’s 6.43% notes due 2019.

Key points:

  • PMP reported 1H18 results which were in-line with the market update provided in February 2018. At that time, the Group announced its second profit downgrade since November 2017
  • While the integration of IPMG appears to now be on track, the second quarter results were impacted by a large reduction in print volume for local community newspapers
  • PMP has a conservative financial policy, as it seeks to maintain minimal net debt and expects to be net debt free by FY20
  • During 1H18, on an underlying basis, after taking into consideration extraordinary working capital movements, free cash flow was AUD7.3m (1H17: AUD6.6m)

Please see the full report on the FIIG website, for MyFIIG clients only. The PMP 6.43% September 2019 bond is available at an indicative yield to worst of 5.87%pa.

Read our PMP research compendium report*

*Please note this content requires a FIIG wholesale client login.

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