Tuesday 06 March 2018 by FIIG Research Company updates

Company updates – CML Group, Elanor, Fitch Ratings, Impact Group, Mackay Sugar, Sunland, Talen, zipMoney and updated DirectBond filter lists

This week, CML Group placed on trading halt, Fitch releases 4Q17 Dinkum RMBS Index, Mackay Sugar update, Moody’s revises Talen outlook, zipMoney Trust research report and updated DirectBonds filter list. Half year results from Elanor, Impact Group and Sunland

Please note all indicated prices are accurate as of 6 March 2018, subject to change.

CML Group trading halt

On 2 March 2018, CML Group (ASX:CML) (CML) was placed in ASX Trading Halt Session State at the request of the company, pending the release of an announcement by the company.

On 6 March 2018, CML announced that it had successfully completed a placement to raise AUD13m (before costs) through a placement of 26 million fully paid ordinary shares to institutional and sophisticated investors. Proceeds from the placement will be used to strengthen the company’s balance sheet post the acquisition of Thorn Group’s Trade and Debtor Finance business and working capital of the company. The full ASX announcement is available here.

In October 2017, CML exercised its rights to convert its ASX listed convertible notes. It currently has two FIIG originated bonds outstanding and has repeatedly noted its intention to transition to being predominantly bank funded. The next call date for both the fixed and floating rate bond is in May 2018 at 104%. Current yield to worst for both bonds is 3.26% pa for the fixed and 3.51% pa for the floating rate.

Read our CML research compendium report*

Elanor Investors Group half year results

We have provided a report for Elanor Investors Group (Elanor) 1H18 results and reiterate our recommendation on its 7.10% notes due 2022 available at a yield to worst of 6.26% pa.  

Key points:

  • Elanor reported core 1H18 EBITDA of AUD5.5m. This was much lower than 1H17 EBITDA of AUD12.8m primarily due to lower transactional income (acquisition fees, performance fees and gain on asset sales)
  • Recurring fund management fees increased to AUD4.22m in 1H18 from AUD3.56m in 1H17
  • Hotels, Tourism and Leisure generated EBITDA of AUD4.3m (1H17: AUD4.2m). The Real Estate portfolio generated EBITDA of AUD0.8m (1H17: AUD0.3m)
  • Funds under management grew 33.7% to AUD864m as at 31 December 2017 from AUD646m as at 31 December 2016

Please see the full report on our research page.

Read our Elanor Investors research compendium report*

Fitch releases 4Q17 Dinkum RMBS Index

On 2 March 2018, Fitch Ratings (Fitch) released its 4Q17 Dinkum RMBS Index, noting: 

  • Australia's mortgage arrears for 4Q17 remain unchanged, at 1.01%, from 3Q17. The 30 plus days arrears ranged between 1.00 and 1.22 per cent during 2017, reflecting Australia's stable economic conditions and low interest rate environment
  • The 30 plus days arrears were 8bps lower in 4Q17 than in 4Q16 due to Australia's improved economic environment and lower standard variable interest rates for owner occupied lending
  • Prepayment rates have remained low during 2017, with the conditional prepayment rate (CPR) recording four consecutive quarters below 20%; this is the longest period the CPR has remained below 20% since 2011
  • Losses experienced after the sale of collateral property remained extremely low, with lenders' mortgage insurance payments or excess spread being sufficient to cover principal shortfalls in all transactions during the quarter

Source: Reuters

Impact Group half year results

We have provided a report for Impact Group (Impact) 1H18 results and reiterate our recommendation on its 8.50% notes due 2021 available at a yield to worst of 7.07% pa.

Key points:

  • Total revenues decreased 6.6% in 1H18 to AUD122.9m (1H17: AUD131.5m). Impact explains the decrease as a result of delays in the release of new land by developers
  • EBITDA declined 13.6% to AUD10.8m (1H17: AUD12.5m). Impact’s EBITDA margin has reduced due to increased overheads associated with its expansion into Victoria, costs incurred implementing its strategy of targeting second and third homebuyers and costs incurred upgrading internal systems. The EBITDA margin deteriorated to 8.5% (1H17: 9.4%)
  • Gearing (total debt to total tangible assets) improved notably with reduced debt and increased retained earnings. Gearing improved to 36.4% (1H17: 51.6%)
  • Impact remains one of Queensland largest home builders. During 1H18 it achieved 559 unconditional property sales and expects 1,300 for the full year (FY17: 1,127)

Please see the full report on our research page.

Read our Impact Group research compendium report*

Mackay Sugar update

We have provided an update on Mackay Sugar and reiterate our recommendation on its 7.25% notes due 2018. Please see the full update on our research page

On 2 March 2018, Mackay Sugar posted an ‘Update on progress of the Finance Extensions and the Recapitalisation Plan’ circular to growers and shareholders. This confirms the company’s extension of its senior bank facilities.

Key points:

  • MSL has confirmed the extension of it senior bank facilities to 2 March 2019
  • Having met this condition precedent, the special resolution dated 11 December 2017, and passed 23 January 2018, is now binding
  • As such, the changes to the terms and conditions of the notes are now in place
  • On 5 April 2018, interest on the Notes will accrue at 7.75% pa and be paid quarterly, as opposed to the current rate of 7.25% pa paid semi annually
  • The new maturity date of the notes is 5 April 2019

The full circular and notice to investors is available on the Mackay Sugar website.

Read our Mackay Sugar research compendium report*

Sunland Group half year results

We have provided a report for Sunland Group (Sunland) 1H18 results and reiterate our recommendation on its 7.55% notes due 2020 available at a yield to worst of 5.77% pa.

Key points:

  • Sunland generated total revenues of AUD194.9m during 1H18 (1H17: AUD102.7m). The majority of earnings are attributed to settlement of the Group’s Abian tower in Brisbane
  • Sunland generated strong free cashflow during the period, repaid the Abian project finance facility of AUD132m and significantly reduced the Group’s working capital facilities
  • Net debt reduced by AUD93.8m over the half to AUD110.8m at December 2017. Debt to tangible asset gearing has reduced to 23.1% (FY17: 33.7%)
  • The group has a sound liquidity position and good balance sheet capacity, with AUD17.8m in cash and AUD183.8m in undrawn working capital lines as at 31 December 2017

Please see the full report on our research page.

Read our Sunland Group research compendium report*

Talen receives Moody’s rating revision

On 28 February 2018, Moody’s Investors Service (Moody’s) revised the outlook for Talen Energy (Talen) to negative from stable, and affirmed its existing ratings. 

The ratings affirmed include Talen’s Corporate Family Rating at B1, its probability of default at B1-PD, its senior secured debt at Ba1, its senior unsecured guaranteed debt at B1; its senior unsecured, nonguaranteed debt at B3 and its speculative grade liquidity rating at SGL-2.

The revision follows Talen’s announcement that on 27 December 2017, it paid a special cash dividend of USD500m to its stockholders.

zipMoney Trust 2017-1 Class B notes report

We have provided a research report for the zipMoney Trust 2017-1 Class B notes. 

Please see the full report on our research page.*

Updates to the DirectBond filter lists – March 2018

The updates for March 2018 and a complete list of DirectBonds are available on our research page here

You can find more information on the DirectBond process here or take a look at the frequently asked questions

Note the DirectBond Filter Lists and FAQs require a FIIG login. 

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