RESEARCH ROUNDUP: Better Indonesia Credit Favored as Deal Stalls

(Bloomberg) -- Indonesian property developer PT Intiland Development delayed a planned debut dollar bond after earlier providing initial guidance of 11.5% for the deal Tuesday, according to people familiar with the matter. The company is still considering when is the best time to sell dollar- denominated bonds, Theresia Rustandi, corporate secretary, said on Wednesday.

Below are comments from analysts/money managers on Indonesian dollar notes and on Intiland’s stalled deal.

CreditSights (R. Lakshmanan)

* Investors want to be compensated for weaker credit-quality names amidst the current tepid market sentiment

* Volatility in Indonesia’s rupiah, as well as the negative outlook for the Indonesian property sector ahead of Presidential elections also affected the first-time issuer

* Investor demand for Indonesian HY new issues is very feeble.

In the secondary market, the shift is towards better quality HY or IG names.

* The Indonesian sovereign issues are seeing robust demand. This is a reflection of the way markets are behaving, the preference for risk-off trades and hence a move away from riskier credits such as Intiland

Western Asset (Swee-Ching Lim)

* We would characterize the pulling of the deal as more idiosyncratic for the issuer, and to an extent the broader Indonesian property space, which has seen weak financial performances in the past couple of years

* We think the fact that Intiland being a debut issuer with single B ratings certainly presented another idiosyncratic speed bump

* There are material differences between Indonesian HY issuers that are not government-linked (such as property developers) compared to Indonesian quasi-sovereign/sovereign issuers of USD bonds

Lucror (Trung Nguyen)

* We came to the conclusion that this deal would most likely not be printed, because Intiland’s scale in terms of revenue/profits is very small despite decent land bank

* The history of high leverage -- ratios look weak in the past two years -- contributed to its weak fundamentals. Other more established peers are trading at deep discount to par and high yields

* Investors are much better off buying in the secondary market the existing notes of peers with a longer track record.

 

8 August, 2018, 05:45:07.455 GMT

By Narae Kim; Edited by Andrew Monahan, Finbarr Flynn, and Beth Thomas