EMERGING_MARKET_CORPORATES:UAE_CORPORATE_CREDITS-2012-12-16.pdf
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1、Middle East UAE 14 December 2012 Emerging Market Corporates UAE Corporate Credits Deutsche Bank AG/London DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MICA(P) 072/04/2012. Market Update Research Team Viacheslav Shilin, MBA Research Analyst (+44) 20 754-79035 Tala Boulos Researc
2、h Analyst (+44) 20 754-53664 Credit Global Markets Research Emerging Markets Update on the UAE corporate credits and bond Top Picks In this report we share our views and outline the main conclusions following our recent meetings with banks, corporates and government bodies in both Dubai and Abu Dha
3、bi. We can broadly divide the universe of visited entities into banks, real estate and quasi-sovereign segments, which, in our view, continue to display quite different operating dynamics. We came back with a general impression of stable- to-improving macroeconomic condition in the country and the e
4、mirate of Dubai in particular, supported by the recent bottoming out of real estate prices, pick up in tourism and slowly recovering international trade volumes. In 4Q12 alone, USD7bn was issued by UAE companies. The bulk of the new supply was from the quasi-sovereign segment and as the issuers exis
5、ting curves were left relatively unscathed, this supports our view, reflected in the top picks, that the sector still offers selective value. Please refer to the section on page 3 for the full list of bond recommendations, rationale and risk factors discussion. Quasi-sovereigns: stand-alone fundamen
6、tal strength underpins Buys We believe the commercially viable quasi-sovereign entities in the UAE have continued to fair better throughout the cycle than the banking and real estate companies. Credits such as JAFZA, DP World and TAQA demonstrated their success through debt refinancing efforts, whil
7、e in the cases of DEWA and Mubadala the stable-to-growing capex and improving cash generation manifested into ongoing government commitments for their future development. We highlight the bonds of DPWDU 6.25% 17, TAQAUH 4.125% 17 and 3.625% 23, DEWAAE 6.375% 16 and 7.375% 20 as our top UAE Buy picks
8、. Stagnant banking sector; real estate stability from recurring revenues Banks, in our opinion, remain under pressure from the regulator to diversify away from their government exposures, which in many cases results in stale balance sheets when compared to the corporate peers. The asset quality cycl
9、e has bottomed in our view for Abu Dhabi financial institution supporting potential future lending growth; but this is far from the case for the Dubai peers. For the real estate sector, we are mostly constructive on the issuers that have been focusing on their recurring revenue portfolios to maintai
10、n cashflow stability such as JAFZA, Emaar and MAF. Recent announcements on new mega-projects in Dubai could become a concern; but these are at early stages. For the Abu Dhabi developers, where oversupply remains more of an issue than for the neighbouring Emirate, the potential merger between the lar
11、gest two developers Aldar and Sorouh could provide a solution to the still depressed market dynamics should it go ahead. Dubai Department of Finance: infrastructure development main focal point On the macro front, Dubai will continue to focus on the key sectors that made up the founding cornerstones
12、 of its economy: retail, transport, logistics and trade. In order to achieve this, the Emirate is pressing ahead with its main infrastructure development projects, which in turn cross-pollinate other sectors. Such flagship initiatives include a second metro line in Dubai (tourism), AED4.5bn expansio
13、n of Al Maktoum cargo airport in Jebel Ali (trade) and AED3bn p.a. road network upgrades (transport). The USD20bn bail-out funding provided by Abu Dhabi in 2009 is due in 2014 and is likely to be rolled-over, in our view. Contingent liabilities for DOF include Dubai World and Nakheel debt maturing i
14、n 2018. In terms of issuance plans, DOF anticipates raising USD1bn/yr to refinance and extend upcoming maturities; matching the duration of its projects. 14 December 2012 IG Multi Sector Emerging Market Corporates Page 2 Deutsche Bank AG/London Table of Contents Bond valuations, relative value and r
15、ecommendations . 3 UAE corporates update . 9 Abu Dhabi National Energy Company (TAQA). 9 Aldar Properties 9 Dubai Electricity which would provide sufficient room for the company to absorb any potential new funding requirements. We acknowledge the fact that the bonds of DP World remain amongst the ch
16、eapest IG paper 14 December 2012 IG Multi Sector Emerging Market Corporates Deutsche Bank AG/London Page 5 across the GCC universe. As such, the DPWDU 6.95% 37 notes have performed particularly well quarter-to-date, influenced by the hunt for yield amongst global investors. We believe there is limit
17、ed room for these bonds to tighten further and maintain our HOLD recommendation. At the same time, we believe that the trend of converging spread levels between DPWDU 6.25% 17 and DUGB 4.9% 17, with the former to outperform the latter, should be sustained as we expect the improving fundamental dynam
18、ics of DPW to outpace those of the underlying sovereign. We maintain our Buy recommendation on DPWDU 6.95% 17. Risks to our DPWDU recommendations include for the downside: escalation of geopolitics in MENA region, sharper-than-expected global economic slowdown, delays with the projects nearing compl
19、etion, spikes in leverage and liquidity metrics. To the upside: increase in the international trade flows, faster recovery of Dubais economy and real estate sector, improving investor sentiment towards Dubai-based government related entities. Figure 2: 6M Z-spread evolution of select UAE real estate
20、 corporate, bps 200 300 400 500 600 700 800 900 18-Jun-1223-Jul-1227-Aug-1201-Oct-1205-Nov-1210-Dec-12 JAFZSK 7 19EMAAR 8.5 16EMAAR 6.4 19 ALDAR 10.75 14DUBAI 4.75 14MAFUAE 5.85 17 MAFUAE 5.25 19 Source: Deutsche Bank 14 December 2012 IG Multi Sector Emerging Market Corporates Page 6 Deutsche Bank A
21、G/London Figure 3: 6M Z-spread evolution of select GCC banks, bp 100 150 200 250 300 350 18-Jun-1223-Jul-1227-Aug-1201-Oct-1205-Nov-1210-Dec-12 EIBUH 4.718 17EIBUH 4.147 18DIBUH 4.752 17 ADCB 4.071 16NBADUH 3.25 17QBNK 3.375 17 Source: Deutsche Bank Figure 4: 6M Z-spread evolution of select UAE Quas
22、i-Sovereign corporates, bp 100 150 200 250 300 350 400 450 500 18-Jun-1223-Jul-1227-Aug-1201-Oct-1205-Nov-1210-Dec-12 DEWAAE 6.375 16DEWAAE 7.375 20MUBAUH 3.75 16 MUBAUH 7.625 19MUBAUH 5.5 21DPWDU 6.25 17 TAQAUH 5.875 16TAQAUH 6.25 19TAQAUH 5.875 21 Source: Deutsche Bank 14 December 2012 IG Multi Se
23、ctor Emerging Market Corporates Deutsche Bank AG/London Page 7 Figure 5: Yield vs. Duration for UAE corporate and banks MUB 5.75 14 ALD 10.75 14 NBA 4.5 14 TAQ 4.75 14 ADC 4.75 14 NBA 4.25 15 DEW 8.5 15 ADI 3.745 15 INTP 3.125 15 INTP 1.75 15 MUB 3.75 16 SIB 4.715 16 EMI 5.125 16 FGB 3.797 16 EMA 8.
24、5 16 DEW 6.375 16 TAQ 5.875 16 UNB 3.875 16 ADI 3.78 16 EIB 4.718 17 FGB 4.046 17 TAM 5.154 17 MAF 5.85 17 INTP 3.75 17 TAQ 4.125 17 NBA 3.25 17 EBI 4.625 17 DIB 4.752 17 DPW 6.25 17 FGB 2.862 17 TAQ 6.165 17 EIB 4.147 18 TAQ 7.25 18 ADW 3.925 20 1.3 1.8 2.3 2.8 3.3 3.8 4.3 1.21.72.22.73.23.74.24.7
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