Market Signals Weekly Review
August 08, 2019
INVESTMENT IDEAS
Today we will look at two corporate debt securities as investment ideas for this week: Ford Motor Company and Development Bank of the Republic of Belarus (the DBRB).
Idea #1: Ford Motor Company
We decided to analyze what the maximum level of profitability is now offered by securities with an “investment” rating issued by borrowers from developed countries. As it turned out, the Eurobond investors of one of the pillars of the American automobile industry Ford Motor Company offer investors the greatest profitability.
Ford Motor Company, one of the five largest global automakers in 2018, took eleventh place in the ranking of the largest US companies in terms of revenue ($ 160 billion). After a difficult period in 2006–2009 the company managed to return to sustainable positive profitability, earning $ 5.1 billion in net profit in 2018. The issuer’s current market capitalization reaches $ 37 billion.
F 7.45 07/16/31 was placed in 1999, the current issue volume in circulation is $ 1.8 billion. An interesting level of paper coupon (7.45%) is noteworthy.
Idea #2: Development Bank of the Republic of Belarus (the DBRB)
Against the background of the recent successful placement of ruble sovereign bonds of the Republic of Belarus on the Moscow Exchange, let us pay attention to the dollar obligations of this issuer. In particular, for the dollar Eurobonds of the Development Bank of the Republic of Belarus with maturity in May 2024.
Last month, S&P affirmed its issuer rating at B with a “stable” outlook. Since our recommendation on DBBYRB 6 ¾ 05/02/24 of May 6, 2019, the spread of its profitability to VEB-23 has decreased by 20 b.p. — up to 160 b.p.
However, the current yield to maturity of this issue (5.6%) looks, in our opinion, still interesting.
Alexey Shternshis
Joint Managing Director
Capital Pi
