Halister News

(Bloomberg) -- Eros International, which was targeted by an anonymous short sellers last year, expects its Ebitda to at least triple in five years as it wins customers on the internet and in China, Chairman Kishore Lulla said in an interview Friday in Mumbai.

• Sees total 150m registered users on ErosNow audio, video streaming service in 5 years, up from >37m on Dec. 31
  • Projects as many as 10% of total users paying for service in 5 years; to reach 1m paying users by fiscal year 2017: presentation dated Feb. 17
• Expects ErosNow ARPU ~$20/year in India, $50 overseas, Lulla says
• NOTE: Analysts project Ebitda will rise to $299m in FY19 from $69m in FY16: Bloomberg data
  • Eros shares in U.S. +51% YTD after -57% in 2015; short interest 23% of float: Bloomberg data
• Plans to release 100 movies annually in next 3-5 years, up from ~60 currently: Lulla
• Company plans to release “Bajirao Mastani” title on as many as 7,500 screens in China; sees $30m-$60m in gross revenue
  • NOTE: Movie grossed ~$50m in India, overseas ex-China
• China JV producing two films approved by govt, expects to complete shooting of one in FY18
  • Eros also plans to introduce ErosNow in China with initial catalog of as many as 500 movies
• Sees maintaining 36% market share in Indian movie distribution business; sees multiplex companies adding as many as 4,000 movie screens in next 5 years
• Sees Trinity -- a unit formed to make franchise movies -- releasing first film in 1Q FY18
• ErosNow to release first original movie on digital media in Oct.- Nov.; expects to double ErosNow movie catalog to 10,000 this year
• Declines to comment on sale of ErosNow stake
  • NOTE: Last year, Eros Said in Talks to Sell Stake in ErosNow to Fullerton
• Parent Eros International Plc exploring options to give shareholders of Indian-listed unit “a chance to participate” in U.S. company, Lulla says
• Eros considering acquisitions, may target companies that distribute content digitally
• Maintains annual capex plan of $250m-$300m
• NOTE: Eros stock in India has fallen ~13% in the same period versus Sensex’s ~3.5% advance

RELATED:

• Eros Says Solid Backing by Temasek to Counter Short Sellers
• Eros Loses Investor Love Amid Questions on Sales, User Numbers

Economic Release Details: {CNGFOREX Index ECOD} --JING JIN

(Bloomberg) -- Accommodative status quo from ECB implies value in leveraged conditional rolldown trades in the belly of the EUR curve, where rates have the highest chances of staying below forwards, Societe Generale strategist Adam Kurpiel writes in client note.

• Buy EUR 6m5y2y ATMF/-25bp mid-curve 1x1.5 receiver spread
• EUR 5y2y forward now offers the best absolute rolldown ~7bp/6-mo.
• Risks: unlimited losses if the 5y2y rate decreases below 0.18%

(Bloomberg) -- U.K. to sell 4.25% 12/2046 for GBP1.5b at 11:30am CET. Analysts are mixed on the sale, see auction supported by upcoming pause of long-end supply, coupon payments, RV considerations.

• Citi (Saumesh Dutta, Jamie Searle)
  • Expect auction to go well; bond has underperformed 12/2042 and 12/2049 since the start of the year, partly reflecting the rarity of supply in this bond
  • Has also cheapened vs 01/2045s, currently close to its cheapest level in over a 1-year; limited RV on a cross- country basis
  • Auction should be supported by pause in supply around the EU referendum, coupons repayments for GBP2.7b to be repaid today (concentrated in longs)

• Santander (Adam Dent)
  • Very rare tap of old 40Y bond, unpredictable consequences for demand
  • Supply dynamics are very supportive, coupons, index extensions, three-week supply break; while 30y gilt yields are near all-time lows, still unlikely to rise sharply soon
  • Don’t see any compelling opportunities for 30y in either direction on the broader curve; 30Y ASW still tight, but not disproportionately to USTs or 10s
  • Gilt maturities around 25Y look rich relative to 30Y even considering overall flattening of the curve; recommend buying auction bond vs 2040s at 1.5bps, target -1bp

• SocGen (Strategists including Marc-Henri Thoumin)
  • Demand expected from GBP2.7b in coupon payments, heavily concentrated at the long end of the curve; has been a key factor driving the curve flatter over the past week
  • Bond looks cheap on fitted curve on a yield vs duration/convexity basis, though not as cheap as some peers
  • Some RV demand expected vs 01/2045s and 12/2049s after recent cheapening; lack of supply after this week with next 30Y+ sale not until August 17
  • See some risks of post supply indigestion as witnessed in February, remain cautious on auction as a result

(Bloomberg) -- USD/KRW non-deliverable forwards account for 43.8% of total volume today, according to trades reported to DTCC; USD/INR second-most active at 13.0%, USD/TWD third at 12.2%.

• Notional amounts traded include:
  • $250m+ of USD/KRW at 1,165.53; matures July 8
• Total volume was $14.7b as of 3:09pm HKT; global total yesterday was $50.1b, with USD/BRL accounting for 14.8%

(Bloomberg) -- Volkswagen full-year adj. EPS average estimate has risen 3.4% in the last four weeks, the most among the 16 carmakers and suppliers on the SXAP index, according to Bloomberg data.

• VW’s 2016 avg Ebit estimate has risen 12% in four weeks vs Daimler’s avg estimate down 2.1% and BMW’s unchanged
• Daimler’s 2016 adj EPS consensus has fallen the most in the SXAP, down 2.2% in four weeks; co. lowered its truck unit profit forecast in May
• The price target for VW, which reported higher-than-expected 1Q Ebit last week, has risen 5.3% in four weeks, also best on the SXAP; the average PT EU145 giving the preferred shares 11% upside

ANALYST COMMENT

• HSBC (hold) says in note yesterday that VW appears to be recovering from diesel emissions scandal faster than expected; even so broker doesn’t see why the company should re-rate more than its German peers
• Deutsche Bank (hold) says yesterday that VW shares have had good run and earnings expectations were cut “severely” in wake of diesel scandal; says staying on sidelines, sees additional diesel legal risks
• Citi (buy) said last week that 1Q results showed signs that co is through the worst of the diesel scandal, while Kepler Cheuvreux said the results confirmed its buy rating

NOTE:

• VW has the SXAP’s second-worst average analyst rating (11 buys/13 holds/10 sells) after Nokian Renkaat (6 buys/11 holds/6 sells)
• VW shares are down 2% YTD vs SXAP down 15%; the shares are 19% below the level of September, when U.S. authorities announced the diesel emissions violations
• June 3: VW Overcomes European Recall Hurdle With Approval for Passat Fix

(Bloomberg) -- Brexit uncertainty is having a clear damping effect on GBP credit risk with just over two weeks to the referendum, while EUR corporate bonds stay underpinned by the prospect of ECB CSPP buying from this week, Bloomberg strategist Simon Ballard writes.

• Marked underperformance of GBP IG and HY corporate bonds relative to their EUR counterparts over past week
  • EUR IG outperforming on CSPP; GBP HY weakness fueled by Brexit concerns
• Yellen sounded note of optimistic realism overnight; noted disappointing May jobs data and global macro fragility
  • Asia credit mkts trading higher as Fed June rate hike fear fades, and buoyed by energy and materials companies
• Notwithstanding Brexit and U.S. concerns, Euro Risk Appetite model highlights resilient bid for corporate credit risk

• CDX IG closed -1.4bps at 74.38 in overnight session; iTraxx Asia Ex Japan IG currently -1.4bps at 138.79

NEWS

• Corporate News
• Japan Marks Lowest-Ever Coupon on Corporate Bond in Toyota Sale
• New Look FY Rev Up 5.4%, Adj. Ebitda Up 7%
• VEB to Sell 180b Rubles of Assets Incl. Gazprom Shrs
• Burckhardt Compression FY16 Sales Rise 2.9%, Unchanged Dividend

• Financial News
• Nomura Sued by Six Taiwanese Banks Over Soured Syndicated Loan
• Citigroup Hires Ex-Barclays’s Jon Omori for Japan Equities

• Credit Rating News
• Increasing Fee Income May Help Japan Mjr Banks, Says S&PGR Rpt
• Fitch Rates Temasek Unit’s Collateralised Fund Obligation
• GAP Airports Outlook to Positive From Stable by Moody’s

• Other News
• Asia Bond Yields Touch Record Lows as Nomura Says Tide to Turn
• Clinton Clinches Democratic Presidential Nomination

ANALYST VIEWS

• The ECB will be in the market later this week for at least a year and its bond holdings won’t be coming back out, whatever happens. It will be price-insensitive and to all intents and purposes issuer-insensitive: creditmarketdaily.com

NEW ISSUES

• Air Liquide EU3b 5-Part Deal
• Commercial Bank of Qatar $750m 5Y MS +215
• Nykredit EU500m 3Y Senior Resolution Notes MS +110
• Tennet Holding EU500m 10Y, EU500m 20Y Green Bonds
• Vonovia EU500m 6Y MS +87, EU500m 10Y MS +108
• European IG credit pipeline here and HY credit pipeline here
• Issuers exposed to S-T rollover and interest-rate reset risk here

• NOTE: Simon Ballard is a credit strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice.

(Bloomberg) -- Netherlands to sell 0% 01/2022 for EU4b-6b via DDA, books open at 10am CET. Analysts highlight cross-market trades for the new DSL, vs Germany and Austria; unlikely to be swapped.

• Rabobank (strategists including Richard McGuire)
  • Don’t anticipate auction bond to be swapped as DSTA strives to achieve its average maturity target
  • Given bullish backdrop for rates, flattening pressures will continue to move along the curve; favor using auction to move along curve, pick up duration
  • New 5Y issue will be welcome given the lack of free- floating bonds in other issues in this sector

• ING (Martin van Vliet)
  • Make sense to use DDA to box 5s10s DSL steepeners vs German flatteners; trade benefits from lingering repo specialness of 10Y bund, also likely tap of the DSL 07/2026 next month

• SocGen (Marc-Henri Thoumin)
  • 5Y DSL vs RAGB has widened by ~6bps since mid-April while 2Y, 10Y spreads have remained stable; recommend buying new 5Y DSL vs RAGBs at -4bps, target -9bps, stop 0bps