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Republic of Indonesia
- Bond: INDON 1.17 29
- Indicative Yield-to-Maturity (YTM): 1.569%
- Credit Rating : Baa2/BBB/BBB
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Country Overview
AS OF 28 May 2025- Indonesia is the world’s fourth-most populous nation and the largest economy in Southeast Asia
- The economy is diverse, with key sectors including manufacturing, agriculture, mining, and services.
- Indonesia is a significant producer of commodities like coal, palm oil, and natural gas.
Business Description
AS OF 28 May 2025Risk & Catalysts
AS OF 28 May 2025Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
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Search topics about wealth insights and investments.Republic of Korea
- Bond: KOREA 5.625 25
- Indicative Yield-to-Maturity (YTM): 4.240%
- Credit Rating : ( Aa2 / AA / AA- )
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Country Overview
AS OF 28 May 2025- Highly Developed Mixed Economy: South Korea boasts a highly developed mixed economy, ranking as the 13th largest globally by nominal GDP and the 4th largest in Asia as of 2025, with a nominal GDP of approximately USD 1.950 trillion.
- Rapid Economic Development: The nation experienced a remarkable economic transformation known as the “Miracle on the Han River”, evolving from an underdeveloped country to a high-income, developed nation in a few decades.
- Global Leader in Key Industries: South Korea is a global leader in sectors such as electronics, telecommunications, automobile production, chemicals, shipbuilding, and steel, with significant investments in research and development (around 4.93% of GDP).
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Key Metric
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CreditSight View Comment
AS OF 29 Jun 2025Recommendation Reviewed:
Recommendation Changed:
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
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Fundamental View
AS OF 28 May 2025Citigroup is a solid global money center bank that has done a decent job cleaning up legacy issues and fortifying the risk profile in the wake of the GFC, though it still lags peers on several fronts including profitability.
Citi has more geographic diversification than peers owing to its international presences, though the retail side is shrinking considerably as Citi exits most of Asia and Mexico, refocusing around a global wealth management/private bank strategy.
Citi lags on the domestic deposit front, with less than half of the deposit base of money center peers and a much smaller physical footprint, though it has been focused on driving deposit flows the past couple of years.
Business Description
AS OF 28 May 2025- Citigroup ranks as the 3rd largest U.S. bank by total assets ($2.57 tn) at 1Q25 and 3rd largest by Total Equity ($213 bn).
- Citi is 4th in terms of U.S. deposits with approximately $743 bn as of 1Q25 across 661 branches (S&P Capital IQ). Given the significantly smaller branch footprint, Citi does not generally possess leading market shares in most states besides South Dakota (#1).
- Citi's major business lines include U.S. consumer (mortgages and credit cards) and retail banking, global consumer, global corporate & investment banking, and global payments. The company is in the process of exiting 13 international consumer markets, refocusing the non-US footprint around four regional hubs and combining wealth management and the private bank to drive synergies out of the hubs.
Risk & Catalysts
AS OF 28 May 2025Citi still lags peers on profitability (both ROA and ROTCE); CEO Fraser adopted the profitability gap as a key focus point as well, and we see Fraser’s strategic moves (e.g. int’l consumer exits, headcount reduction in management layers) as aimed at capital and expense optimization to improve ROE.
While not as severe as a Wells-type situation, Citi’s regulatory mishaps introduce risks should the bank fail to show improvement in internal controls, or if another major risk management failure crops up. Our base case: Citi will be able to satisfy regulators and end up with improved infrastructure, though it will likely be a multi-year process with resultant upward cost pressures.
Citi’s global footprint makes it more exposed to emerging markets and non-domestic economies; in the near-term, that could create earnings and capital volatility to the degree tariff policies drive USD appreciation.
Key Metric
AS OF 28 May 2025| $ mn | FY21 | FY22 | FY23 | FY24 | LTM 1Q25 |
|---|---|---|---|---|---|
| ROAE (annual) | 10.9% | 7.5% | 4.5% | 6.1% | 6.4% |
| ROAA (annual) | 0.92% | 0.61% | 0.38% | 0.51% | 0.53% |
| PPNR / Avg. Assets | 1.02% | 0.97% | 3.93% | 3.56% | 3.86% |
| Efficiency Ratio | 68% | 67% | 272% | n/m | n/m |
| Net Interest Margin (Annual) | 1.94% | 2.20% | 2.37% | 2.29% | 2.29% |
| Net charge-offs (LTM) / Loans | 0.70% | 0.55% | 0.95% | 1.29% | 1.31% |
| Common Dividend Payout | 19% | 27% | 130% | n/m | n/m |
| CET1 Ratio | 12.3% | 13.0% | 13.4% | 13.6% | 13.4% |
| Supplementary Leverage Ratio (SLR) | 5.7% | 5.8% | 5.8% | 5.9% | 5.8% |
| Liquidity Coverage Ratio (LCR) | 115% | 118% | 116% | 117% | 117% |
CreditSight View Comment
AS OF 01 May 2025Citi’s Underperform recommendation, which changed in December 2024, revolves around a narrow spread range across the Big 6 peer group and what we see as more idiosyncratic risk heading in 2025. Even with recent widening, Citi is trading close to several peers we view as better-positioned fundamentally. However we’re comfortable with Citi as a core credit and still believe in Fraser’s transformation efforts, but 2025 could be bumpy: Citi is more exposed to non-USD currencies than peers (stronger dollar hurts CTA), is looking to IPO Banamex at a time of rising Mexico/US tensions (and related FX impact), and facing angsty equity analysts as management tries to deliver on medium-term targets.
Recommendation Reviewed: May 01, 2025
Recommendation Changed: December 05, 2024
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
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Fundamental View
AS OF 28 May 2025Goldman Sachs’ performance and market share in its core legacy businesses of investment banking and sales and trading have remained very solid, working through soft periods associated with rising rates; with market conditions improving into 2025 these businesses should continue to excel.
Goldman’s results have been weighed in recent years by costs associated with exiting the unsuccessful foray into various consumer banking businesses; such costs are largely in the rearview mirror. Wealth and Asset Management are now the most likely areas of growth in the coming years, where Goldman can leverage its strengths in HNW and alternative asset management.
Business Description
AS OF 28 May 2025- Goldman Sachs is now the fifth largest bank holding company in the U.S. with approximately $1.76 tn in assets as of 1Q25 and a market capitalization of $175.4 bn as of May 23rd, 2025.
- Goldman Sachs presents its activities through three business segments: Global Banking & Markets, Asset & Wealth Management, and Platform Solutions.
- Goldman's historical strengths include equity and FICC sales & trading, investment banking, institutional investment management including alternatives, and high net worth wealth management. It has been expanding its wealth management client base, and adding other stable fee income streams amid a sluggish capital market environment. 5
Risk & Catalysts
AS OF 28 May 2025The early 2020’s were a mixed bag– the foray into consumer lending was costly and ultimately was reversed, diverting capital and management attention and providing a meaningful drag on profitability. Goldman has re-focused on its core businesses, though its profile will remain less diversified than large GSIB peers.
Goldman could participate in further M&A to achieve its long-term strategic goals, most likely through add-on deals related to asset/wealth management.
Goldman could be impacted by various risks during periods of market turmoil, but for the most part, has been positively impacted by bouts of volatility which tend to spur more client trading activity– 2025 tariff risks being a recent example. Goldman is subject to significant market and counterparty risks as reflected in the DFAST/SCB regime.
Key Metric
AS OF 28 May 2025| $ mn | FY21 | FY22 | FY23 | FY24 | 1Q25 |
|---|---|---|---|---|---|
| ROAE (annual) | 21.3% | 9.7% | 7.3% | 12.0% | 12.3% |
| ROAA (annual) | 1.5% | 0.7% | 0.5% | 0.8% | 0.9% |
| PPNR / Avg. Assets | 1.86% | 1.08% | 3.29% | 3.92% | 1.16% |
| Efficiency Ratio | 54% | 65% | 282% | 266% | 63% |
| Net charge-offs (LTM) / Loans | 0.19% | 0.30% | 0.68% | 0.61% | 0.61% |
| Common Dividend Payout | 10.6% | 28.4% | 158.9% | 129.4% | 25.9% |
| CET1 Ratio | 13.6% | 15.0% | 14.4% | 15.0% | 14.8% |
| Supplementary Leverage Ratio (SLR) | 5.5% | 5.8% | 5.5% | 5.5% | 5.5% |
| Liquidity Coverage Ratio (LCR) | 122% | 129% | 128% | 126% | 126% |
CreditSight View Comment
AS OF 15 Apr 2025We maintain our Market perform recommendation for Goldman Sachs; we remain quite comfortable with the name fundamentally but see better value at JPMorgan and Wells Fargo among money center banks, particularly in the context of our shift to a more defensive stance across the sector. Goldman should be back to a normal pace of issuance so technicals should not be quite as much of a tailwind going forward as they had been in 2023 and early 2024, though the fundamental picture continues to improve with improved capital markets conditions as well as reduced drag from exited businesses. Market conditions thus far have aligned well with Goldman’s strengths in trading, though market conditions will likely have to stabilize for investment banking to regain momentum.
Recommendation Reviewed: April 15, 2025
Recommendation Changed: January 12, 2022
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
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Search topics about wealth insights and investments.HCA Healthcare
- Bond: HCA 5.25 30
- Indicative Yield-to-Maturity (YTM): 5.013%
- Credit Rating : BBB
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Fundamental View
AS OF 28 May 2025HCA’s volume metrics and EBITDA margins consistently best industry peers, primarily due to strong operational efficiency and an inpatient/outpatient focus within large, healthy markets.
HCA’s credit metrics have improved in recent years and leverage sits near the low end of management’s target net leverage range of 2.75-3.75x.
HCA benefits from substantial financial flexibility provided by strong FCF generation and easy access to the capital markets. The company also maintains sufficient liquidity with a well-laddered maturity schedule.
Business Description
AS OF 28 May 2025- HCA operates more than 190 hospitals with ~50k beds and 125 freestanding surgery units (as of 1Q25). The company operates in 20 states and England, but ~50% of its hospitals are located in Texas and Florida. HCA is the largest for-profit hospital operator in the US by revenue. HCA also purchased 41 urgent care centers in Texas from FastMed for an undisclosed amount.
- HCA has gone private twice since its initial public offering in 1969, most recently in 2006. During periods of private ownership the company has engaged in debt-financed special dividends. HCA returned to public ownership in 2011.
- HCA has been an active consolidator in the industry, acquiring General Health Services, Columbia Healthcare, Hospital Affiliates, and Healthcare Corp, among others. In rationalizing its offering of services and market focus, HCA has sold or spun-off hospital groups such as LifePoint, Triad, and HealthTrust.
Risk & Catalysts
AS OF 28 May 2025We see some risk of choppy operating performance tied to an unwind of acuity and payor mix benefits experienced through COVID.
HCA guides to FY25 revenue growth of ~5% and adjusted EBITDA growth of ~6%. Management reported an 9% YoY decline in 1Q25 contract labor costs and with expectations of this trend to continue through FY25.
HCA maintains the flexibility to manage to target leverage levels. Net leverage totaled 3.1x at 1Q25. Management updated its net leverage target to 2.75-3.75x (from 3-4x previously).
HCA’s board recently authorized an additional $10 bn share repurchase program (with a significant portion expected to be completed in FY25).
Key Metric
AS OF 28 May 2025| $ mn | Y20 | Y21 | Y22 | Y23 | Y24 | LTM 1Q25 |
|---|---|---|---|---|---|---|
| Revenue | 51,533 | 58,752 | 60,233 | 64,968 | 70,603 | 71,585 |
| SWB | 23,874 | 26,779 | 27,685 | 29,487 | 31,170 | 31,460 |
| Supplies | 8,369 | 9,481 | 9,371 | 9,902 | 10,755 | 10,848 |
| Adj. EBITDA | 10,037 | 12,644 | 12,067 | 12,726 | 13,882 | 14,262 |
| Total Debt | 31,004 | 34,579 | 38,084 | 39,593 | 43,031 | 44,576 |
| Gross Leverage | 3.1x | 2.7x | 3.2x | 3.1x | 3.1x | 3.1x |
| Interest Coverage | 6.2x | 8.4x | 7.3x | 6.7x | 7.2x | 7.4x |
CreditSight View Comment
AS OF 05 Jun 2025We maintain an Outperform recommendation on HCA. HCA remains the strongest hospital operator in the for-profit space, exhibiting operational stability and strong FCF generation. These strengths should help the company weather any tariff- or policy-related headwinds. We see HCA as a good alternative to some of the widest BBB-rated credits in our IG Pharma universe, namely Biogen and Viatris.
Recommendation Reviewed: June 05, 2025
Recommendation Changed: May 02, 2018
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
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Fundamental View
AS OF 28 May 2025JPMorgan is one of the strongest and best positioned banks to navigate the current environment, with a well-diversified business model and good competitive positioning across a variety of lending and capital markets areas.
The company continues to deploy its considerable earnings power into reinvestment, specifically around technology where we are bullish on its ability to drive competitive advantages through strategic enhancements and efficiency gains.
Business Description
AS OF 28 May 2025- JPMorgan ranks as the largest U.S. bank by total assets ($4.4 tn at 1Q25) and deposits ($2.49 tn at 1Q25).
- JPMorgan ranks 1st in terms of U.S. deposits with approximately $2.08 tn in deposits at YE24 across 4,970 branches (S&P Capital IQ). JPMorgan's footprint includes New York (#1), Texas (#1), California (#2), Illinois (#1), Michigan (#1), Arizona (#1), Ohio (#5), and Florida (#4), among others.
- JPMorgan's major business lines include investment banking, retail banking, card services, treasury & securities services, commercial banking, and asset & wealth management.
Risk & Catalysts
AS OF 28 May 2025Succession planning at JPMorgan has a higher profile than many peers, with CEO Dimon (68 year-old) having held the top spot for over 15 years. Another recent round of shuffling top management yielded a little clarity, with Jennifer Piepszak taking herself out of the running and moving into the COO seat, with remaining candidates including Marianne Lake (CEO of Consumer), Troy Rohrbaugh (CEO of Commercial/Investment Bank), and Mary Erdoes (CEO of Asset/Wealth Management).
The sector remains exposed to reputational, legislative/administrative risk, and cyber threats, although the significant tech spend over the past few years should (theoretically) result in a stronger position for JPM to manage the security threats.
Although not likely a credit risk, JPMorgan may continue to be acquisitive around non-bank financial and ancillary services; but we would expect any deal to be conservatively funded and looking to further technology and fee income strategies (e.g. payments or asset management).
Key Metric
AS OF 28 May 2025| $ mn | FY21 | FY22 | FY23 | FY24 | 1Q25 |
|---|---|---|---|---|---|
| ROAE (annual) | 17.0% | 13.2% | 16.0% | 17.4% | 17.5% |
| ROAA (annual) | 1.3% | 1.0% | 1.3% | 1.4% | 1.4% |
| PPNR / Avg. Assets | 1.32% | 1.39% | 7.06% | n/m | 2.08% |
| Efficiency Ratio | 59% | 58% | 214% | n/m | 53% |
| Net Interest Margin (Annual) | 1.63% | 2.00% | 2.70% | 2.63% | 2.60% |
| Net charge-offs (LTM) / Loans | 0.26% | 0.25% | 0.48% | 0.63% | 0.65% |
| Common Dividend Payout | 24% | 32% | 101% | n/m | 24% |
| CET1 Ratio | 13.1% | 13.2% | 15.0% | 15.7% | 15.4% |
| Supplementary Leverage Ratio (SLR) | 5.4% | 5.6% | 6.1% | 6.1% | 6.0% |
| Liquidity Coverage Ratio (LCR) | 110% | 110% | 113% | 113% | 113% |
CreditSight View Comment
AS OF 14 Apr 2025Our Outperform view on JPM is all about defensive value: rightfully perceived as the industry bellwether, spread differentials among Big 6 peers have collapsed with investors now able to rotate into highest quality with only a nominal spread sacrifice. Defensive value has become more important given extreme policy uncertainty and we continue to like the value in JPM even after recent widening across IG and the bank peer group. Technicals may be mildly supportive, with larger JPM facing ~$25 bn in maturities/calls in FY25, below BAC with peer banks in the $21-22 bn range. Core credit strengths including capitalization may slide with the BISIII softening and delay, but from an extremely strong starting point.
Recommendation Reviewed: April 14, 2025
Recommendation Changed: December 05, 2024
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
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Fundamental View
AS OF 27 May 2025Nissan unveiled their second strategic plan in as many years, with the Re: Nissan Recovery Plan under new CEO Ivan Espinosa focused on sweeping changes to the company’s manufacturing footprint and cost structure. We believe the plan comes with a high degree of execution risk considering execution has been a major organizational weakness in recent years. Lacking in the recovery plan, in our view, was updated details of its hybrid vehicle development and introduction targets, which would address a hole in its product lineup in a fast-growing global segment. While we are hopeful the Re: Nissan Recovery Plan succeeds, and we will be rooting for management to flawlessly execute the plan, we view currently view the plan as a “show me” story until we gain confidence in their ability to execute.
Business Description
AS OF 27 May 2025- Nissan, with headquarters in Yokohama, Japan, is a leading global automotive manufacturer with a market presence in many countries around the globe. The company’s growth investments are focused primarily on Japan, North America, and China, core markets with large profit pools in which Nissan has a meaningful market share. The company’s business in China is conducted through a joint venture with Dongfeng Motor Corporation.
- Nissan’s Sales Financing segment supports the sale of its vehicles by providing financing solutions to its customers and dealers. To enhance their creditworthiness, Nissan maintains keepwell (support) agreements with its wholly owned financial subsidiaries including Nissan Motor Acceptance Corporation (NMAC) in the United States and Nissan Financial Services (NFS) in Japan.
- The Renault-Nissan-Mitsubishi Alliance was established in 1999 to enhance member company scale in product development and raw material purchasing. The alliance includes equity participation, which led to Nissan holding ownership stakes in Renault (15% non-voting) and Mitsubishi (34%) and Renault holding an ownership stake in Nissan (43%). The Alliance’s automobile production volume is the third largest globally behind Toyota and Volkswagen.
Risk & Catalysts
AS OF 27 May 2025Management provided FY25 guidance for production volumes, retail sales, and consolidated operating profit, noting the guidance excludes tariff impacts. However, it noted its guidance for operating profit, net income, and automotive free cash flow is preliminary owing to uncertainty related to the potential impact of tariffs and additional restructuring costs that are currently being assessed. More broadly, the company is viewing FY25 as a year of transition that will set the stage for achieving positive automotive operating profit and free cash flow by FY26.
The company expects to produce and sell 3% fewer vehicles in FY25 than it did in FY24. The retail sales decline expectation is driven by lower projected sales in China, which management expects to decline by about 18%. Global production volume is expected to decline to 3.0 mn units to manage dealer inventories based on the company’s lower retail sales outlook. The company expects revenue to decrease 1% in FY25 as lower volumes are partially offset by improved sales incentive management and favorable pricing related to new model launches in 2H25.
Key Metric
AS OF 27 May 2025| JPY bn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Revenue | 6,843 | 7,393 | 9,573 | 11,524 | 11,371 |
| EBIT | (471) | (42) | 242 | 409 | (54) |
| EBIT Margin | (7%) | (1%) | 3% | 4% | (0%) |
| EBITDA | (201) | 247 | 559 | 760 | 309 |
| EBITDA Margin | (2.9%) | 3.3% | 5.8% | 6.6% | 2.7% |
| Total Liquidity | 4,096 | 3,601 | 3,658 | 4,196 | 4,272 |
| Net Debt | (636) | (728) | (1,213) | (1,546) | (1,499) |
| Total Debt | 1,260 | 973 | 687 | 468 | 661 |
| Gross Leverage | n/m | 3.9x | 1.2x | 0.6x | 2.1x |
| Net Leverage | 3.2x | -2.9x | -2.2x | -2.0x | -4.8x |
CreditSight View Comment
AS OF 06 Jun 2025Our Underperform recommendation on Nissan Motor and Nissan Motor Acceptance Corporation (NMAC) notes is based on our view the notes are subject to downside risk from the recently enacted US auto import tariffs that could thwart its profit improvement initiatives in the US and potentially extend its recovery process. The major risk to our underperform recommendation is a potential partnership with Foxconn, KKR, Tesla, or Honda, the latter of which could lead to expectations for a near-term rating upgrade back to investment grade.
Recommendation Reviewed: June 06, 2025
Recommendation Changed: February 26, 2025
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
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Fundamental View
AS OF 27 May 2025Toyota’s financial guidance for FY26 reflects expectations for higher vehicle production and wholesales but lower consolidated operating profit. Most of the decline in profit is attributable to currency that is projected to go from a tailwind in FY25 to a material headwind in FY26. The other major profit headwind is tariffs, which we estimate could be a 200 bp automotive EBITDA margin headwind based upon management’s estimates. While significant, we believe the tariff headwind – if realized – would not push its profit margin below the rating agency downgrade triggers. Management noted tariff impacts are difficult to estimate based on ongoing negotiations, including government-to-government dialog between Japan and the US.
Business Description
AS OF 27 May 2025- Toyota Motor Corp. (TMC) engages in the manufacture and sale of motor vehicles and parts. It operates through the following segments: Automotive, Financial Services, and All Other. The Automotive segment designs, manufactures, assembles and sells passenger cars, minivans, trucks, and related vehicle parts and accessories. Toyota is also involved in the development of intelligent transport systems. The Financial Services segment offers purchase or lease financing to Toyota vehicle dealers and customers. It also provides retail leasing through lease contracts purchased by dealers. The company was founded by Kiichiro Toyoda on August 28, 1937, and is headquartered in Toyota, Japan.
- Toyota Financial Services Corporation (TFSC), a wholly owned subsidiary of TMC, oversees the management of Toyota's finance companies worldwide. Toyota Motor Credit Corporation (TMCC) is the company’s principal financial services subsidiary in the United States. Under terms of the credit support agreement between TFSC and TMCC, TFSC agrees to: (1) maintain 100% ownership of TMCC; (2) cause TMCC and its subsidiaries to have a tangible net worth of at least $100,000; (3) make sufficient funds available to TMCC so that it will be able to service the obligations arising out of its own bonds, debentures, notes and other investment securities and commercial paper. The terms of the credit support agreement between TMC and TFSC are very similar to the terms of the TFSC and TMCC credit support agreement.
Risk & Catalysts
AS OF 27 May 2025Toyota unveiled FY26 financial guidance that includes a 5% increase in vehicle wholesales and a 1% increase in automotive revenue but a 21% decrease in consolidated operating income. Consolidated vehicle sales are expected to increase by about 5% YoY based on growth in all regions. FY25 consolidated operating income guidance of ¥3.8 tn is 21% lower on a YoY basis, which would represent the second consecutive double-digit decline from its peak ¥5.4 tn consolidated operating income it reported in FY24.
On tariffs, management stated details of tariffs are still in flux, including ongoing government-to-government negotiations between Japan and the US. It indicated the tariffs that have been imposed to date are reflected in its forecast, but noted it is difficult to forecast the future given the fluidity of global trade negotiations. The company has a long-term plan to increase its local supply percentage ratio in the US as part of its business continuity plan. However, it has no immediate plans to change in its US vehicle production or auto parts sourcing plans in the near term owing to uncertainty in country tariffs and the durability of US vehicle and auto parts tariffs.
Key Metric
AS OF 27 May 2025| JPY bn | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|
| Automotive Revenue | 24,652 | 28,606 | 33,777 | 41,081 | 42,996 |
| EBIT | 1,778 | 2,519 | 2,486 | 4,890 | 4,047 |
| EBIT Margin | 6.5% | 8.0% | 6.7% | 10.8% | 8.4% |
| EBITDA | 2,654 | 3,526 | 3,671 | 6,159 | 5,425 |
| EBITDA Margin | 9.8% | 11.2% | 9.9% | 13.7% | 11.3% |
| Total Liquidity | 11,557 | 15,864 | 10,090 | 12,401 | 11,599 |
| Net Debt | 597 | (1,719) | (2,825) | (4,025) | (3,355) |
| Total Debt | 3,872 | 2,580 | 2,724 | 2,868 | 2,736 |
| Gross Leverage | 1.5x | 0.7x | 0.7x | 0.5x | 0.5x |
| Net Leverage | 0.2x | -0.5x | -0.8x | -0.7x | -0.6x |
CreditSight View Comment
AS OF 24 Jun 2025Our Underperform recommendation on notes of Toyota Motor Co. and Toyota Motor Credit Corporation is based primarily on relative value, although we consider the Toyota bond complex to be a relatively safe haven for long-term investors.
Recommendation Reviewed: June 24, 2025
Recommendation Changed: May 09, 2025
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
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Fundamental View
AS OF 27 May 2025Virtually all the company’s FY26 profit headwinds stem from currency and tariffs that combined represent a 370 bp consolidated operating profit headwind. The currency headwind is related to the depreciation of emerging market currencies against the US dollar and, in our view, is rarely a consideration in the credit rating decision-making process. The tariff headwind is more concerning, although we note the company’s tariff cost estimates are a worst-case scenario that includes tariffs on parts as the company works to complete the country-of-origin certification process to qualify for the USMCA tariff exemption. Still, we believe the weak guidance and uncertain trade environment may be enough for Moody’s and Fitch to follow S&P’s lead in revising Honda’s outlook to negative.
Business Description
AS OF 27 May 2025- Honda Motor Co., Ltd. engages in the manufacture and sale of automobiles, motorcycles, and power products. It operates through the following segments: Automobile, Motorcycle, Financial Services, and Power Product and Other Businesses. The Automobile segment manufactures and sells automobiles and related accessories. The Motorcycle segment handles all-terrain vehicles, motorcycle business, and related parts. The Financial Services segment provides financial and insurance services. The Power Products and Other Businesses segment offers power products and relevant parts.
- American Honda Finance Corporation (AHFC) is a wholly-owned subsidiary of American Honda Motor Co., Inc. (AHM or the Parent). Honda Canada Finance Inc. (HCFI) is a majority-owned subsidiary of AHFC. Non-controlling interest in HCFI is held by Honda Canada Inc. (HCI), an affiliate of AHFC. AHM is a wholly-owned subsidiary and HCI is an indirect wholly-owned subsidiary of Honda Motor Co., Ltd. (HMC). Honda Motor Co. (HMC) maintains Keep Well (support) agreements with its North American finance subsidiaries, AHFC and HCFI. Under the Keep Well agreements, HMC agrees to (1) maintain at least 80% ownership in AHFC and HCFI, (2) ensure AHFC and HCFI maintain a positive net worth, and (3) ensure both AHFC and HCFI have sufficient liquidity to meet their debt payment obligations.
Risk & Catalysts
AS OF 27 May 2025Management unveiled FY26 guidance that represented higher motorcycle wholesales, lower automobile wholesales, and a steep decline in consolidated operating income based on currency and tariff headwinds. Management expects FY26 motorcycle wholesales to increase 4%, with the change compared to FY25 driven primarily by Asia. It expects automobile wholesales in North America to increase 2% YoY; while management currently expects the North America automobile market size to be about the same as last year, it is concerned about the impact of tariffs on total demand.
FY26 revenue is expected to decline by about 6% as price increases related to “improved product values” are expected to be offset by currency headwinds. Management predicts its FY26 consolidated operating margin would be the same as its FY25 margin of 6.2% when adjusted for warranty, currency, and tariff impacts. However, the expected impacts of currency and tariffs are expected to reduce Honda’s consolidated operating income by 59% in FY26, or 370 bp of margin compression to 2.5%. The currency impacts are driven by projected depreciation of emerging market currencies against the US dollar
Key Metric
AS OF 27 May 2025| JPY bn | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|
| Revenue | 10,908 | 11,967 | 14,167 | 17,434 | 18,509 |
| EBIT | 576 | 741 | 612 | 1,219 | 899 |
| EBIT Margin | 5.3% | 6.2% | 4.3% | 7.0% | 4.9% |
| EBITDA | 1,175 | 1,334 | 1,294 | 1,964 | 1,630 |
| EBITDA Margin | 10.8% | 11.1% | 9.1% | 11.3% | 8.8% |
| Total Liquidity | 3,717 | 4,612 | 4,926 | 6,150 | 5,387 |
| Net Debt | (2,048) | (2,481) | (2,751) | (3,762) | (3,216) |
| Total Debt | 480 | 837 | 803 | 863 | 646 |
| Gross Leverage | 0.4x | 0.6x | 0.6x | 0.4x | 0.4x |
| Net Leverage | -1.7x | -1.9x | -2.1x | -1.9x | -2.0x |
CreditSight View Comment
AS OF 25 Jun 2025We are lowering our recommendation on Honda Motor Co. and American Honda Finance Corporation notes from Market perform to Underperform based on relative value and projected tariff costs that could lead to negative outlook revisions by Moody’s and Fitch, partially offset by tariff risk mitigation strategies that we believe could improve its profit outlook over the intermediate term.
Recommendation Reviewed: June 25, 2025
Recommendation Changed: May 15, 2025
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
How may we help you?
Search topics about wealth insights and investments.San Miguel Corporation
- Sector: Manufacturing
- Sub Sector: Diversified Conglomerates
- Country: Philippines
- Region: Philippines
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Fundamental View
AS OF 27 May 2025SMC’s FY24 earnings and credit metrics EBITDA improved YoY as we had expected from resilient broad-based demand recovery, lower thermal coal input costs, new project contributions, and good cost control measures.
We are comfortable with SMC’s large diversified operations and dominant market share in key sectors, which could outweigh its persisting high airport and infrastructure capex.
We see low non-call risk for the c.2025 and c.2026 perps in the SMC complex, given SMC’s strong ability and willingness to repay earlier perps at SMC GP, good access to diverse funding channels, and deep reputational concerns upon a non-call.
Business Description
AS OF 27 May 2025- SMC is a massive conglomerate in the Philippines with business interests across six business segments: Food & Beverage (F&B), fuel refining and retailing, power, packaging, infrastructure, and others.
- Its F&B business is operated through San Miguel Food & Beverage, the largest F&B company in the Philippines with three main divisions: Beer and Non-alcoholic Beverage (including beers and juices), Spirits (gin and Chinese wine), and Food (including packaged foods, animal feeds, poultry and fresh meats).
- SMC’s fuel refining and retailing business is operated through Petron Corporation (~68% stake), the largest oil refining and retailing company in the Philippines, and one of the largest in Malaysia. Petron has a total refining capacity of ~268k barrels/day.
- SMC’s power business is operated through SMC Global Power Holdings (SMC GP, 100% stake), one of the largest power generating companies in the Philippines. It maintains a diversified portfolio across coal (62%), natural gas (26%), and renewable energy (12%) sources.
- Through its packaging business, it manufactures glass containers, plastic crates, pellets, bottles and caps, aluminium cans, and other types of packaging products.
- It operates its Infrastructure business through San Miguel Holdings Corp (SMHC), in which it holds a 100% stake. It currently operates ~190 km of toll roads in the country, connecting high-traffic, arterial routes in Luzon.
Risk & Catalysts
AS OF 27 May 2025SMC’s revenues are concentrated in the Philippines (~80%), which poses geographical concentration risk.
SMC incurs significant capex, particularly in its power/energy and infrastructure businesses. In October 2020, SMC began construction of the mega New Manila International Airport (requires ~PHP 750 bn of capex spread over 5-7 years). This could keep SMC’s credit metrics elevated and free cash flows in negative territory.
As a holding company, SMC is reliant on dividend upstreaming from its operating subsidiaries to service its debt, which can be difficult should the operating subsidiaries face cash flow difficulties.
SMC operates in the businesses of thermal power generation and fuel refining, which may be looked at unfavourably by some ESG-focused investors.
Key Metric
AS OF 27 May 2025| PHP bn | FY22 | FY23 | FY24 | 1Q24 | 1Q25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 72.3% | 71.6% | 73.0% | 72.0% | 71.0% |
| Net Debt to Book Cap | 58.5% | 60.4% | 61.2% | 60.6% | 58.0% |
| Debt/Total Equity | 261.3% | 251.9% | 269.9% | 256.7% | 244.8% |
| Debt/Total Assets | 69.8% | 68.1% | 68.2% | 68.0% | 68.4% |
| Gross Leverage | 9.1x | 8.4x | 8.3x | 8.2x | 7.9x |
| Net Leverage | 7.4x | 7.1x | 7.0x | 6.9x | 6.5x |
| Interest Coverage | 2.8x | 2.1x | 2.1x | 2.1x | 2.1x |
| EBITDA Margin | 12.2% | 13.8% | 14.0% | 12.5% | 15.6% |
CreditSight View Comment
AS OF 27 May 2025We have a Market perform recommendation on SMC and its sole c.Jul-25 $ perp; we see limited extension risk for SMC’s perp, yet we don’t see much price upside from current levels. SMC’s c.Jul-2025 trades close to par and fairly to Ayala Corp’s c.Sep-2026 in our view. We like SMC’s dominant market position in multiple sectors, long operating track record and diversified operations. Yet it incurs sizable airport and infrastructure capex that would likely keep its credit metrics elevated and free cash flows negative. Meanwhile, we remain watchful of SMC’s ability to support SMC GP past 2025.
Recommendation Reviewed: May 27, 2025
Recommendation Changed: April 05, 2023
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank