A Guide to Vontobel Credit Research Performance creates trust Vontobel Credit Research April 2015
Vontobel Credit Research April 2015 Page 2 Vontobel Fixed Income Who are we? Vontobel Credit Research: Dominik Meyer, CAIA (Head): 058 283 63 41, dominik.meyer@vontobel.ch Rocco Schilling, CFA: 058 283 59 87, rocco.schilling@vontobel.ch Marc Schulthess: 058 283 71 48, marc.schulthess@vontobel.ch Vontobel Fixed Income Trading and Sales Philipp Alena (Head): 058 283 73 06, philipp.alena@vontobel.ch Pascal Bürki: 058 283 72 49, pascal.buerki@vontobel.ch Scott Gähwiler: 058 283 73 38, scott.gaehwiler@vontobel.ch Ursula Schneider: 058 283 72 71, ursula.schneider@vontobel.ch
Vontobel Credit Research April 2015 Page 3 Vontobel Credit Research Overview Description (Sell Side activities) Focus on Swiss corporate and financial issuers, ideally not covered by any of the big three rating agencies and with large volumes of bonds outstanding and above average liquidity. Coverage of currently 51 companies; coverage will be constantly expanded over the next few months. In-depth company and sector reports including a credit rating and investment recommendations for outstanding bonds. Recommendation on outstanding bonds: relative value analysis based on the yield development of the analysed bonds vs. similarly rated bonds in the Swiss Bond Index (SBI). Maintenance of own financial model with individual model forecasts allows for a transparent and timely monitoring of companies credit profile and an early adaption of investment recommendations. Forward-looking, rather than only backward-looking company analysis Starting from 30 June 2015: again rating provider for the Swiss Bond Index (SBI)
Vontobel Credit Research April 2015 Page 4 Strategic Re-Positioning within Swiss Sell Side Research Differentiation against Competitors Strategic Rationale: Get out of the cluster! «Me-too»-strategy is destined to fail! DEPTH & SOPHISTICATION OF RESEARCH: Most in-depth Most timely Best company and management knowledge LEVEL OF SERVICE PROVIDED: Most pro-active & ad hoc research Relative value recommendations Active investment recommendations Company roadshows (CFO Lunch presentations) Regular investor presentations & updates (phone) Direct access to analysts
Vontobel Credit Research April 2015 Page 5 Strategic Positioning within Swiss Sell Side Research Depth & Sophistication of Research Business Risk Profile Example: explanations to business risk profile scoring
Vontobel Credit Research April 2015 Page 6 Strategic Positioning within Swiss Sell Side Research Depth & Sophistication of Research (continued) Financial Risk Profile Transparent and comprehensible approach: Example: explanations to financial risk profile scoring
Vontobel Credit Research April 2015 Page 7 Strategic Positioning within Swiss Sell Side Research Depth & Sophistication of Research (continued) Financial Risk Profile Rating methodology (based on S&P): Example: credit adjustments to company financials, such as unfunded pensions, operating lease, sector specific adaptions (financial debt at partner plants, etc.)
Vontobel Credit Research April 2015 Page 8 Strategic Positioning within Swiss Sell Side Research Relative Value Investment Recommendations Valuation of individual bonds vs curve of similarly rated bonds within the Swiss Bond Index (SBI): Example: detection of under-/overvaluation with Holcim (BBB/negative)
Vontobel Credit Research April 2015 Page 9 Vontobel Credit Research Products Covered Our Current Product Range Vontobel Credit Morning Note (daily coverage and market related newsflow) Company Report (core product covering rating and recommendation changes) Sector Report (sector research) Vontobel Relative Value Monitor (short and concise overview of key relative value drivers) Other/Ad-Hoc Products Vontobel Special Comment (special bond relevant themes such as Cyprus bailout, Greek haircut) Vontobel Market Insight (analysis and overview of interesting investment opportunities)
Product Range Vontobel Credit Research a) Vontobel Credit Morning Note Vontobel Credit Research April 2015 Page 10 Description An early short and concise overview of daily spread relevant news and events with regard to (i) our own company coverage, (ii) major developments (including macro) relevant for Swiss/European bond investors and (iii) key bond market observations. How we use it In this product we process all news relevant for bond markets in general as well as of our companies covered on a daily basis. How you can use it Get a quick overview, see if there is anything that needs special attention, work or immediate action; also includes dial-in numbers and times of analyst/investor calls/meetings as well as references to our research published during the day.
Product Range Vontobel Credit Research b) Vontobel Company Report Vontobel Credit Research April 2015 Page 11 Description Our flagship products; bottom-up company analysis, idea driven How we use it We use this product to bring either new ideas, updated (refreshed) old ideas or new aspects of key companies covered to you This is the core product to announce and explain changes to credit ratings and investment recommendations. How you can use it Mostly to get new investment ideas or to stay on top of current ideas Allows you to closely monitor the development of the credit and investment profile of the companies you cover and look at.
Product Range Vontobel Credit Research c) Vontobel Sector Report Vontobel Credit Research April 2015 Page 12 Description Brings together a precise and detailed overview of sector drivers & catalysts and how they affect companies profile. Usually also includes an update of (or introduction to new) companies covered. How we use it We use this product mainly for companies that are dominantly sector driven or on the occasion of initiating a new company/ a new sector. How you can use it Mostly to get an introduction to a new sector or an update on the sector in case credit drivers & catalysts change. Allows you to early capture key developments relevant to the companies you are interested in.
Product Range Vontobel Credit Research d) Vontobel Relative Value Monitor Vontobel Credit Research April 2015 Page 13 Description The Vontobel Relative Value Monitor provides you with a short and concise overview of key relative value drivers for the Swiss Fixed Income market. How we use it We use this product to make you aware of key opportunities and threats related to key market developments within our coverage portfolio. How you can use it To stay up to date with key market developments relevant for your investment portfolio. In order to get new trading and relative value investment ideas.
Product Range Vontobel Credit Research e) Vontobel Credit Research Market Insight Vontobel Credit Research April 2015 Page 14 Description The Vontobel Credit Research Market Insight analyses important developments within Swiss or international bond markets Examples include: Attractiveness and performance of Swiss hybrid issues, issuance activity of Swiss corporates How we use it This is a product we use in order to make investors aware of major new market developments Examples: Performance analysis and characteristics of Swiss hybrid bonds, corporate new bond issuance and their initial market performance How you can use it Provides an overview and analysis of potential new investor opportunities
Product Range Vontobel Credit Research f) Vontobel Credit Research Special Comment Vontobel Credit Research April 2015 Page 15 Description The Vontobel Credit Research Special Comment is an ad hoc assessment of landmark events within global bond markets Examples include: updates with regard to the debt crisis in Europe (Cyprus bailout, Italian elections, Greek bailout, etc.), changes in state guarantee schemes, impact from new regulatory requirements. How we use it This is an ad hoc product, which we use whenever there are landmark changes within global bond markets. How you can use it Keeps you up to date with and explains key changes within global bond markets and regulations (e.g. haircuts on government bonds, bailouts, government guarantee schemes) that need your attention.
Vontobel Credit Research April 2015 Page 16 Vontobel Credit Research Ratings available on Vontobel Research Net for paying clients
Vontobel Credit Research April 2015 Page 17 Vontobel Credit Research SBI rating provider starting from end of June 2015 Starting from 1 June 2015, Vontobel Credit Research will serve again as a rating provider for the SBI -Domestic. For the first time Vontobel credit ratings will be applied with the rebalancing of the indices end of June 2015. Our coverage currently represents around 20% of the outstanding bond volume within the SBI-Domestic or 51% on a like-for-like basis. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 12% 88% Cantonal banks 42% 62% 97% 58% 38% Corporates Cantons Other Financials not covered VT coverage 49% 51% Aggregated Source: SIX, Vontobel Credit Research
Vontobel Credit Research April 2015 Page 18 Vontobel Credit Research Coverage Universe Currently 51 issuers under coverage - still in the build-up phase Target: around 75 companies (but: not more than 25 per analyst!) ABB A/stable Clariant BBB-/stable Georg Fischer BBB+/stable Holcim BBB/negative Sika A+/negative SGS A/stable Lonza - BBB-/stable Givaudan - A-/stable Swisscom A/stable Migros A/negative Coop BBB+/stable Alpiq BBB-/stable Axpo A/under review BKW A/under review Repower BBB/under review Grande Dixence A-/stable ENAG - BBB+/stable Engadiner KW - A-/stable KKW Leibstadt BBB+/stable KW Amsteg - AA/stable Electricité d Emosson - BBB+/stable KW Göschenen - A+/stable KW Hinterrhein - BBB+/stable KW Linth Limmern A/stable KW Oberhasli AA/negative KW Zervreila A/stable Maggia Kraftwerke - A+/stable Nant de Drance - A/stable AKEB - A/stable Swissgrid - AA-/stable
Vontobel Credit Research April 2015 Page 19 Vontobel Credit Research Coverage Universe (continued) Currently 51 issuers under coverage - still in the build-up phase Target: around 75 companies (but: not more than 25 per analyst!) Recently initiated: 10 largest KBs and their respective cantons; as well as Cembra and Swisscom ZGKB AAA/stable GRKB AAA/stable SZKB AAA/stable ZKB AAA/stable LUKB AA+/stable SGKB AA+/stable BKB AA+/stable AKB AA+/stable TKB AA+/stable BLKB AA+/stable Cembra A-/stable