EM CEEMEA CREDIT: TPEPW: Q125 results: profitability improving
May-22 10:08
Tauron (TPEPW: -/-/BBB-)
Q125 results: profitability improving
- Leveraged improved as EBITDA went higher, cash flow weaker due to working capital but overall, we see the results as supportive for Tauron’s credit profile and spreads.
- Tauron reporting 1Q25 results. Revenues were +9.5% YoY at PLN9.3bn which was mainly driven by distribution +13% YoY, other divisions were a +/- 1 to 2%. Group EBITDA was +23% YoY at PLN 2.3bn, which again was driven by distribution +20% YoY (contributing around 50% of total group EBITDA), but also the lower margin wholesale business where the group doubled its EBITDA.
- Cash flow from operations were weaker YoY at PLN1.8bn, entirely due to working capital outflow compared to inflow last year, resulting in FCF of PLN387mn. Net debt was reported at PLN13.9bn and LTM non-adj leverage of 2.56x compared to 2.78x at the end of FY24.
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OUTLOOK: Price Signal Summary - USD Downtrend Remains Firmly Intact
Apr-22 10:06
- In FX, the trend in EURUSD remains bullish and Monday’s cycle high reinforces current conditions and highlights a bullish start to this week’s session. The break higher maintains the price sequence of higher highs and higher lows and note that moving average studies are in a bull-mode position, signalling a continued dominant uptrend. The focus is on 1.1608 next, the Nov 9 2021 high. Key support is unchanged at the 20-day EMA, at 1.1140.
- The trend condition in GBPUSD remains up and Monday’s rally reinforces current conditions. The pair has recently breached key resistance at 1.3207, the Apr 3 high and a bull trigger. This highlights a resumption of the medium-term uptrend. Note that moving average studies are in a bull-mode position, signalling a dominant uptrend. Sights are on 1.3434 next, the Sep 26 ‘24 high. Support to watch is 1.3075, the 20-day EMA.
- The trend condition in USDJPY remains bearish and this week’s fresh cycle lows reinforce this condition. The extension down confirms a resumption of the downtrend and maintains the price sequence of lower lows and lower highs. Note too that moving average studies are in a bear-mode position highlighting a dominant downtrend. Sights are on 139.79 next, a 1.382 projection of the Feb 12 - Mar 11 - 28 price swing. The 1.50 projection is at 138.82. Initial firm resistance to watch is the 20-day EMA, at 145.25. First resistance is 142.25, the Apr 21 high.
FOREX: No Let-Up for FX Risk as Lagged Effects Keenly Felt by Corporates
Apr-22 10:02
- While front-end implied vols have abated from highs, the fresh cycle low in the USD Index and lagged impacts on corporates is still a major present risk. The histogram below shows that while 3m implied is off 12m highs, it remains well above the upper quartile for the majority of G10 FX.
- The effects of broad USD volatility are also being keenly felt in the corporate world: UK AIM-listed currency risk management firm Argentex have suspended their shares after FX volatility compromised their short-term liquidity position. In an RNS release they note that if FX vols persist its liquidity position would be "significantly stretched". Full RNS post here: https://www.londonstockexchange.com/news-article/AGFX/financial-position-suspension-of-trading/16998959
- Firms like Argentex sell FX hedging products including forwards and options to corporate clients, who are then subject to margin calls should markets move against their position. In turn, the firm hedges its cumulative exposure in the wholesale market via major banking partners - but are then exposed to the same margin call risk through times of volatility. That appears to be the scenario playing out here - and is unlikely to be a one-off case.
- Distressed liquidity among corporate service providers is an effective proxy for the underlying client - and serves as a further reminder of the dangers to economic activity from even brief spells of extended FX vol.
OUTLOOK: Price Signal Summary - Bear Threat In S&P E-Minis Remains Present
Apr-22 09:46
- In the equity space, a reversal higher in S&P E-Minis on Apr 9 highlighted the start of a correction. The trend condition has been oversold following recent weakness and gains have allowed this to unwind. The contract remains below important resistance points and the trend condition is bearish. The latest move down signals the end of the corrective cycle. Sights are on 4832.00, the Apr 7 low and bear trigger. Initial resistance to watch is 5437.24, the 20-day EMA.
- EUROSTOXX 50 futures continue to trade above their recent lows. The latest bounce highlights a corrective cycle and this is allowing an unwinding of the recent oversold trend condition. Resistance levels to watch are 4978.63, the 20-day EMA, and 5113.20, the 50-day EMA. Key support and the bear trigger has been defined at 4444.00, the Apr 7 low. A break of this level would confirm a resumption of the downtrend.First support lies at 4664.00, the Apr 10 low.
