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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
CREDIT RESEARCH
- Danske view Traton as attractive across the curve, trading wider than its rating implies and wider than peers Volvo and Daimler Trucks.• Despite credit rating differences with these peers, operational performance differences have tightened as Traton revenues increase along with profitability.
- The valuation disparities may result from Traton's close ties to Volkswagen Group and lesser debt market presence compared to Daimler and Volvo.
- Upgrade potential is seen in the Moody's rating in the short to medium term if Traton continues to reduce margin differences with peers and decrease leverage.
- The newly-issued Traton 26s (Baa2/BBB) offer particularly strong value, trading wider than the 'BBB-' curve as is visible in the below RV chart (ours)
- Scania 25s (BBB) (Scania being the top performing subsidiary of the Traton group) also present value, trading in line with the Traton curve but higher in the capital structure.
- Further arguments for the trade include margin improvement momentum with a 12% margin possible if other brands can match the performance of Scania. Leverage is also anticipated to decrease in 2024, with improvements from both profitability and cash generation.
- Risks include a harsher than expected recession in 2024, though Traton's geographical diversification and optimization efforts may mitigate this. Strong ties to Volkswagen Group also mean that any changes in VW’s credit quality could impact Traton, especially for S&P’s rating where changes would be directly transferred.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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