andysch04 escribió:Muchachos, veo que un sinnúmero de pelpas le estan pasando el lustre al tvpx ...cuando el merval inicie una corrección, es probable que los cupones tambien, o no la ven así?
Andy, esto lo posteé hace unos días..
USD Warrants Enter Vulnerable Territory beyond USD12
• Historical data indicates that at current levels USD warrants are no longer massively cheap as has been the
case for most of this year.
• Recent buyback stories shouldn’t have a long-lasting effect on markets, as we assign a low probability to
such a transaction in coming months.
In recent days, USD warrants have reached new record highs,
trading near US$12.00 and accumulating an impressive 70%
gain return since late May. During August’s spike in global
risk aversion, USD warrants lost almost 10% in price terms,
but their subsequent recovery has proven to be particularly
steep, exhibiting a US$2.5 rally in just five weeks.
Adding fuel to market sentiment, last week we have had
market reports about the possibility of the government
repurchasing GDP warrants in significant scale, and also the
release of official 2Q10 GDP data confirming that
Argentina’s economy is likely to grow near 8% this year. In
this context, we decided to check our warrants’ valuation
model and review our fair-value estimates.
In summary, we find USD warrants fairly well valued at
current levels, at least against dollar sovereign bonds. If
market sentiment in EM remains positive, warrants will
likely rally further, but at this point we believe that dollar
bonds like Boden 15s or Discounts may offer better riskadjusted
returns.
USD warrants: Expected cash flows vs. market prices
4%
5%
6%
7%
8%
5-Jan 8-Feb 16-Mar 23-Apr 1-Jun 30-Jun 2-Aug 7-Sep
3%
5%
7%
9%
11%
13% USD w arrant price, RHS
NPV3
Data through September 20, 2010. Sources: JPMorgan.
Buyback talks
According to the 2011 budget bill the government sent to
Congress, there is a ARS8.7 billion provision for the
“repurchase of GDP-linked debts,” which the market took as
an indications of official plans to buy back warrants in a
public offering or similar transaction. However, Secretary of
Finance Lorenzino later clarified that the government in fact
was also considering the repurchase of other type of debts,
including GDP warrants.
After taking a look at some of the spreadsheets included in
the budget bill, our impression is that chances of a formal
repurchase offer for warrants in 2011 look a bit slim, for a
variety of reasons:
(1) The budget item “repurchases of GDP-linked debts” is
probably a provision for next year’s warrant coupon payment
due December 15, 2011, as the two basic conditions for
payments will surely be fulfilled (real growth higher than
3.3% and actual real GDP well above base case real GDP).
There is no other mention of warrants’ coupon payments in
the rest of uses of funds included in the budget bill, leading
us to the conclusion that the warrants repurchase story is
likely to be a misunderstanding.
(2) Now that the government cannot count on a majority in
Congress, negotiations with opposition groups promise to be
tough. In this context, we believe that chances of key budget
guidelines being materially changed in the legislative process
are high, which would also affect original government
strategy on the financing front. Furthermore, some local
political observers believe that the entire 2011 budget bill
might be rejected by Congress, which means that authorities
would have to extend this year’s budget into 2011. In this
context, the legal background behind an eventual debt
buyback proposal today appears a bit fragile.
Argentina, September 22, 2010 2
(3) In the budget bill, the government reckons it might have a
financing gap of US$7.5 billion had it not tapped Central
Bank foreign reserves by that amount. This suggests that the
government’s cash position may be not sufficiently
comfortable to enable it to launch an aggressive debt
buyback program, especially in a year in which key
presidential elections are taking place, with public works and
social benefits being at the top of spending priorities.
Warrants valuation: Where will the rally go?
Our short-term valuation model basically consists in getting
an estimate of the NPV of the next three coupons (NPV3),
and assuming that the difference between this measure and
actual market prices is a negative function of country risk
(proxied by Argentina’s EMBI spread index). After the latest
official GDP data (especially the 13.8% y/y increase in GDP
prices, also a key variable for the calculation of warrants’
payout), we have adjusted our NPV3 estimate by 5% to
US$7.5, which means that the residual value of warrants is
now around US$4.5 (12 minus 7.5). Historical data suggests
that this number is fairly consistent with an EMBI level of
600 bps, and allows us to believe that USD warrants have
stopped being massively undervalued as was the case during
most of this year. In the same direction, a relative value
analysis against local equities also indicates that the days of
very cheap warrants are probably gone.
That said, warrants have proved to be an excellent vehicle to
express upbeat growth views on EM in general and Argentina
in particular, which means that external markets will
continue to be a key driver in this market. Our main point is
that in order to obtain expected returns of 15%-20% (a
reasonable reward for its very high beta status), our model
indicates that this would require EMBI spreads south of 525
bps, real GDP growth above 6% in 2011, an stable FX rate
over the next 15 months, or a combination of these factors.
Up to this point, we think that such a scenario probably looks
a bit overambitious, thus leading us to the conclusion that
USD warrants positions above the 12 mark should be
handled with care.
USD GDP warrants vs. Local stocks
y = 410.46Ln(x) - 442.31
R2 = 0.8247
y = 328.39Ln(x) - 283.96
R2 = 0.8828
200
300
400
500
600
700
800
900
4 6 8 10 12 14 16 18 20
Jan2007-Apr2010 Jan2009-Sep2010
CURRENT
Warrant prices include cumulative coupon payments (0.62, 1.32, 2.28
and 3.17 for 2006-2009 years, respectively). Data through September
20, 2010.
Argentina, September 22, 2010 3
