HEMA - in depth

All,

Please find our in-depth analysis and model of HEMA here.

Macro factors are not headed in the right direction for the company and its cost saving efforts are falling somewhat short of our expectations. Ramphastos’ plan seems to have been to invest option value and try to grow revenues asset light. That makes the SUNs not only the equity in terms of valuation, but also reliant on an equity story, while the SSNs at 10% YTW are not nearly as attractive as other bonds in that yield zone.

HEMA bonds are trading rich in our opinion and we’ll wait for a better entry point. While we are projecting a meaningful deleveraging into year-end - chiefly for VAT and WC related effects and offset by one less week of earnings, we are not yet rushing out to build a position in the name.

Wolfgang