Pick Up Over 7.5% Yield-to-Maturity with Approach Resources, Bonds Mature June 2021

This week, Durig Capital takes a look at an oil and gas producer who has balanced its revenue streams between oil, natural gas and natural gas liquids (NGLs).  Approach Resources has posted excellent results the past two quarters and has some unique advantages amongst oil and gas producers – significant, contiguous acreage, 100% owned infrastructure, improved well recovery and a balanced product portfolio. It’s most recent quarter continued the positive trend set in Q1.

 

  • A 21% increase in revenues year-over-year.

  • Production increases over Q1 by 2%, at the high end of quarterly guidance.

  • 18% increase in EBITDAX.

  • Interest coverage of 2.7x.

Collect Over 10.5% Yield-to-Maturity with Avon Products, Bonds Mature March 2023

This week, Durig Capital takes a look at a 130-year old company, whose name is synonymous with direct selling. Avon Products is now a global manufacturer and distributor of a wide range of beauty products. The company’s recently posted its most recent quarterly results.  Some of the highlights include:
 

  • A 62% increase in operating profit.

  • The company’s average order was up 6%.

  • Operating margin was up 160 basis points over last year’s Q2.

Over 24.5% Yield-to-Maturity with GNC Holdings, Bonds Mature August 2020

This week’s bond focus takes a third look at a global specialty retailer of health and wellness products. Durig Capital’s last review of GNC discussed the Harbin China deal. While that deal is currently awaiting regulatory approval, GNC has since reported its second quarter results. The company continues to report successes in several areas.

 

  • Q2 international segment sales increased 11% year-over-year.

  • E-commerce sales increased by 8.3%

  • The company’s myGNC and ProRewards customer loyalty programs grew 14% and 8.8% respectively over Q1 levels.

  • Q2 interest coverage was a healthy 1.8x.

Pick Up Over 8% Yield-to-Maturity with Mallinckrodt International, Bonds Mature April 2023

This week, Durig Capital looks to the healthcare sector where a specialty pharmaceutical company has posted solid back-to-back quarters resulting in increased guidance for 2018. As a result of Mallinckrodt Pharmaceuticals’ performance in both Q1 and Q2, company management has raised 2018 guidance citing solid performance across its product lines. Some of the highlights from Mallinckrodt’s Q2 numbers include:

 

  • Q2 cash flows from operating activities grew by 17.6% over the same period last year.

  • Net sales increased 5.3% year-over-year.

  • Adjusted Gross Profit increased by 8.4%

  • Year-to-date debt reduction of $535.2 million

  • Interest coverage over 2x for the first six months of 2018.

Parker Drilling, Over 13.25% Yield-to-Maturity, August 2020

This week, Durig Capital looks again at Parker Drilling, a company that provides contract drilling / drilling related services and rental tools to the oil industry. (Durig Capital reviewed Parker Drilling in June 2015). Having survived the unprecedented declines in oil prices over the past three years, Parker Drilling has emerged as a leaner, more competitive company. Its most recent quarterly results show a company that continues to perform.

 

  • Q2 adjusted EBITDA growth of 39% year over year.

  • Consecutive quarterly revenue growth of 8.1%.

  • Gross margin as a percentage of revenues increased to 22.8%, up from 16.5% in Q1.

  • Q2 interest coverage ratio of 2.4x.

Discover 7.75% YTM with Denbury Resources, Bonds Mature August 2021

This week’s bond review focuses on a company involved in tertiary oil production. Denbury Resources produces oil using carbon dioxide injections to draw more oil out of fields that have exhausted their production from conventional methods. Denbury has had a fantastic year since our last review of the company and has just posted results from the company’s second quarter. Highlights include:

 

  • 56% increase in revenues.

  • Production growth of 4%.

  • Adjusted Cash Flow from Operations increased 106% year-over-year.

  • Q2 interest coverage was 3.4x

Go Green with 8.0% YTM from Canadian Solar, Bonds Mature February 2019

This week’s bond review shines a light on the solar industry, focusing on the second largest solar company by revenues. Canadian Solar has experienced outstanding growth over the past few years, with revenues growing by nearly 19% between 2016 and 2017. In addition, the company is projecting revenue growth this year of over 35% over  last year. Growth has been driven by the large demands in China in recent years, but also increased demand in countries such as Brazil, Mexico and India. Canadian Solar’s first quarter results show the company is off to a solid start this year.

 

  • Gross profit in Q1 increased 57% over Q1 2017.

  • Net revenue in Q1 was up an impressive 110.5% from Q1 2017.

  • Operating expenses and general and administrative expenses both decreased year-over-year in Q1.

  • Interest coverage for Q1 was a solid 2.6x.

Earn 7.18% YTM with Conn’s Inc., Bonds Mature July 2022

This week’s bond review delves into the retail sector with a specialty retailer of durable consumer goods who also offers its customers financing on their purchases. Conn’s Inc., which is headquartered in Texas, has a market presence that stretches across the southern United States. It’s most recent quarterly results show a company registering wins from a multi-year planned strategic repositioning. Total operating income increased by 62.3% over the prior year period. In addition, Conn’s posted a record quarterly retail gross margin of 39.6%. The company’s credit segment had positive outcomes as well, generating its first positive operating income in four years as credit revenues grew over 8% year over year.  Conn’s continues to grow, opening two new stores in its most recent quarter, with more scheduled for this fiscal year. The company’s 2022 bonds are in demand right now, with a yield-to-maturity of about 7.18%. This competitive yield as well as the opportunity for diversification into the retail sector, makes these bonds a smart addition for Durig Capital’s Fixed Income 2 (FX2) Managed Income Portfolio, the recent performance of which is shown below.

Find 9.4% Yield-to-Maturity with Hertz, Bonds Mature October 2022

This week’s bond review ventures into the auto world, specifically car rentals. Hertz is one of the leading auto rental companies in the U.S. and around the world. The company has posted three back to back quarters where global revenues have increased year-over-year. It’s most recent quarter registered an 8% increase in total revenues, with adjusted corporate EBITDA improving by $51 million. For Q1, the company also posted solid cash flows from operating activities of $401 million as well as an outstanding interest coverage ratio of 3.5x.  Hertz has also recently begun a revitalization plan to improve its U.S. based revenues, including improving its technology platforms, customer service, marketing and fleet optimization. The company’s 2022 bonds, with a yield to maturity of around 9.4%, offer a fantastic opportunity to add diversification into the retail / consumer auto industry and make an ideal addition to Durig Capital’s Fixed Income 2 (FX2) Managed Income Portfolio, the recent performance of which is shown below.

Produce Over 12.5% YTM with Alliance One International, Bonds Mature July 2021

 

This week, Durig Capital takes another look at one of two publicly held global leaf tobacco merchants. The last review of Alliance One earlier this year revealed that the company had made its entrance into the e-cigarette market through its acquisition on Purilum, an e-liquids producer. Now Alliance One is taking further steps to diversify its product offerings into both the cannabis and industrial hemp markets. Additionally, the company recently released its Q4 and FY 2018 results. Fiscal year 2018 recorded improvements over the previous year, including: