HSBC Securities analyst Sarah Leshner began on Monday coverage of six asset-backed securities in the Brazilian oil and gas equipment and services industry, saying the bonds offer an opportunity for investors to play the sector while being shielded from volatility in prices and output volumes. Leshner initiated coverage of debt issued by QGOG and Schahin with an "overweight" recommendation, and a "neutral" one for Odebrecht.
Bonds for these companies have rallied along with the rest of the market in the last three months but still offer a potential compression in yields of about one percentage point to comparable debt issued by Petróleo Brasileiro SA, the state-controlled oil company known as Petrobras. The lower the yield, the higher the price for a bond.
According to Leshner, "each issue benefits from a strong relationship with Petrobras, securitization in the form of rig equipment, and tight bond structures," adding that "we see compelling relative value opportunities in the sector on the back of undervalued differences in underlying assets, structures and operators."