We believe that Praeco Pty Limited’s (Praeco) indexed annuity bonds (IABs due 2020) with a YTW of 4.92% (quoted at a mid-price of AUD22.99) offer fair relative value when compared to peers. However, we do not believe Praeco’s fixed rate notes (Notes due 2022) with a YTW of 3.93% (quoted at a mid-price of AUD105.58) offer compelling value and as such we have an Underperform recommendation on the Notes.
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