AMS Osram - comment

Post Q2 numbers rating agencies are striking a more cautious note on AMS Osram than us.  On Thursday, Moody’s confirmed the B2 long-term rating but changed the outlook to negative from stable.  Subsequently, Fitch downgrades to B+ from BB-.  Ultimately, both rating agencies cite concerns for H2 2024, on the back of a weaker macro picture coupled with customer destocking continuing to weigh on demand for the remainder of 2024.  Over the longer term, both rating agencies state the underlying demain dynamics remain favourable, and expect growth from 2025 onwards. 

As we stated in our recent note, AMS Osram’s leverage remains high, but any resolution to their Kulim factory and the related lease should ease their leverage burden.  Company management remained bullish on resolving this issue in H2 2024.  The impact of recent contract wins should partially insulate AMS Osram over the medium term.  We continue to retain our position in the Senior Notes.