Alain Afflelou : Recommendation upgrade to Buy following market correction

The market correction observed since the outbreak of the conflict in the Middle East has significantly altered expectations regarding the refinancing dates of many high-yield issuers. Initially expected as early as 2026 for most of them, under market conditions that were still extremely favourable in February, the dates have frequently been pushed back, with wider yields and spreads as a result. This is particularly true for the Afflelou 6.0% 2029 notes, which now offer a YTW of 4.8% on the July 2028 call (vs. a 2.3% low on the July 2026 call in February prior to the market correction).
This yield over just over two years remains, admittedly, below that of comparable bonds, notably Picard 2029 (B2/B) at 5.2% on the July 2028 call or Mobilux 2030 (B2/B+) with 5.4% on the May 2028 call. That said, we believe Afflelou boasts the most defensive operating profile in the sector, and we believe it offers a good opportunity in absolute terms, particularly as a 2028 call seems late to us (12 months before maturity) whereas, in the event of a call in July 2027, the yield would reach 5.2%. In the (currently uncertain) scenario where the conflict is resolved and the market eases back to pre-conflict conditions, a call in July 2026 would yield as high as 7.2%.