Company Update

26 Maret 2020

MNCS Investment Strategy 26 Maret 2020

#JCIChallengeAccepted: Stay at Home

And Buy an Ultra-deep Sale Stocks!


Indonesia Covid-19 Death Toll Rises to 58; 790 Cases as of Mar 25, 2020

The Ministry of Health has announced 105 new confirmed Covid-19 cases on Wednesday, 25 March 2020, bringing the total number of infections nationwide to 790, with 58 deaths and 31 recovered. Indonesia’s Covid-19 cases rise rapidly to 790 in less than 4 weeks with highest death toll in SEA. In response to this, the government has been preparing for the case handling by taking several actions such as: 1) Modifying 4 towers of Wisma Atlet Kemayoran Jakarta as a special hospital for Covid-19 quarantine patient with rooms and available facilities around 3,000 beds (maximum capacity up to 24,000 beds/10 towers); 2) Purchase of 500,000 rapid-test kits from China which are able to detect early symptoms of Covid-19; 3) Purchase of around 2 million of Avigan drug and 3 millions of Chloroquine; 4) Providing additional incentives for doctors and medical officers who work in emergency response status areas.


Covid-19 has Potentially Threaten More Damage to Global Economy

Global transportation, tourism, supply chain, and commodity market are currently sluggish due to the temporary shutdowns. In addition, DJIA and JCI are simultaneously showing a significant drop by -34.85%/-36.67% YTD, respectively. Therefore, OECD revised FY20E global economic growth to the level of 2.4% (vs previously at 2.9%), US’ GDP to 1.9% (vs previously at 2.0%), China’s GDP to 4.9% (vs previously at 5.7%), and Indonesia’s GDP to 4.8% (vs previously at 5.0%). KMPG even predicted that Covid-19 outbreak could potentially pull US economic growth down to negative zone at -4.5% in FY20E and will recover in FY21F/FY22F by -1.1%/0.8% YoY.


Lesson learned from the Previous Pandemics

At present, the fatality rate due to Covid-19 in Indonesia reaches 7.34% (58 cases) and the recovery rate reaches 3.92% (31 cases). Globally, Covid-19 cases have reached 441,187 (as of March 25, 2020) with 19,784 deaths. Compared to previous epidemics such as SARS (774 fatalities), MERS (858 fatalities), and Ebola (13,562 fatalities) the death toll by Covid-19 has indeed surpassed the aforementioned epidemics due to the wider spread cases. However, looking back at the fatality rate of Covid-19 which is only 4.34%, it is still, by all means, far lower than SARS (9.60%), MERS (34.30%), and Ebola (40.40%). According to the Chinese CDC, the fatality rate is much higher for elderlies aged 60 years and above (3.60%-14.80%) while for people younger than 50 years old, it doesn’t reach 1%. The rise of coronavirus news intensity, followed by hoax news which truth can’t be ascertained, surged the public anxiety. Nevertheless, based on what occurred during SARS outbreak in 2003, of which recovery process could take around 6 months, we believe that the handling of the current case will be faster.


Has the JCI Bottomed Out yet?

The Jakarta Composite Index (JCI) has been significantly depressed by 24.57% within the last two weeks in Mar-2020 with a minimum probability of rebound. The market’s fear of recession are increasing, followed by foreign net sell which currently is at IDR10.84 trillion and USD/IDR depreciates by 17% YTD. Even so, we continue to believe in the promising rebound potential, supported by: 1) Decreasing figure of Covid-19 cases mainly in China and Italy, with fatality rates that can be suppressed; 2) From technical side, JCI’s strong support is at the level of 3,820-3,850, but if JCI were able to move through the 4,200-4,250 level on weekly basis, then it could potentially rebound towards 4,500-5,000 area in the bullish scenario; 3) Attractive risk and reward ratio where maximum downside in one day is only 7% whilst the upside can reach 20%-35%.


Indonesian Government Issues an Emergency Stimulus Package to Dampen the Turbulence

The government is currently preparing stimulus packages I and II to prepare on economic challenges caused by Covid-19 outbreak with a value reaching IDR33.20 trillion. Some of the stimulus packages include: 1) Stimulus Package I is intended to save tourism sector by exempting taxes of hotels, restaurants, and flight ticket discounts; 2) Stimulus package II includes the exemption of income tax (PPh) 21 for workers, postponement of Import Income Tax imposition, and reduction of Corporate Income Tax by 30%; 3) Relaxation of credit for SME with a value under IDR10 billion which will be provided by the bank and non-bank financial industries; 4) Relaxation of share buyback actions by issuers. Amid the rupiah’s depreciation and a plunging JCI, it is the right time to deliver a variety of stimulus packages to boost public trusts, especially to support people’s purchasing power and businesses continuity.


It’s time to Focus on Blue Chips and Dividend Player

MNCS believes that the JCI movement in 1H20E will still be affected by both global and domestic sentiments. We also have published MNCS Primbon Index 2020. MNCS maintains our JCI mid-year target at 5,601 as a pessimistic scenario with 55% of probability ratio. MNCS implements a defensive strategy in the midst of high stock market volatility in 1H20E by focusing on the Consumer Sector (Overweight), Telco Sector (Neutral), and Banking Sector (Neutral), particularly on high-yield dividend stock and some blue chips such as: HMSP (BUY; TP: IDR2,500), GGRM (BUY; TP: IDR63,000), TLKM (BUY; TP: IDR3,400), ASII (BUY; TP: IDR4,820), BBRI (BUY; TP: IDR4,400) and BBNI (BUY; TP: IDR6,900). Meanwhile, there is a potential of short-term strengthening in the Coal Mining Sector (Neutral) and the top picks are PTBA (BUY; TP: IDR2,310) and ITMG (BUY; TP: IDR10,630). We avoid Retail, Hotel, and Aviation Sectors in the current situation as the volumes will relatively be slowing down.


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