MNCS Morning Navigator

03 Juni 2021

MNCS Morning Navigator 03 June 2021

Global Market Highlight
DJIA increased by +0.07% on Wednesday (02/06) followed by S&P 500 (+0.14%) and Nasdaq (+0.14%). Wall Street closed slightly higher as the energy sector rose on the back of rising oil prices. Sentiment on oil prices has also been supported by rising expectations that Iranian supplies to the market will be delayed due to talks over the nuclear deal. On the other hand, the material sector weakened. As the week progresses, investors' attention will turn to the monthly jobs report for May-21 which estimates that around 650,000 jobs were created in May-21. Moreover, the market will look forward to several data releases today, such as: 1) US Markit Composite PMI; 2) China Caixin Composite PMI; 3) UK Markit/CIPS Composite PMI.
Domestic Update
• Indonesia’s CPI rose 1.68% YoY in May slightly higher than Bank Indonesia (BI) projection & consensus estimate (1.64% YoY vs 1.67% YoY). Core inflation increased to 1.37% YoY or 19 bps higher than previous month indicating better consumer purchasing power (BPS). MNCS Comment: Rising inflation in May is in line with the consensus forecast. BI-7DRR vs Inflation spread now stands at 213 bps. Benign inflation outlook for 2021 making Indonesia’s financial assets valuation remain attractive in real terms.
• Indonesia’s Minister of Finance Sri Mulyani stated that Covid-19 remains a risk for the 2022 budget as the epicenter of the outbreak shifted to the east. Sri Mulyani also mentioned possible monetary tightening by The Fed as high inflation started to materialize in the US. MNCS Comment: Covid-19 resurgence in some Asian countries has brought a pressure to regional economic recovery momentum. The possibility of earlier than expected tapering is reflected in U.S. released macro data recently indicating a stronger output growth prospect. We believe that earlier tapering will only induce currency volatility and capital outflow from EM which can lead to rupiah depreciation against USD, stock market correction and rising yield of Indonesia’s gov’t bond.
• Furthermore, there was an addition of 601 new Covid-19 cases in Jakarta yesterday.
Company News
1. MEDC IJ posted revenue of USD1.09 billion in FY20, which is down -20.05% (vs USD1.37 billion FY20). However, net loss also increased significantly from USD188.97 million in FY20 or 394.73% (vs USD38.76 FY19). Revenues mainly came from customer contract revenues of USD1.06 billion and financial revenues of USD32.06 million (vs FY19 which came from net oil and gas sales of USD1.16 billion, sales of electricity and other related services of USD212.22 million) (Emiten News). MNCS Comment: The decline in MEDC's performance was due to the decline in oil prices in FY20 due to market volatility. However, we believe that its subsidiary (Aman Mineral) will contribute to improving MEDC's performance this year by selling coal and gold. MEDC is trading at -6.73x/0.98x PE/PBV.
2. TOWR IJ posted revenue of Rp1.95 trillion in 1Q21, an increase of +7.73% YoY (vs. Rp1.81 trillion in 1Q20). However, COGS TOWR also increased from Rp520.34 billion in 1Q20 to Rp536.12 billion in 1Q21. TOWR posted a net profit of Rp799.23 billion in 1Q21 which increased by +52.08% YoY (vs. Rp518.96 billion in 1Q20) (IQ Plus). MNCS Comment: TOWR's performance is relatively inline with MNCS and consensus estimates implying 25% of FY21E's total net profit. We estimate that solid performance will continue to be supported by the increase in the tower and fiber optic businesses. TOWR is currently trading at 21.68x/6.05x PE/PBV.
3. SMRA IJ posted revenue of Rp1.07 trillion in 1Q21, an increase of +2.88% YoY (vs. Rp1.04 trillion in 1Q20). However, SMRA's COGS also increased from Rp511.47 billion in 1Q20 to Rp580.59 billion in 1Q21. SMRA posted a net profit of Rp37.41 billion in 1Q21 which increased by +0.99% YoY (vs. Rp37.04 billion in 1Q20) (IQ Plus). MNCS Comment: The improvement in SMRA's performance in 1Q21 was driven by an increase in landed house property sales which were affected by the VAT incentives from the government. We see SMRA's performance will grow in line with the economic recovery after being affected by Covid-19 in FY20. SMRA is currently trading at 92.55x/2.01x PE/PBV.
IHSG Updates
JCI rose by +1.41% to 6,031.58 on Wednesday (02/06) followed net foreign buy reaching IDR509.85 billion. JCI rose as most sectors strengthened, led by tech (+9.94%), energy (+2.93%) and infrastructure (+2.16%), while the transport sector fell. JCI was increased by market optimism after released data PMI and Inflation rate. Meanwhile, the Rupiah exchange rate was flat at IDR14,280. We estimate JCI will move in the range of 5,900-6,100 while waiting for Foreign Exchange Reserves data release. Today's recommendation: PGAS, BBCA, INDF, MEDC.
Corporate Action
Cum Dividend Date: MBAP (IDR115/share), SAMF (IDR19/share)
Right Issue: SMRA (IDR720/share)
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