MNCS Morning Navigator 04 August 2020

Global Market Highlight

DJIA rose by 0.89% on Monday (03/08) followed by S&P 500 (+0.72%) and Nasdaq (+1.47%). The increase was supported by tech stocks namely Apple (+2.5%) after they announce for an upcoming 1:4 stock split followed by Microsoft (+5%) who considers to buy Tik Tok share after the US President threatened to banned the app. Meanwhile, investors are responding to a positive sentiment from FactSet data which stated that 84% of S&P500 release results beyond market expectations. Moreover, the market will look forward to several data releases today, such as: 1) US Factory Orders; 2) Canada Markit Manufacturing PMI; 3) Australia Interest Rate Decision.

Domestic Updates

Indonesia's inflation rate dropped to 1.54% YoY / -0.1% MoM in July 2020. This is the lowest since May 2000 and below market expectations of 1.66% as the restriction measures imposed by the government to halt the rapid spread of Covid-19 led consumers to stay at home. Prices rose at a softer pace for housing & utilities (0.93% vs 1.12% in June), food, drinks, tobacco (1.73% vs 3.03%), food services & restaurant (2.57% vs 2.96%), recreation, sport & culture (1.26% vs 1.42%), furnishings (1.52% vs 1.66%) and education (2.66% vs 3.66%). On the other hand, prices fell further for both transport (-0.71% vs -1.37%) and information, communication & financial services (-0.31% vs -0.30%).

Company News

1. ICBP IJ managed to score a significant profit growth in 1H20, rising by 31.2% YoY to IDR3.38 tn. This was caused by the 4.14% YoY increase in sales of IDR23.05 tn. Although COGS (+0.67% YoY), sales and distribution expenses (+5.1% YoY), and G&A expenses (+11.06% YoY) all have increased, the company was also able to increase operating income in other lines (+133.8% YoY) and reduce other operating expenses (-0.62% YoY) (Market Bisnis). MNCS Comment: ICBP 1H20 net profits came in IDR3.38 tn, beating the consensus and our estimate, forming 60%/63% of consensus and MNCS FY20E estimate. We maintain our BUY recommendation of ICBP with a TP at IDR10,300. ICBP is currently traded at 13.68x/3.97x PE/PBV.
2. MYOR IJ reported 2Q20 revenue of IDR11.08 tn, an 8.10% YoY decrease. Domestic attributed to IDR6.88 tn of the revenue, while export was IDR4.2 tn. The decline in export sales was offset by higher domestic sales due to its strong and diversified brand. Despite the revenue decline, it also reported a 1H20 net profit increase of 16.22% YoY, reaching IDR938.47. It is the only FMCG company with an increase in net profit, as competitors like UNVR IJ and KINO IJ saw a decline due to Covid-19. The profit growth was a result of reducing short-term bank loans and foreign exchange earnings (Market Bisnis). MNCS Comment: Despite the export sales slowing down, we believe MYOR's strong brands and solid market position will support its profitability as they give the company sufficient pricing power to weather cost increases. MYOR is currently traded at 27.28x/4.83x PE/PBV.
3. KLBF IJ reported revenue growth of 3.8% YoY to IDR11.60 tn in 1H20. Net profit also substantially increased by 10.4% YoY to IDR1.38 tn. The company maintained positive and stable sales and net profit due to the distribution and logistics division. The line recorded an increase in sales of 10.1% YoY to IDR3.75 tn, which is 32.4% of the company’s total net sales in 1H20. Other divisions, such as health products and nutrition, also saw an increase in sales (Market Bisnis). MNCS Comment: We believe KLBF continued to make efficiency gains amid this challenging situation. To mitigate the impact of Covid-19, the management stated that it had already secured most of its raw materials supply by using many vendors. KLBF is currently traded at 26.35x/4.47x PE/PBV.
4. ANTM IJ reported a decline in financial performance in 1H20 despite the soaring gold prices. The decline was caused by the drastic reduction in sales, decreasing by -36% YoY to IDR9.2 tn from IDR14.42 tn. Furthermore, the company’s other expenses rose significantly too by 248.45% YoY to IDR318.7 bn, even though its COGS has been reduced from IDR12.27 tn last year, to IDR7.9 tn. Thus, the company only pocketed a net profit of IDR84.42 bn, a whopping -80.1% YoY decrease (Market Bisnis). MNCS Comment: We see the substantial decrease on revenue was caused by a -49.72% YoY drop in gold sales from 15,741 kg in 1H19 to only 7,915 kg in 1H20 while other expense surge was caused by a loss on foreign exchange reaching IDR156.54 bn in 1H20. ANTM is currently traded at 0.93x PBV.

IHSG Updates

JCI dropped by -2.78% to 5,006.22 on Monday (03/08) followed by net foreign sell reaching IDR1.48 trillion. Stock price drop was caused by the foreign investors concerns towards the economic growth data that will be released on Thursday (05/08) and the following recession potential and the 2Q20 earnings performance that is expected to be disappointing. Furthermore, the Ministry of Finance and consensus estimate that GDP will be -3.1% to -4.2% YoY. Meanwhile, the CPI shows a deflation in July which reflecting a low purchasing power. Moreover, the Rupiah exchange rate was weakening at IDR14,630. We estimate JCI will move in the range of 4,977-5,030 while waiting for Inflation Rate. Today's recommendation: BBNI, MAPI, CPIN, PGAS.

Corporate Action

Cum Dividend Date: AKRA, PBSA, UNVR

Disclaimer On

BBNI, MAPI, CPIN, PGAS, ICBP, MYOR, KLBF