MNCS Morning Navigator 04 November 2020

Global Market Highlight

DJIA rose by +2.06% on Tuesday (03/11) followed byS&P 500 (+1.78%) and Nasdaq (+1.85%). Stocks rose on investors' hopes that the US presidential election would run smoothly without a lawsuit. The market sees Biden going to win hands down so the lawsuit won't happen and discussion of the stimulus will be carried out more quickly.  A recent poll from NBC News / Wall Street Journal shows former Vice President Joe Biden outperformed Trump on the final day of the vote by gaining 52% of the vote. Moreover, the market will look forward to several data releases today, such as: 1) US Balance of Trade; 2) US ISM Non Manufacturing PMI; 3) China Caixin Composite PMI.

Domestic Update

The Ministry of Public Works and Public Housing (PUPR) seeks to address the housing shortage (backlog) and encourage low-income people (MBR) to have livable houses. As of 31 October 2020 the One Million Houses Program has reached 601,637 units. The achievements of the One Million Houses Program consist of the results of the construction of 434,828 low-income community houses (MBR) and 166,809 non-MBR units. The construction of MBR houses consists of the construction of 77,812 units of independent houses from the Ministry of PUPR and 393 units of Housing Special Allocation Fund (DAK).

Company News

1.       ISAT IJ revenue increased by 3.1% YoY to IDR20.59 trillion in 9M20. The cellular phones segment which maintained to give highest contribution of IDR17.03 trillion experienced an increase of 12.9% YoY from its data center, while others such as the Multimedia, Internet and Data (MIDI) segment that contributes IDR3.16 trillion has decreased by -2.5% YoY due to lower sales from internet and IT, and telecommunication segment (IDR395.5 million) decreased by -24% YoY due to lower traffic. Despite the increase in revenue, ISAT undergone higher loss of IDR457.5 billion in 9M20 (Market Bisnis). MNCS Comment: We note that customer base and ARPU growth drives a better topline in 3Q20, while its finance cost still dampening the bottom-line. ISAT is currently traded at 0.89x PBV.
2.       ADRO IJrevenue fell by -26% YoY to USD1.95 billion in 3Q20. Revenues from the mining and coal trading segments decreased -25% YoY, the mining services segment decreased by -42% YoY, and other segments decreased -32% YoY. However, with a strong short-term strategy, ADRO managed to decrease its COGS by -20% YoY, cost of coal cash per tonne by -17%, fuel cost by -28% and operating expense by -23%. Despite that, net profit plunged by -73.05% YoY to USD109.37 million in 3Q20 (Market Bisnis). MNCS Comment: ADRO seem to be affected by the declining demand as well as commodity price, although ADRO is on the long term advantage due to their business diversification and coal downstream. ADRO is currently traded at 16.92x/0.68x PE/PBV.
3.        HOKI IJ booked a negative growth on sales of 23.6% YoY to IDR936.57 billion in 9M20 due the ongoing pandemic forcing the kiosk and supermarket to close. Even though HOKI managed to reduce COGS by -21.6% YoY, the operating expense increased 9.81% YoY. Thus, HOKI's net profit decreased significantly by 62.46% YoY to IDR28.50 billion in 9M20 (Market Bisnis). MNCS Comment: We are concerned that demand in the traditional markets would weaken along with the possible shift in rice consumption from premium to medium rice segment by informal sector workers. However, we believe that the potential demand for HOKI’s rice would come only from the festive season in 4Q20. HOKI is currently traded at 53.52x/3.17x PBV.

IHSG Updates

JCI rose by +0.87% to 5,159.45 on Tuesday (03/11) followed by net foreign sell reaching IDR279.98 billion. JCI return to hike amid the strengthening on Global and Regional Asia Indices due to positive PMI data releases and the US election. All sector were rising led by Miscellaneous and Consumer sector.  Meanwhile, the Rupiah exchange rate was strengthening at IDR14,585. We estimate JCI will move in the range of 5,120 – 5,182 while waiting for 3Q20 GDP data release. Today's recommendation: BBCA, CPIN, TKIM, ASRI.

Disclaimer On

BBCA, CPIN, TKIM, ASRI, HOKI, ISAT, ADRO