MNCS Morning Navigator 05 August 2020

Global Market Highlight

DJIA rose by +0.62% on Tuesday (04/08) followed by S&P 500 (+0.36%) and Nasdaq (+0.35%). The strengthening was driven by the positive 2Q performance of technology companies in the US. Another supporting sentiment is from pharmaceutical company, Eli Lilly, who is starting a third phase of a trial for the LY-CoV555 coded drug which is believed to prevent the spread of the Covid-19 virus among medical personnel. On the other hand, the July ISM Manufacturing PMI was at 54.2, up from the previous month at 52.6. This realization is better than the estimated increase of 53.6. Moreover, the market will look forward to several data releases today, such as: 1) US Balance of Trade; 2) China Caixin Composite PMI; 3) Eurozone Markit Composite PMI.

Domestic Updates

1. The value of loans in Indonesia increased by 1.49% YoY. However, this is the lowest monthly rate of growth in lending since June 2002, when the bank lending fell by 1.2%. In May 2020, the value of loans increased by 3.04% YoY and in April 2020, the value of loans increased by 5.73% YoY.
2. The disbursement of the 13th civil servants salary is estimated to take place next week. The ministry of finance allocates the 13th salary budget of IDR28.5 trillion. From the total of the budget, IDR14.6 trillion will be distributed for the police, the military, and the retirees. While for regional civil servants with the budget amounted to IDR13.89 trillion. We see that this was meant to stimulate people's purchasing power.

Company News

1. PZZA IJ recorded a drastic financial performance decline in 1H20. It booked revenue of IDR1.82 trillion, down 6.06% YoY. Sales in Jakarta still remained strong despite the large-scale social restriction, reaching 40.24% of the company’s total sales. Despite the slight decline in revenue, PZZA recorded a drastic profit decline, down by 90% YoY to IDR10.47 billion. This is caused by an increase in COGS and other operating expenses. As a result, the company also recorded a rise in liabilities amounting to IDR1.1 trillion, a 44% increase (Market Bisnis). MNCS Comment: The lower revenues, combined with weaker margins, resulted in a weaker perfomance. The government imposed the large scale social distancing policies starting in early April and Malls closure, so the 2Q20 was more adversely affected. PZZA is currently traded at 85.82x/1.43x PE/PBV.
2. RALS IJ faced a problematic semester, recording a decline in revenue and profit by up to double digits. In 1H20, it pocketed IDR1.47 trillion, down by 57.88% YoY, due to a decrease in sales. As a result, net profit eroded by 60.89% YoY IDR613.73 billion from IDR1.57 tn last year, even though COGS has been reduced by 55.19% YoY to IDR860.08 billion and other expenses has been decreased as well (Kontan). MNCS Comment: We see RALS's 1H20 results have been significantly affected by mall closures and slowdown in consumer demand due to the Covid-19 pandemic. Management expected that revenue potentially lower by 20%-50% while earnings fall by 75% during the pandemic. RALS is currently traded at 0.91x PBV.
3. SMRA IJ booked a revenue of IDR2.18 trillion, dropped by 18.35% YoY in 1H20. The largest revenue contributor remains the property development segment which decreased by 5.66% YoY to 1.5 trillion. Meanwhile, SMRA net profits slipped by 93% YoY to IDR10 billion. The Large Scale Social Distancing in Jabodetabek and Bali negatively impacted all of SMRA`s investment property business, especially malls, hotels, and recreation property, all of which recorded negative gross profits. (Kontan).MNCS Comment: This performance is an impact faced by SMRA in 2Q20 where the presence of PSBB hampers the performance of tenant mall rentals and decreases hotel occupancy. SMRA is currently traded at 1.11x PBV.

IHSG Updates

JCI rose by +1.37% to 5,075.00 on Tuesday (04/08) followed by net foreign sell reaching IDR45.12 billion. Stock price rise was a respond towards the market price drop on Monday. Today the market will be expecting the 2Q GDP which became investor concerns although the 1Q20 GDP was still positive at 2.97% YoY, which means the country has still has a long way to recession. 2Q GDP is forecasted to reached -4.9% YoY while the consensus estimates is at the level of -4.61% YoY.  Moreover, the Rupiah exchange rate was strengthening at IDR14,625. We estimate JCI will move in the range of 5,030-5,100 while waiting for GDP growth 2Q20. Today's recommendation: BRPT, INCO, KLBF, WIKA.

Corporate Action

Cum Dividend Date: WIIM, PGLI, MGRO

Disclaimer On

BRPT, INCO, KLBF, WIKA, SMRA, RALS, PZZA