MNCS Morning Navigator 06 October 2020

Global Market Highlight

DJIA rose by +1.68% on Monday (05/10) followed by S&P 500 (+1.80%) and Nasdaq (+2.32%). The strengthening of global exchanges was accompanied by the return of US President Donald Trump home after being declared that his condition had improved. Trump's downfall has sparked a stricter anti-corona policy. New York Mayor announced on Sunday that economic activity in nine boroughs of Brooklyn and Queens would be restricted from next Wednesday. Furthermore, Nancy Pelosi and Finance Minister are still in stimulus talks. They are trying to bridge the gap that is still happening between the USD2.2 trillion Democratic proposal and the USD1.6 trillion White House bid. The hope is that this stimulus can be agreed upon to increase liquidity in the market. Moreover, the market will look forward to several data releases today, such as: 1) US Balance of Trade; 2) UK Construction PMI; 3) Canada Balance of Trade.

Domestic Updates

Indonesian parliament (DPR) Passes Jokowi's Omnibus Law Bill on Job Creation as Law. DPR has officially passed the Omnibus Law bill on job creation as the legal law on Monday, Oct 5^th 2020. The bill will cut the mandatory severance benefits paid by employers to 19 times monthly wages from 32 times now. Despite of its controversial changes proposed to the 2003 labour law, Indonesian government views that it is needed to improve the investment climate and streamline regulations in Southeast Asia's biggest economy. On the flip side, a coalition of 15 activist groups, including trade unions, condemned the bill in a statement on Sunday and called on workers to join a planned national strike on Oct. 6^th – 8^th 2020. MNCS Comment: The controversy will potentially bring short term volatility to Indonesian market if the demonstration runs unsmooth. However, we believe it will be only temporary and the policy will surely bring benefits to increase productivity and inflow of FDI to Indonesia in the long run. Industrial estate will potentially get a good catalyst for the implementation of the law.

Company News

1.        HEAL IJ will conduct a private placement amounting to 10% of the issued and paid in capital. The shares issued reached 297.3 million and worth IDR100/share. This will increase the capital by IDR29.73 billion after the corporate action. The current shareholder's stock will be diluted by 9.09%. The purpose of the private placement is to strengthening the capital structure, meeting working capital needs, and meeting capital expenditure needs for the company's business development whereas the DER ratio will decrease (Market Bisnis). MNCS Comment: This private placement will help heal the company's cash in the midst of a challenging business in the hospital industry. This is inseparable from the decrease in HEAL profit in 1H20 which decreased due to the hospital being the object of risk for exposure to Covid-19. HEAL is currently traded at 45.92x/4.35x PE/PBV.
2.        BRIS IJ reported the net income surged by 158.46% YoY to IDR168 billion as as of Aug 2020. It is supported by loan disbursement of IDR1.94 trillion as of Aug 2020 which increased 19.75% YoY. The management said that the upside for the Shariah development is still high as the financial literation still stands at 16.34% from 100%. The management set the growth of net income at 150% - 170% YoY from IDR74.02 billion in FY19 to IDR185.05 billion – IDR199.85 billion in FY20E (Bisnis). MNCS Comment: BRIS performance has far exceed the growth of Indonesia banking sector and proved its resiliency in midst of uncertainty due to Covid-19. Furthermore, the merger story is still coloring the prosper prospect of the Company. BRIS is currently traded at 1.57x PBV, still on par with the average of the industry.
3.        HMSP IJ and GGRM IJrecorded good performance on its stock price increased by 4.63%/+4.19% in Oct 5^th 2020. The stock prices hit its rock bottom after the sharp fall since Aug 2020 due to lowering demand outlook and govt plan to increase cigar excise with high double digit growth in FY21F. MNCS Comment: We view the rebound of the share price is supported by the expectation on lower excise hike in FY21F, which will be at low teens for SKM and low single digit for SKT. It is also supported by the oversold condition for those stocks. We believe that the rebound will continue for today (Oct 6^th 2020) as mentioned in our last Sectoral Scope Wave report yesterday.HMSP/GGRM are currently traded at 17.5x/10.49x PE.

IHSG Updates

JCI grew by +0.65% to 4,958.77 on Monday (05/10) followed by net foreign buy reaching IDR35.20 billion. Index bounced back following the strengthening in the Regional Asia Indices following the news of Trump's discharge from the hospital. The incline is supported by the consumer and finance sector. The market will looking forward to the impact of the Omnibus Law approval. Meanwhile, the Rupiah exchange rate was strengthening at IDR14,800.We estimate JCI will move in the range of 4,840 – 4,991 while waiting for Consumer Confidence data release. Today's recommendation: AKRA, BMRI, EXCL, BRPT.

Corporate Action

Cum Dividend: UNTR (IDR171/share), ASII (IDR27/share)

Disclaimer On

HEAL, BRIS, GGRM, HMSP, AKRA, BMRI, EXCL, BRPT