MNCS Morning Navigator 07 July 2020

Global Market Highlight

DJIA climbed +1.78% on Monday (06/07) followed by S&P 500 (+1.59%) and Nasdaq (+2.21%). US market jumped Monday following the holiday weekend, lifted by medical, technology companies to banks. Moreover, data from the Institute for Supply Management showed a surprise expansion in the US services sector, ISM rose to 57.1 in June 2020 (vs estimate of 50.1). That was even as data continued to point to a rise in Covid-19 cases, which some investors have worried might force officials to further delay reopening plans across the country. Moreover, Shanghai Composite Index soaring 5.7% to its highest level since early 2018. Furthermore, the market will look forward to several data releases today, such as: 1) US Fed Bostic Speech; 2) China Foreign Exchange Reserves in June-2020; 3) Japan Household Spending in May-2020.

Domestic Updates

BI just released Consumer Confidence Index as of June 2020 which stood at 83.8, an increase from 77.8 in May 2020.This indicated that consumer confidence in economic conditions had improved, although it was still at a level <100. Consumer confidence was monitored to improve in all categories of respondents, both by expenditure level and by age group. The improvement in consumer optimism was mainly due to stronger consumer expectations for economic conditions forecast in the next 6 months, in line with the easing of the Covid-19 pandemic in Indonesia. Strengthening on the expectations side was mainly supported by forecasts of expansion in business activity that increased in the next 6 months. On the other hand, consumer perceptions of current economic conditions are monitored to be still low and continue to weaken, mainly due to a decrease in consumer optimism about purchasing durable goods.

Company News

1.       KLBF IJ states the realization of the capital expenditure (capex) has reached IDR600 billion from a budget of IDR1 trillion. In other words, the realization reached 60%. The capex which has been absorbed is used to complete the relocation of the Bintang Toedjoe and Saka Farma factories to Cikarang. In addition, capital expenditure has also been used for the construction of Enseval Putera Mega Trading and Global Chemindo Megatrading warehouses. KLBF plans to release one to two new supplement products to boost sales. (Market Bisnis) MNCS Comment: Amid the pandemic, KLBF seem to expand smoothly while being in the position of advantage, as their top line and bottom line soared by 8.02%/12.47% YoY in 1Q20. KLBF is currently traded at 26.84x/4.36x PE/PBV.
2.       ACES IJ has just launched its newest outlet in Sawangan, Depok, West Java over last weekend.  The 2,270-m2 store is the 10th outlet opened by the company this year. Currently the company operates a total of 205 stores. Since the start of the year the company has launched new outlets in several cities including Yogyakarta, Mojokerto, Gorontalo, and Makassar. It seeks to open a total of 15 new stores by the end of the year. (Kontan) MNCS Comment: ACES is also one of the companies benefited from the pandemic as their top and bottom line rose by 4.25%/3.90% YoY in 1Q20 so we see that there will be no obstruction in expansion. ACES is currently traded at 26.05x/5.21x PE/PBV.
3.       AGRO IJ are planning a share buyback and will not exceed from 20% of the total paid-up capital. The buyback budget is amounting to IDR2.5 billion and will be done from 3 July 2020 to 2 October 2020. The buyback is planned to be done in current market conditions that fluctuate significantly. (IDX Channel) MNCS Comment: As the price of its shares continues to decline 23.73% YTD, AGRO plans to repurchase  its shares in efforts to shore up the domestic money market amid the Covid-19 outbreak. AGRO is currently traded at 0.79x PBV.

IHSG Updates

JCI was flat by +0.30% to 4,988.87 on Monday (06/07), followed by net foreign sell reaching IDR547.38 billion. The movement occurred with the significant strengthening of global and regional Asia indices driven from euphoria from data releases that indicates economic recovery. Moreover, the Consumer Confidence Index raise optimism in the domestic market as it indicates improving economic condition. Meanwhile, the Rupiah exchange rate against the USD was weakening at IDR14,490. We estimate JCI will move in the range of 4,914-5,020 while waiting for Foreign Exchange Reserves. Today's recommendation: TLKM, BBNI, ASII, INDF.

Corporate Action

Ex Dividend Date: MYOR

IPO: PGUN, SOFA

Disclaimer On

TLKM, BBNI, ASII, INDF, KLBF, ACES, AGRO