MNCS Morning Navigator 09 July 2020

Global Market Highlight

DJIA increased by +0.68% on Wednesday (08/07) followed by S&P 500 (+0.78%) and Nasdaq (1.44%). These increases are supported by the rise in tech stocks namely: 1) Apple (+2.3%); 2) Microsoft (+2.2%); 3) Netflix (+2%); 4) Amazon (+2.7%) which made S&P recorded an all-time high. Market sentiment also improved slightly after the US government signed a USD1.6 billion contract with Novavax to develop the corona vaccine. Meanwhile, the Covid-19 cases in the US has reached 3.05 million with 132,256 mortality. Furthermore, the market will look forward to several data releases today, such as: 1) US Initial Jobless Claims; 2) China Inflation Rate; 3) Germany Balance of Trade.

Domestic Updates

Retail sales in Indonesia tumbled by 20.6% YoY year in May 2020, after a 16.9% YoY fall a month earlier. This marked the sixth straight month of drop in retail trade and the steepest since October 2008, amid deteriorating consumption as people were forced to stay at home on the back of public health measures to contain the spread of Covid-19. Sales decreased at faster paces for all categories: clothing (-74% YoY), information & communication equipment (-19.7% YoY), cultural & recreational goods (-53.7% YoY), fuel (-45.4% YoY), automotive parts & accessories (-46.9% YoY), home appliances (-21.9% YoY), and food, beverages & tobacco (- 9.7% YoY). On a monthly basis, retail sales rose by 4% MoM in May, after a 13.3% MoM slump in April.

Company News

1.       SMRA IJ recorded 1H20 marketing sales at IDR1.1 trillion, in which 70% of the sales are contributed from residential projects. However, this target is only equivalent to 24.44% of their total year-round target of IDR4.5 trillion. Management refused to comment on the company’s next steps to meet the target. However, SMRA does have an advantage of stable recurring income from tenant rents at malls, and lower interest rate from bank at 11%. (Market Bisnis) MNCS Comment: SMRA's marketing sales achievements were quite low during the pandemic, but reopening mall will reduce the risk of a deeper decline in SMRA's financial statements. SMRA is currently traded at 1.23x PBV.
2.       INAF IJ recorded a decrease in sales of 14.47% YoY to IDR1.36 trillion in FY19. Yet, the company managed to reduce the cost of goods sold, sales expenses, general and administrative expenses, and financial expenses. So INAF managed to score a net profit of IDR7.96 billion in FY19 compared to a net loss of IDR32.73 billion in FY18. (Market Bisnis) MNCS Comment: Along with the Covid-19 pandemic, the demand of medicine and healthcare supplies will rise and become an advantage for INAF. INAF is currently traded at 6.44x PBV.
3.       WIKA IJ recorded a new contract value of IDR3.14 trillion in 5M20. Most of the contracts obtained from precast concrete products. The next contributors came from infrastructure projects. This includes the construction of roads, buildings and others. In detail, WIKA's acquisition of new contracts came from industries amounting to IDR1.61 trillion, infrastructure and buildings amounting to IDR1.11 trillion, energy and industrial plants IDR143 billion, and properties amounting to IDR275.74 billion. (Market Bisnis) MNCS Comment: WIKA's new contract fell to 75% YoY in 5M20, and only reached 5% of the target in FY20E. WIKA is currently traded at 0.77x PBV.

IHSG Updates

JCI rose by +1.79% to 5,076.17 on Wednesday (08/07), followed by net foreign buy reaching IDR78.26 billion. This increased movement is supported by improved economic data as indicated by the Consumer Confidence Index in June 2020 which rose to 83.8 compared to the previous month at 77.8. This is followed by another positive sentiment such as foreign exchange reserves for June 2020 which rose to USD131.7 billion compared with the position of the end of May 2020 at USD130.5 billion. The improved data seem to raise optimism about the state of the Indonesian economy as foreign investors re-enter the stock market, reflected in the net foreign buy. Meanwhile, the Rupiah exchange rate against the USD was strengthening at IDR14,410.We estimate JCI will move in the range of 4,973-5,140 while observing the global market. Today's recommendation: MDKA, PWON, BBRI, TKIM.

Corporate Action

RUPS: TAXI, DOID, BUMI

Disclaimer On

MDKA, PWON, BBRI, TKIM, SMRA, INAF, WIKA