MNCS Morning Navigator 10 July 2020

Global Market Highlight

DJIA slipped by -1.39% on Thursday (09/07)followed by various movements from S&P 500 (-0.56%) and Nasdaq (+0.53%). These various movements occurred amid renewed concerns about Covid-19 and its impact on the economy. Across the territory of the US state the surge in cases continues, raising concerns about the restriction of activity and dimming the prospects for rapid economic recovery. The weakening of Goldman Sachs, American Express, JP Morgan Chase and Nike stock prices contributed to the drop in Dow Jones while the rise in Nvidia, Tesla, eBay and Cisco stock prices sustain the increase in Nasdaq. Furthermore, the market will look forward to several data releases today, such as: 1) US Purchasing Price Index; 2) Japan Purchasing Price Index; 3) Italy Industrial Production.

Domestic Updates

Bank Indonesia (BI) is ready to take quick action to take action for the recovery of the Indonesian economy such as continuing monetary easing in the form of cutting the benchmark interest rate. BI has done it three times, and we see that if there is room for a reduction in interest rates, we will reduce it again. In addition, BI will also carry out its duties to maintain the stability of the rupiah exchange rate, decrease the yield of Government Securities (SBN), and also increase liquidity through quantitative easing (QE). BI is also ready to assist the government in the distribution of social assistance (social assistance) through the electronification program and is optimistic that the social assistance electronification will launch the distribution of fiscal stimulus to the public.

Company News

1.       MDLN IJ cannot pay the principal amount of their bonds at IDR150 billion with a fixed interest rate of 12.5% per year. Their stocks are now suspended in all markets, and MDLN will receive special monitoring from Indonesian Rating Agency (Pefindo), who has downgraded their bonds from “idBBB-“ to “idCCC”. Pefindo warned that it will fall further to D if they fail to meet their financial obligations. As a result, MDLN IJ saw their shares falling by 11.29% to IDR55 per share in the last five trading days (IDN Financials). MNCS Comment: We note that the assigned reflects its strained cash balance, weakened ability to pay debts (1.41x DER level), and possibility of restructuring. MDLN is currently traded at 0.10x PBV.
2.       TKIM IJ through their subsidiary PT Oki Pulp & Paper Mills, issued medium term notes amounting at IDR300 Billion with a fixed interest rate of 11% per year, which will be paid every three months. This MTN has a tenure of 36 months, which will mature on July 9, 2023 (Market Bisnis). MNCS Comment: We believe TKIM still has room to explore funding through MTN as DER level is still below 1x. TKIM is currently traded at 2.17x/0.88x PE/PBV.
3.       TCPI IJ decided to distribute IDR25 billion in cash for dividends for the FY19 performance. The company’s director revealed that in FY19, the company’s net profit is IDR270 billion, in which IDR25 Billion will be used to share dividends. Thus, each share will be IDR5, yielding at 0.1%. For the remaining net profit, IDR2 billion will be used for general reserve and the rest of IDR245.5 billion will be used for retained earnings (Market Bisnis). MNCS Comment: TCPI still managed to distribute dividend even in the midst of economic slowdown. TCPI is currently traded at 14.60x PBV.

IHSG Updates

JCI dropped by -0.46% to 5,052.79 on Thursday (09/07), followed by net foreign sell reaching IDR131.47 billion. The weakening occurred amidst the various movements of global indices and the strengthening in the regional Asia indices. Moreover, the domestic market concern increased regarding the impact of the surge in cases of the corona virus on the economy that could lead to a recession have prompted investors to avoid risky assets such as stocks for a while. As of yesterday, Covid-19 cases in Indonesia surged by 2,657 cases creating a new high record, making the total case reach 70,736. Meanwhile, the Rupiah exchange rate against the USD was strengthening at IDR14,395. We estimate JCI will move in the range of 4,977-5,140 while waiting for the Balance of Trade data release. Today's recommendation: WSKT, GGRM, ADRO, SMGR.

Corporate Action

Cash Dividend: PTBA, ASII, JSMR

Disclaimer On

WSKT, GGRM, ADRO, SMGR, TCPI, TKIM, MDLN