MNCS Morning Navigator 12 August 2020

Global Market Highlight

DJIA slipped by -0.38% on Tuesday (11/08) followed by S&P 500 (-0.80%) and Nasdaq (-1.69%). The weakening of the Dow was due to profit taking by investors after a long 7-day rally.  This decline was led by the fall of Facebook and Amazon by 2%, followed by Apple (-3.4%) and Netflix (-3%). On the other hand, investors are still waiting for further US stimulus, which is still uncertain to face the pandemic. This uncertainty arises due to the absence of an internal agreement by the US government to issue new stimulus. Moreover, the market will look forward to several data releases today, such as: 1) US Inflation Rate; 2) China New Yuan Loans; 3) China FDI.

Domestic Updates

The Retail Sales Survey shows that the Real Sales Index in June 2020 contracted by -17.1% (YoY), which actually improved from a contraction of -20.6% (YoY) in May 2020. Improvements in sales occurred in almost all commodity groups, especially the category of motor vehicle fuels, food and beverages, tobacco, and communication equipment. Improvements are in line with the relaxation of PSBB. In July 2020, retail sales are forecasted to improve again to the contraction of -12.3% YoY.

Company News

1. MEDC IJ plans to buy back its bonds that worth IDR3.24 trillion, before they mature in 2021. Besides early repayment, the company is also planning to sell up to 7.5 billion new shares, amounting to USD150 million, in 3Q20. Shareholders who do not exercise their rights to subscribe to the new share in the Preemptive Rights will have their ownership diluted to a maximum of 29.5% (Insider Stories). MNCS Comment: This corporate action is to strengthen the company's working capital structure, amid uncertainty over world oil prices. MEDC is currently traded at 0.61x PBV.
2. BBYB IJ will distribute cash dividends for the 2019 financial year, amounting to IDR1.6 billion on September 3, 2020. The payout ratio is only 10%, and the dividend value is IDR0.24 per share. The cum dividend date will end on August 12, 2020. Aside from the allocation to cash dividends, the company is also allocating 3% for reserves, and the remaining 87% for retained earnings. Management has yet to determine what the retained earnings will be used for (Bisnis). MNCS Comment: BBYB's yield is at 0.08%, while BBYB was absent in distributing dividend last year. BBYB is currently traded at 2.10x PBV.
3. LPGI IJ plans to distribute dividends up to IDR32.1 billion, with each share being IDR214 and a dividend yield of 5.67%. The cum dividend date is 18 August 2020. The dividends are equal to 40.12% of FY19 net profit, which is IDR80 billion. This payout ratio and value per share are smaller than the previous year’s that reached 70.96% and IDR325, respectively (Kontan). MNCS Comment: Although net margin rose to 6.9% in FY19, LPGI seems to lower their dividend payout ratio which makes the yield lower this year from 9.02% previously. LPGI is currently traded at 3.73x/0.71x PE/PBV.

IHSG Updates

JCI rose by +0.63% to 5,190.17 on Tuesday (11/08) although followed by net foreign sell reaching IDR703.34 billion. Stock prices continue to climb, boosted by a domestic sentiment while the regional Asia indices closes disparately. Bio Farma began conducting clinical trials on its vaccine candidates on 1,620 volunteers as a third phase clinical trial of a vaccine in collaboration with a biotech company from China, Sinovac. This collaboration for clinical trials was carried out by Bio Farma together with Padjadjaran University Faculty of Health.  A production plan has also been prepared with a capacity of 100 million doses per year while there will be 250 million doses available per year in December. The news certainly provides a catalyst within the domestic market. Moreover, the Rupiah exchange rate was weakening at IDR14,680. We estimate JCI will move in the range of 5,130-5,200 while waiting for the release of balance of trade data. Today's recommendation: MAIN, RALS, BBRI, INDY.

Corporate Action

RUPS: BWPT, HERO, FAST

Disclaimer On

MAIN, RALS, BBRI, INDY, MEDC, BBYB, LPGI