MNCS Morning Navigator 12 October 2020

Global Market Highlight

DJIA rose by +0.57% on Friday (09/10) followed by S&P 500 (+0.88%) and Nasdaq (+1.39%). Stock prices rise as President Trump increase the White House's stimulus offer to USD1.8 trillion, up from USD1.6 trillion but remains well below the USD2.2 trillion in the bill House Democrats passed last week. In a total reversal, Trump said this week he's interested in a large-scale stimulus deal 48 hours after abruptly calling off stimulus talks entirely on Tuesday, but congressional Republicans remain opposed to a stimulus over USD1 trillion or any amount of new aid. Senate Republicans have united behind the price tag of USD500 billion. Moreover, the market will look forward to several data releases today, such as: 1) US IMF Virtual Annual Meeting; 2) China New Yuan Loans; 3) China Foreign Direct Investment.

Domestic Updates

Jakarta Government decided that Jakarta will return to transition large-scale social restriction (PSBB). They conveyed that this decision was based on several indicators, namely daily case reports, daily death cases, trends in active cases, and the level of filling of the Covid-19 Referral Hospital. This also means that activity will return to normal with limited capacity within a space, while restaurants can open for dine-in with 50% capacity while keeping physical distancing. Furthermore, it is said that cinemas can also reopen for film screening with only 25% capacity and arranged distanced seating.

Company News

1.       SSMS IJ plans to produce 600,000 mt of CPO or increased by 37% YoY in FY20E. Bottom line is also set to reach IDR400 billion in FY20E. Management stated that the target CPO production will be pushed out in the 3Q and 4Q as the peak production. As of September 2020, CPO production has reached 319,533 mt or 53.25% from the target in FY20E (Investor Daily). MNCS Comment: We think it is quite sensible to produce most of the CPO on the 2H of the year being the rainy season which increased production. But in regard of the upcoming La Nina season which caused extreme weather and resulted in delayed harvest and flood on the field, we think this might affect SSMS production. SSMS is currently traded at 2.06x PBV.
2.       SMGR IJ through its subsidiary SMCB, along with the Jakarta Municipal Environment Office and UNVR, has processed domestic waste at Bantargebang Integrated Waste Facility in Bekasi, West Java into refuse-derived fuel (RDF). The materials used include rice husk, coconut husk, sawdust, tobacco waste, and corn kernels delivered from Tuban, Lamongan, Bojonegoro, and Banyuwangi. In addition to its efficiency compared to coal, the use of alternative fuel also empowers farmers and communities around our plants. The project is estimated to produce 1,000 tonnes of RDF per month, 80%-90% of which consists of plastic waste that will be used by SIG as an alternative energy source (IDN Financials). MNCS Comment: We see that manufacture companies are moving towards and environmentally friendly alternatives. This will surely be beneficial for the company as it implements efficiency by reducing cost. SMGR is currently traded at 22.07x/1.70x PE/PBV
3.       CASH IJ recorded a quite decent growth of 50% YoY in transactions, while sales volume also grew by 91% YoY to innovate and make adjustments to products and services to strengthen the position as a payment gateway. Management said that the growth in transaction achievement and sales volume during the Covid-19 pandemic was supported by cooperation with a number of bank and non-bank partners, for example, Fabelio, Artajasa, Commonwealth Bank, POST, and Vospay which is CASH's strategy to expand its business (IDN Financials). MNCS Comment: Prior to Covid-19, a cashless payment is starting to show a trend. Following the pandemic it is being obliged to pay digitally which is an advantage for CASH. We see that the growth is also contributed from the pandemic, though as of 1H20, CASH still recorded a net loss but we see that this will revert in the future following the increase on transaction. CASH is currently traded at 7.69x PBV.

IHSG Updates

JCI increased by +0.29% to 5,053.66 on Friday (09/10) despite being followed by net foreign sell reaching IDR89.53 billion. Stock price closed on a perfect consecutive rise along with most of the Regional Asia indices following the release of Caixin PMI Manufacturing in China which kept on rising to 54.8 in September. Furthermore, the rise on the JCI index was driven by mining and agriculture sector following the approval of Omnibus Law. Meanwhile, the Rupiah exchange rate was strengthening at IDR14,700. We estimate JCI will move in the range of 4,840 – 5,075 while waiting for Interest Rate Decision. Today's recommendation: TINS, ACES, BBNI, WIKA.

Corporate Action

RUPS: TRIL

Disclaimer On

TINS, ACES, BBNI, WIKA, CASH, SMGR, SSMS