MNCS Morning Navigator 13 October 2020

Global Market Highlight

DJIA rose by +0.88% on Monday (12/10) followed by S&P 500 (+1.64%) and Nasdaq (+2.56%). Index rally supported by tech stocks such as Apple (+ 6.4%) as investors looked ahead on Apple to unveil its first 5G iPhone. Monday’s rally came even as chances for another round of stimulus before the election appeared to dim over the weekend. Meanwhile, Investors are also bracing for the 3Q earnings season as several major banks and airlines are slated to report their results this week. Moreover, the market will look forward to several data releases today, such as: 1) US Core Inflation Rate; 2) China Balance of Trade; 3) UK Employment Change.

Domestic Updates

The Deputy of Minister of Finance stated that Indonesia hopes to be one of the top five economic powers with a GDP of USD7 trillion by 2045. The government continues to work hard to realize that program by improving the economic sector and the impact of the Covid-19 pandemic did not affect the program. Despite that, the government will innovate and make new breakthroughs to accelerate economic recovery. While government spending has become the main weapon for driving the growth of the real sector. (IDN Financials)

Ministry of Health will direct its 2021 policy to accelerate recovery from the Covid-19 pandemic. These includes budgets for the following: 1) IDR2.4 trillion of the 2021 health budget will be allocated for JKN premium assistance for non-wage earning workers and non-workers; 2) IDR18 trillion to anticipate COVID-19 vaccine procurement; 3) IDR2.8 trillion for tuberculosis control; 4) IDR10.7 trillion for the Health Operational Assistance scheme; 5) IDR1.1 trillion to provide additional food for pregnant women and toddlers. (IDN Financials)

Company News

1.       ITMG IJ has spent IDR1.54 billion for exploration activities in east Borneo. ITMG through two subsidiaries had conducted drilling which prioritized on pre-production and development drilling activities with open hole drilling and coring methods. In detail, both subsidiaries spent IDR851.82 million and IDR692.05 million each. While ITMG's cash stood at USD287.34 million as of 1H20 (IDN Financials). MNCS Comment: We believe that ITMG is maximizing their performance as they only had reached 44.50% coal production from their target of 20 million ton in FY20E. ITMG is currently traded at 10.84x/0.75x PE/PBV.
2.       JPFA IJ is establishing a new joint venture (JV) with Hendrix Genetics Aquaculture BV. The JV was named JVCo whereas JPFA will hold 49% of shares through its subsidiary (PT Suri Tani Pemuka (STP), while Hendrix Genetics hold the remaining 51%. The initial capital reached IDR20 billion and JPFA believed with the joint venture, HGA can provide supplies for the Indonesian shrimp industry (IDN Financials). MNCS Comment: We believe that the JV will improve its efficiency and logistics. By establishing a JV with a leading genetics supplier of post larvae in Indonesia, JPFA will also be able to benefit from the leading market position of Kona Bay shrimps. JPFA is currently traded at 42.90x/1.25x PE/PBV
3.       BIRD IJ is modifying it's fleet to fit the current need from customers. Through Big Bird they are adjusting the seat to accommodate bikes as well as removing them to transform Big Bird into a logistic fleet. Big Bird is also marketed for employee shuttle. While BIRD modifies Golden Bird for a corporate rent car that will be charge hourly (Investor Daily). MNCS Comment: BIRD is aware that there is a shift on consumer demands therefore they are trying to accommodate them. Otherwise, BIRD's business model will be out of date and cannot adapt with the moving demands during the tough situations. BIRD is currently traded at 0.42x PBV.

IHSG Updates

JCI increased by +0.78% to 5,093.09 on Monday (12/10) despite being followed by net foreign sell reaching IDR104.93 billion. Index continues its rally amid the strengthening on Regional Asia indices. The increase was driven by most off the sector especially Finance (+1.83%), Agriculture (+1.27) and Mining (+1.01%) while property, miscellaneous and consumer sector drop. Meanwhile, the Rupiah exchange rate was strengthening at IDR14,700. We estimate JCI will move in the range of 4,990 – 5,110 while waiting for Interest Rate Decision. Today's recommendation: PTBA, BBRI, LSIP, WSKT.

Corporate Action

RUPS: IPCM

Disclaimer On

PTBA, BBRI, LSIP, WSKT, JPFA, ITMG, BIRD