MNCS Morning Navigator 14 July 2020

Global Market Highlight

DJIA was flat by +0.04% on Monday (13/07)followed by the weakening from S&P 500 (-0.94%) and Nasdaq (-2.13%). This various movements were influenced by market players who look forward to the earnings season. In addition, there will be release of US inflation data today which is projected to decline by -1.1% compared to the previous year by 1.2%. On the other hand, the US-China dispute continues. Reportedly China intends to emphasizes the use of the yuan in various transactions. However, this decision is still not strong considering the globalization of the yuan largely depends on convertibility under the capital account. Moreover, the market will look forward to several data releases today, such as: 1) US Core Inflation Rate; 2) China Balance of Trade; 3) Eurozone Economic Sentiment.

Domestic Updates

Director General of Financing and Risk Management stated that during 1H20 the government had issued 3 SBNs denominated in foreign currencies as part of financing the State Budget (APBN) 2020. The government first issued global bonds in January 2020 amounting to USD2 billion and EUR1 billion, respectively. Subsequently, the government re-issued three series of USD-denominated global Government Bonds (SUN) with a total nominal value of USD4.3 billion in April 2020. This issuance is the first Sovereign Bond issuance during a pandemic with relatively low yields. In addition, one of the global bond series has the longest tenure of up to 50 years. Then, the government last issued global bonds in June 2020 which were Global Sukuk of USD2.5 billion. In the 2H20E the government will still implement opportunistic, flexible, and prudent strategies in the issuance of foreign currency SBN.

Company News

1. LPKR IJ recorded marketing sales of IDR1.05 trillion in 1Q20, a 26% YoY increase. Thus, it already achieved 42% of their 2020 marketing sales target, which is IDR2.5 trillion. In 2Q20, marketing sales are also projected at IDR349 billion, a 65% YoY increase. Management said that they will maintain their 2020 marketing sales target due to a number of new projects, namely Cendana Homes and Waterfront. However, the Covid-19 pandemic still remained a concern for the launch of these new projects (Kontan). MNCS Comment: This achievement was due to sales in Cikarang with a price of IDR500 million to IDR1.5 billion per unit. The housing segment is intended for the first owner. LPKR is currently traded at 0.42x PBV.
2. ANTM IJ is exploring the European market as a potential export destination for nickel after an increase in their profit margins. Their performance has been doing well due to an increase in the global demand of nickel and the company’s ability to decrease cash cost. The average global cash cost of ferronickel production is USD4.85 per pound, while ANTM managed to reduce it to USD3.35, the lowest in the World (Market Bisnis). MNCS Comment: Other than the rise in gold price, ANTM is also benefitted from the rise of nickel demand and price. ANTM is currently traded at 0.90x PBV.
3. MSIN IJ sought to raise IDR146.65 billion through the issuance of 520.2 million new shares. It will use the new shares to develop its digital platforms, mainly in KlakKlik and AdMediate. Management will also use the money to increase the production of video content in their online and TV platforms (IDN Financials). MNCS Comment: Management has not yet set the price for the rights issue plan and still needs to obtain approval from its shareholders. MSIN is currently traded at 5.48x/0.92x PE/PBV.

IHSG Updates

JCI increased by +0.66% to 5,064.45 on Monday (13/07), although followed by net foreign sell reaching IDR44.11 billion. The increase occurred amid the strengthening of Regional Asia Indices despite the various movements of the US Indices. Furthermore, there was an additional of 1,282 cases yesterday making the total case in Indonesia reaching 76,981. As a result, DKI Jakarta Governor warned of the possibility of the PSBB being re-applied if the number of cases continues to increase. This will further hampered the domestic economy as the risk of recession is getting bigger. Meanwhile, the Rupiah exchange rate against the USD was strengthening at IDR14,425. We estimate JCI will move in the range of 5,009-5,140 while waiting for the Balance of Trade data release. Today's recommendation: UNTR, ERAA, ASII, BMRI.

Corporate Action

Cum Dividend: DVLA

Ex Dividend: VINS

RUPS: ASBI

Disclaimer On

UNTR, ERAA, ASII, BMRI, ANTM, LPKR, MSIN