MNCS Morning Navigator 14 October 2020

Global Market Highlight

DJIA dropped by -0.55% on Tuesday (13/10) followed by S&P 500 (-0.63%) and Nasdaq (-0.10%). Wall Street were stalled on concerns Johnson & Johnson's development of the Covid-19 vaccine would be hampered. The company announced that the clinical trial of the Covid-19 vaccine it was developing was temporarily halted due to an unexplained disease that the clinical trial participants suffered. Furthermore, investors were also affected by reports that the Speaker of the US House of Representatives Nancy Pelosi rejected the USD1.8 trillion stimulus package proposal that the White House offered because it was far below the need to overcome the recession. Apart from monitoring stimulus developments, investors are also waiting for the release of the financial performance of US listed companies. Moreover, the market will look forward to several data releases today, such as: 1) US MBA Mortgage Application; 2) US Purchasing Price Index; 3) Japan Industrial Production.

Domestic Updates

Bank Indonesia decided to maintain the BI 7-Day Reverse Repo Rate (BI7DRR) at 4.00%, the Deposit Facility rate at 3.25%, and the Lending Facility interest rate at 4.75%. This decision takes into account the need to maintain the stability of the Rupiah exchange rate, amidst inflation which is predicted to remain low. (Bank Indonesia)

Minister for Economic Affairs stated that the realization of funds for handling the Covid-19 pandemic or the new corona virus is equals to 48% of IDR 695.2 trillion. Which means the amount reached IDR331.29 trillion as of October 7, 2020. Government has also allocated a budget for handling a trillion corona virus pandemic amounting to IDR695.2 trillion. The funds were disbursed through a number of programs. (CNN Indonesia)

Company News

1. BRIS IJ along with PT Bank BNI Syariah, PT Bank Syariah Mandiri (BSM) has signed the conditional merger agreement. Based on the deal, BRIS will determined as a surviving bank to received the asset of the other lenders. The official merger is expected to take place in February 2021 (Emiten News). MNCS Comment: We believe this strategy become a positive sentiment for BRIS as total assets of the merged bank will reached IDR245 trillion (USD16.73 billion) and become the largest sharia bank in the country. BRIS is currently traded at 46.63x/2.10x PE/PBV.
2. ANTM  IJ will be a representative of MIND ID in the Indonesia Battery Holding (IBH) project amounting to USD12 billion. ANTM will provide within the upstream with providing the raw materials needed while MIND ID will assist the process through downstreaming it into a battery. PLN and Pertamina will also act as an intermediate within the value chain (Market Bisnis). MNCS Comment: We see that ferronickel has become the second largest contributor towards ANTM’s revenue, so this participation may as well assured ANTM’s nickel absorption and will be of advantage for ANTM in the long run with the rise of EV battery demand.  ANTM is currently traded at 108.37x/1.02x PE/PBV
3. IPCC IJ recorded an increase in loading service as of September 2020, along with the PSBB easing on economic and industrial activity. This has driven automotive manufacturer and heavy equipment to increase their activities. CBU unit increased by 22.5% in September compared to monthly average while heavy equipment rose slightly by 1.5% compared to monthly average (Investor Daily). MNCS Comment: This is an improvement for IPCC as their business was largely impacted by the pandemic, though they recorded an increase on 2Q20 top line but net income margin is thinning. We hope that this will boost IPCC’s performance in the next period. IPCC is currently traded at 0.66x PBV.

IHSG Updates

JCI increased by +0.78% to 5,132.57 on Tuesday (13/10) despite being followed by net foreign sell reaching IDR55.69 billion. JCI has not hit the brake yet, though the Regional Asia indices were moving indifferently. The rise was driven by the financial sector as the Sharia bank merger news was released. Index also seem to have taken in the unchanged rate, and has braced for another demonstration in regard of the Omnibus Law. Meanwhile, the Rupiah exchange rate was weakening at IDR14,725. We estimate JCI will move in the range of 5,050 – 5,150 while waiting for Balance of Trade. Today's recommendation: ASII, AKRA, PGAS, BBCA.

Corporate Action

RUPS: BKSL

Cum date Dividend: ASGR (IDR5/share)

Disclaimer On

ASII, AKRA, PGAS, BBCA, BRIS, IPCC, ANTM