MNCS Morning Navigator 170621

MNCS Morning Navigator

17 June 2021

Global Market Highlight

DJIA fell by (-0.77%) on Wednesday (16/06) followed by S&P 500 (-0.54%) and Nasdaq (-0.24%). Wall Street fell as project rate hikes for 2023, the central bank could begin rising interest rates a year earlier than expected. The market will look forward to several data releases today, such as: 1) US FOMC Economic Projections; 2) US The Fed Interest Rate decision; 3) Euro Area Core Inflation Rate YoY Final.

Domestic Update

• BI will announce its monetary policy today. Consensus agreed that national central bank will keep interest rate unchanged at 3.5%. MNCS comment: BI has cut its benchmark rate 150 bps since Covid-19 pandemic strike. Even though the threat of rising U.S. inflation above central bank target thus triggering the potential of tapering, We believe that BI will continue to maintain the benchmark interest rate to maintain the rupiah exchange rate.
• Financial Service Authority (OJK) claimed restructured loan trend has decreased. As of April 2021, bank's restructured credit was IDR775.32 trillion, below IDR900 trillion in the previous month. However non-performing loan (NPL) increased 5 bps to 3.22% in April from 3.17% in March. MNCS Comment: Although NPL figure seems remain manageable, we remain cautious on high LaR which already stood at 25% that could potentially turn to NPL. Various sector such as (Trade, construction, transportation, service and manufacture) still dominated nominal NPL (72% from total sectors NPL). We expect banks loan loss provision to hike that could potentially sap out its profitability. However from the industry landscape, Indonesian banks remain resilient on the back of solid CAR at 23%-24% and ample liquidity with LDR at 81% - 83%.
• Furthermore, there was an addition of 2,376 new Covid-19 cases in Jakarta yesterday.

Company News

1. BBTN IJ recorded Third Party Funds (DPK) of IDR289.46 trillion in 4M21 or up +41.07% YoY (vs. IDR205.18 trillion in 4M20). BBTN's DPK growth far exceeded the growth of the banking industry's DPK. Based on Bank Indonesia records, as of April 2021, banking industry deposits increased 11.5% YoY to IDR6.558 trillion (Emiten News). MNCS Comment: This achievement is in line with the management target to increase cheap fundings, where the DPK is targeted to grow 7% -9% YoY on FY21E. Savings from the cost of fund are one of the BBTN profit drivers. BBTN is trading at 6.59x/0.86x PE/PBV.

2. LPCK IJ posted revenue of IDR239.17 billion in 1Q21, down -58.35% YoY (vs IDR574.37 billion in 1Q20). However, COGS LPCK also decreased from IDR304.90 billion in 1Q20 to IDR146.02 billion in 1Q21. LPCK posted a net profit of IDR87.30 billion in 1Q21 which decreased by 89% YoY (vs. IDR793.58 billion in 1Q20) (Bisnis Indonesia). MNCS Comment: The non-absorption of some landbank and LPCK’s properties has resulted in a decrease in the top/bottom-line LPCK. The company must be able to take advantage of property momentum in FY21 to improve its performance. LPCK is currently trading at 8.98x/0.49x PE/PBV levels.

3. MERK IJ has budgeted capital expenditure worth IDR57 billion which will be used to improve factory performance. The source of funding capex comes from internal cash. Capital expenditure will be used to maintain utilization and efficiency and development of diabetes and cardio products (Bisnis Indonesia). MNCS Comment: We see this capex allocation to be one of the company's strategies to encourage 3% YoY income growth and efficiency at production prices on FY21E. Currently MERK is trading at 7.18x/2.30x PE/PBV levels.

IHSG Updates

JCI fell by (-0.17%) to 6,078.57 on Wednesday (16/06) followed by net foreign sell reaching IDR452.36 billion. JCI was weakened along with various sector, led by finance (-1.44%), health (-1.37%), and infrastructure (-0.25%). On the other hand, the technology sector managed to strengthen by +15.22%, followed by energy +0.94%, and property +0.19%. The high rate of daily Covid-19 cases, and the discourse on the implementation of Social Restrictions are still negative sentiments for market movements. Meanwhile, the Rupiah exchange rate was weakening at IDR14,238. We estimate the JCI will move in the range of 6,030-6,120 while waiting for interest rate decision. Today's recommendation: EXCL, PNLF, WSBP, AALI.

Corporate Action

Cum Dividend Date: BRAM (IDR400/share), ACES (IDR32.15/share), IMPC (IDR6/share)

Disclaimer On

EXCL, PNLF, WSBP, AALI, MERK, LPCK, BBTN