MNCS Morning Navigator 18 November 2020

Global Market Highlight

DJIA slipped by -0.56% on Tuesday (17/11) followed by S&P 500 (-0.48%) and Nasdaq (-0.21%). Stock prices dropped as investors digested data showing signs of weakness in the US consumer, while Amazon's foray into the pharmacy business sent drug store stocks lower. Against the sluggish economic backdrop, Federal Reserve Chairman Jerome Powell said both monetary and fiscal stimulus would be needed to support the economic recovery, which still has a "long way to go". Moreover, the market will look forward to several data releases today, such as: 1) UK Inflation Rate; 2) Eurozone Core Inflation Rate; 3) Canada Core Inflation Rate.

Domestic Update

The Ministry of Transportation reported a budget absorption rate of 70.72% (IDR25.02 trillion) in mid-Nov20 and target 95.8% realization in Dec20. The realization in personnel expenditure was reported to be  IDR3.1 trillion (vs IDR3.5 trillion budget), material expenditure of IDR9.3 trillion (vs IDR12.8 trillion) and capital expenditure of IDR12.5 trillion (vs IDR19 trillion). There was IDR45.66 trillion allocated for the 2021 budget such as 20.81% for management support program, 74.36% for connectivity infrastructure (land transportation, railways, sea and air transportation, BPTJ), 0.25% for research and technology innovation and 4.59% for vocational education and training.

Company News

1.       TLKM IJand its subsidiary, PT Telekomunikasi Seluler (Telkomsel) signed a cooperation agreement with Gojek in the form of funding totalled to USD150 million (IDR2.1 trillion). The collaboration will accelerate the transformation of Telkomsel as a digital telco company and strengthen consistency in building a digital ecosystem (Market Bisnis). MNCS Comment: We believe TLKM will benefit the Gojek ecosystem to improve the digital businesses with only 8%-10% of its FY20E capex. TLKM is currently traded at 14.34x/3.14x PE/PBV.
2.        APLN IJreported a decrease in revenue of 1.17% YoY to IDR2.88 trillion for 9M20, even though the sales segment which contributes 73.1% has risen by 9.09% YoY. Apartment sales increased by 4.3% YoY while the land sales increased by 167.15% YoY. However, the company’s recurring income decreasedby 21.31% YoY.  Moreover, APLN faced a loss in foreign exchange of IDR414.22 billion. Therefore, it resulted in the company to record a net loss of IDR2.88 trillion, decreased by -1.17% YoY (Market Bisnis). MNCS Comment: the depreciation of the rupiah caused APLN to experience a net loss in 9M20.  However, it is important to be grateful for the improvement in income for 9M20. APLN is currently traded at 0.33x PBV.
3.        HEAL IJ proposed to buy back shares up to IDR100 billion from November 2020 to February 2021. This corporate action aims to stabilize price volatility and to provide flexibility in managing long-term capital. Repurchase price has been limited to a maximum of IDR4,000. On the other hand, HEAL also ponder to acquire hospital network after the private placement has been approved by shareholders (Market Bisnis). MNCS Comment: buyback plan is good enough to increase HEAL liquidity.  In addition, the plan to increase the number of hospitals is quite appropriate when the hospital business begins to recover. HEAL is currently traded at 29.91x/4.42x PE/PBV.

IHSG Updates

JCI increased by +0.64% to 5,529.94 on Tuesday (17/11) followed by net foreign buy reaching IDR809.65 billion. JCI is in the uptrend while other regional Asia indices closed indifferently. JCI was backed by six sectors while trade, agriculture and miscellaneous sector drop. Infrastructure sector led the rise due to TLKM's funding to Gojek while consumer sector also increased supposedly due to early window dressing as foreign investors start to bid in. Meanwhile, the Rupiah exchange rate was strengthening at IDR14,055. We estimate JCI will move in the range of 5,381 – 5,570 while waiting for car sales and property price index data release. Today's recommendation: TOWR, SIMP, PTBA, MAPI.

Corporate Action

RUPS: BTPN, RIGS

Stock Split: MITI (5:2)

Disclaimer On

TOWR, SIMP, PTBA, MAPI, HEAL, TLKM, APLN