MNCS Morning Navigator 18 September 2020

Global Market Highlight

DJIA dropped by -0.47% on Thursday (17/09) followed by S&P500 and Nasdaq by -0.84%/-1.27%. Stock prices drop due to the negative sentiments from the unsettled stimulus package following the Fed rate announcement, meanwhile the drop on tech stocks namely Facebook (-3.3%), Amazon (-2.3%), Netflix (-2.8%), Alphabet (-1.7%), Apple (-1%) and Microsoft. Although, the release on unemployment benefit drops to 860.000 while estimated at 875.000 is a positive news, it seems to budge the market. Moreover, the market will look forward to several data releases today, such as: 1) Michigan Consumer Sentiment; 2) US Current Account; 3) Japan Inflation Rate.

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 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. To encourage economic recovery from the impact of the COVID-19 pandemic, Bank Indonesia emphasizes the quantity pathway through liquidity provision, including Bank Indonesia's support to the Government in accelerating the realization of the 2020 State Budget. In addition to this decision, Bank Indonesia also took the following steps: 1) Continue the Rupiah exchange rate stabilization policy in line with market fundamentals and mechanisms; 2) Strengthening the monetary operation strategy in order to increase the transmission of the monetary policy stance pursued; 3) Extending the provision period for the easing of the Rupiah Statutory Reserves by 50bps for banks channeling MSME credit and export-import and non-MSME credit for priority sectors stipulated in the National Economic Recovery program, from 31 December 2020 to 30 June 2021; 4) Encourage the development of money market instruments to support corporate and MSME financing in line with the National Economic Recovery program; 5)Continue to expand QRIS acceptance in order to support the economic recovery program and the development of MSMEs.

Company News

1.       IPCC IJrevealed that the number of completely built-up (CBU) vehicles that were exported was 13,844 units as of August 2020 which fell 61.39% YoY from 35,857 units in the same period last year. While on import, there were 1,177 vehicles entering through the IPCC terminal in August 2020 though it decreased by 83.16% YoY compared to 6,989 in August 2019. Meanwhile, in accumulation, the number of CBU vehicle imports through the IPCC reached 22,337 units as of August 2020 which dropped by 56.86% YoY compared to the same period last year of 51,782 units (Market Bisnis). MNCS Comment: IPCC were growing in FY19, but as the pandemic hits in early FY20, the top and bottom line are slashed significantly. This was due to the tighter import export regulation on some countries regarding the Covid-19 spread. IPCC is currently traded at 0.67x PBV.
2.       GOOD IJplans to take over 55% of KEJU share from individual investor as one of the strategy to expand their food and beverage supply chain. Roughly calculated the amount to obtain KEJU shares reached IDR1 trillion with price as of 17 September at IDR1.220/share or equals to 825 million of shares. Meanwhile as of September, the company has used 80% of the capital expenditure. (Market Bisnis). MNCS Comment: We see that this strategy of expansion is quite aggressive as KEJU’s market cap is equal to 19.30% of GOOD’s. KEJU’s valuation stood at a premium with 17.68x/3.96x PE/PBV while GOOD is slightly lower at 16.91x/3.50x PE/PBV.
3.       WOOD IJrevised their top line target to IDR2.6 trillion in FY20E from IDR2.5 trillion previously. The target is 23.8%YoY higher than FY19’s revenue of IDR2.1 trillion. The management seems to be optimistic as there are higher furniture orders in the 2H20. Meanwhile they estimated the net income margin to be at 10%-12% level (Kontan). MNCS Comment: We evaluate that the revised target is achievable. Though it seems that their 1Q20 revenue was decreased, their 2Q20 top line increased by 16% YoY to IDR1.1 trillion, which means they have reached 42.3% of revenue target this year. WOOD is currently traded at 11.11x/0.90x PE/PBV.

IHSG Updates

JCI dropped by -0.40% to 5038.40 on Thursday (17/09) followed by net foreign sell reaching IDR404.90 billion. JCI continues to decline along with the weakening on Regional Asia Indices. Investors seem to have anticipated the unchanged 7DRR at 4%, while there is minimum catalyst on the market.Meanwhile, the Rupiah exchange rate was strengthening at IDR14,830.We estimate JCI will move in the range of 5,000-5,220while waiting for Loan Growth. Today's recommendation: BBNI, TBIG, WTON, MAPI

Corporate Action

RUPS: POOL, HEXA, AMIN

Disclaimer On

BBNI, TBIG, WTON, MAPI, GOOD, IPCC, WOOD