MNCS Morning Navigator 20 November 2020

Global Market Highlight

DJIA rose by +0.15% on Thursday (19/11) followed by S&P 500 (+0.39%) and Nasdaq (+0.87%). Various uncertainties still hamper the pace of global indices. Although the Pfizer, BioNTech and Moderna vaccines show effectiveness levels of up to 95%, the lockdown decisions by New York and Los Angeles have the market worry. In addition, the release of labor data shows unsatisfactory results as 742,000 US citizens filed claims for unemployment benefits (worse than the consensus of 710,000), while discussions between Republicans and Democrats about a social assistance bill in the US began. The Democrat Party's proposal of USD2.2 trillion aid is not in line with the Republican Party's proposal of USD500 billion. The unfinished negotiations have also made the global stock market worse. Moreover, the market will look forward to several data releases today, such as: 1) UK Consumer Confidence; 2) Japan Inflation Rate; 3) Eurozone Consumer Confidence.

Domestic Update

Bank Indonesia cut the BI 7-day Reverse Repo Rate (BI7DRR) by 25 bps to 3.75% (vs 4% previously) with the Deposit Facility rate of 3% and Lending Facility interest rate of 4.5%. This decision takes into account the forecast for continued low inflation, maintained external stability, and as further steps to accelerate national economic recovery. Bank Indonesia remains committed to supporting liquidity, including Bank Indonesia's support for the Government in accelerating the realization of the 2020 State Budget.

Company News

1.       DILD IJrevenue increased by 11.33% YoY in 3Q20 to IDR2.06 trillion despite the fall in revenue from sales and recurring income (-5.24% and -5.2% YoY respectively). The company booked a significant increase in net profit of 505.06% YoY to IDR39.45 billion in 3Q20 (Market Bisnis). MNCS Comment: DILD managed to survive the pandemic by scoring a stellar performance. The bottom line is also benefited from gain in foreign exchange. DILD is currently traded at 37.24x/0.38x PE/PBV.
2.        MIDI IJbooked a positive increase in revenue of 9.59% to IDR9.51 trillion. The growth is factorized by competitive price and marketing offered. Net profit decreased by 2.82% to IDR137.47 billion due to an increase in opex (Market Bisnis). MNCS Comment: Retail sector especially modern trade retailer is quite resilient to the pandemic. We believe MIDI to recover in FY21E as management set to add 250 more stores amid the pandemic. MIDI is currently traded at 23.59x/3.33x PBV.
3.        WIKA IJ proposed to obtained IDR2 trillion from issuance of bonds (IDR1.5 trillion) and sukuk (IDR500 billion) as a part of Wijaya Karya Bonds Phase I 2020 Public Offering amounting to IDR4 trillion. The proceeds will be used for working capital and to refinance Komodo Bonds that due in Jan21. The offering and allotment period is scheduled for 15-16 December 2020 (Market Bisnis). MNCS Comment: This refinancing will help WIKA in maintaining its cash. Moreover, next year WIKA must be prepared to conduct a new tender because the government will refocus on infrastructure development. WIKA is currently traded at 197.03x/0.98x PE/PBV.

IHSG Updates

JCI increased by +0.66% to 5,5594.06 on Thursday (19/11) followed by net foreign buy reaching IDR329.36 billion. JCI is on the rise backed by property, mining, consumer and agriculture sector. Consumer itself is supported by the increasing optimism on tobacco sector following the consideration of tobacco tax next year. While Property is supported by the interest rate cut to 3.75% that will back property sales. Furthermore, the mining sector increase is supported by the Government statement that 9 companies will be running gasification project providing 12 million ton of DME for 20 years while agriculture is pushed by the increasing CPO commodity price. Meanwhile, the Rupiah exchange rate was weakening at IDR14,155. We estimate JCI will move in the range of 5,381 – 5,710 while waiting for 3Q Current Account Data release. Today's recommendation: PGAS, HMSP, UNTR, WSBP.

Corporate Action

RUPS: GIAA, SKLT

Cum Date Dividend: SPTO (IDR20/share)

Disclaimer On

PGAS, HMSP, UNTR, WSBP, DILD, MIDIM WIKA