MNCS Morning Navigator 20 October 2020

Global Market Highlight

DJIA dropped by -1.44%% on Monday (19/10) followed by S&P 500 (-1.63%) and Nasdaq (-1.65%). The weakening occurred due to talks between Finance Minister Steven Mnuchin and House Speaker Nancy Pelosi which took place on Monday, regarding the fiscal stimulus package that had yet to find an agreement. Market participants are also looking forward to Jerome Powell's speech which will discuss the current US monetary policy and economic conditions. Moreover, the market will look forward to several data releases today, such as: 1) China House Price Index; 2) Eurozone Current Account; 3) US Building Permits.

Domestic Updates

The government shows that the realization of state revenue and grants by the end of September 2020 reached IDR1,158.99 trillion. This is equivalent to 68.18% of the target in the APBN-Perpres 72/2020, while the country's revenue growth was still contracting negatively by 13.65% YoY. State Revenue originating from tax revenues has reached IDR892.44 trillion, or equalst to 63.54% of APBN-Perpres 72/2020. On the other hand, Non-Tax State Revenues (PNBP) reached IDR260.87 trillion, equivalent to 88.69% of the target and grant realization reached IDR 5.68 trillion. Based on its achievements, state revenue originating from taxation and PNBP revenues was higher, respectively, by 63.5% and 88.7% of the target compared to last year's 58.19% and 79.78%, respectively.

Company News

1.       ARNA IJ posted a 1.1% YoY decline on 9M20 revenue. However, COGS dropped by 6.6% YoY to IDR1.12 trillion followed by sales expenses which decrease to IDR139.1 billion. So ARNA managed to record a net profit of IDR221.5 billion which increased by 38.31% YoY in 9M20 (Market Bisnis). MNCS Comment: We believe ARNA still manage to maintain its operational performance and cost efficiency, holding their net profit margin at a level of 12.11%. With appropriate product mix development strategy supported by efficiency in gas usage can boost ARNA’s margin in FY20E. ARNA is currently traded at 11.73x/2.90x PE/PBV.
2.       INTP IJ recorded total cement sales of 1.7 million tons during September 2020 which came from domestic. The additional sales made INTP cement sales reach 11.7 million tons as of 3Q20. This achievement was 8.59% YoY lower than the realization of cement sales in the same period last year of 12.8 million tons. Meanwhile, INTP has cut growth this year to a range of -5% to -7% from the previous 3% to 4% due to the impact of the Covid-19 pandemic (Market Bisnis). MNCS Comment: We estimate that cement sales growth in 2H20 will tend to be better than in 1H20. Despite challenges from oversupply and new players, the ongoing growth from the property and infrastructure sectors has been able to sustain cement sales. INTP is currently traded at 46.60x/1.86x PE/PBV.
3.       SMBR IJrecorded cement sales of 202,717 tons in September 2020. The sales increase of 18% MoM was supported by sales in Southern Sumatra. With cement sales of 1,083 million tons in the January - August 2020 period, the year-to-date sales  has reached 1.28 million tons in 3Q20. This achievement is 15.23% YoY lower than the same period last year of 1.51 million tons. However, the realization is getting closer to the sales target of 1.92 million tons this year (Market Bisnis).  MNCS Comment: Sales of SMBR cement have increased, supported by the southern part of Sumatra with South Sumatra and Lampung which are the driving forces for sales in the region. The sale was supported by the resumption of infrastructure and property projects. SMBR is currently traded at 1.54x PBV.

IHSG Updates

JCI increased by +0.45% to 5,126.33 on Monday (19/10) though followed by net foreign sell reaching IDR394.37 billion. JCI rose again amid the strengthening on most of the Regional Asia Indices following positive catalyst boosted by the GDP announcement from China which increased by 4.9% in 3Q20. JCI movement was driven by the increase from Mining and Finance sector. Meanwhile, the Rupiah exchange rate was weakening at IDR14,708.We estimate JCI will move in the range of 5,000 – 5,187. Today's recommendation: HMSP, WSKT, BBRI, ERAA.

Corporate Action

RUPS: MBAP, DVLA

Disclaimer On

HMSP, WSKT, BBRI, ERAA, SMBR, INTP, HRTA