MNCS Morning Navigator 21 October 2020

Global Market Highlight

DJIA rose by +0.40% on Tuesday (20/10) followed by S&P 500 (+0.47%) and Nasdaq (+0.33%). Stock markets closed higher over optimism that US stimulus would be agreed upon which emerged after the positive progress of stimulus negotiations and was claimed to be getting closer to an agreement. This stimulus will accelerate the recovery of the US economy amid the pandemic. The CEO of Moderna stated that his COVID-19 vaccine will be available for emergency use in December.  This will happen if the vaccine test yields positive results this November. This statement was responded positively by the market because it increases the hope of returning to normal life. Moreover, the market will look forward to several data releases today, such as: 1) UK Core Inflation Rate; 2) Canada Core Inflation Rate; 3) US EIA Cushing Crude Oil Stocks Change.

Domestic Updates

The Ministry of Finance posted noted the 2020 State Budget (APBN) deficit which reached IDR687.5 trillion in September 2020. This deficit is equivalent to 4.16% of Indonesia's gross domestic product (GDP). Ministry of Finance data shows that the deficit has reached 65.6% of the year-end outlook of IDR1,039.2 trillion. Meanwhile, this deficit grew by 170.2% YoY when compared to the realization in the same period in 2019, which was IDR252.41 trillion.

Company News

1.        IRRA IJ posted revenue that grew by 9.39% YoY to IDR141.06 billion in 3Q20. The company's revenue consist of non-electromedical medical devices (syringes) which grow 19.3% YoY to IDR33.14 billion. In addition, revenue from diagnostic in vitro products grew by 6.5% YoY to IDR107.77 billion. So IRRA's net profit reached IDR35.47 billion, a sharp increase of 475% YoY compared to the September 2019 period of IDR6.16 billion (Market Bisnis). MNCS Comment: IRRA was affected by the pandemic at first but lately the demand for medical supplies increased which is beneficial for IRRA. Though we see that revenue has not fully recovered but it was increasing quarterly while the net margin is definitely on a higher level. IRRA is currently traded at 29.77x/8.06x PE/PBV.
2.       INCO IJ has produced 19,477 tonnes of nickel in matte in 3Q20 which was 4% YoY higher than the company's production volume in the previous quarter of 18,701 tons. However, this realization was lower than the production in 3Q19 in the range of 19,820 tons. Thus, INCO's nickel in matte production amounted to 55,792 tonnes YTD, increased by 10% YoY compared to production in the same period last year of 50,531 tonnes. Nickel production target this year is not much different from last year's production realization of 71,025 tons (Market Bisnis). MNCS Comment: We see that INCO's performance is quite positive even during the pandemic because the achievement is higher than last year. As of now, INCO has reach 71.14% of their target which we think is reasonable. INCO is also selected for the nickel supplier in the Indonesia Battery Holding which will benefit INCO in the long term. INTP is currently traded at 27.01x/1.44x PE/PBV.
3.       ADRO IJstated that they does not have any plans to acquire the Paiton Steam Power Plant (PLTU). Instead they chose to focus on completing the existing PLTU project as well as developing the power plant business independently in the future. Currently, ADRO is working on the Bhimasena Power Indonesia (BPI) PLTU project in Batang, Central Java. Citing the company's performance report, until the end of June 2020, the PLTU project with a capacity of 2x1,000 megawatts (MW) has made 94% progress. ADRO will continue to strive to develop its business in the electricity sector, including in order to support the government in developing renewable energy-based power plants. (Kontan).  MNCS Comment: ADRO remains focused on their current power plant which we see is still supportive of the Government power target of 35,000 megawatt in the future. ADRO is currently traded at 8.72x/0.73x PE/PBV.

IHSG Updates

JCI decreased by -0.52% to 5,099.84 on Tuesday (20/10) though followed by net foreign sell reaching IDR168.56 billion. JCI dropped amid the various closing on Regional Asia Indices. Furthermore, consumer and property sector contribute to the weakening index while miscellaneous industry strengthened significantly by 2.40%. Meanwhile, the Rupiah exchange rate was strengthening at IDR14,658. We estimate JCI will move in the range of 5,000 – 5,187. Today's recommendation: ASII, BRPT, ISAT, MDKA.

Corporate Action

RUPS: BMRI, PALM, BSSR

Disclaimer On

ASII, BRPT, ISAT, MDKA, INCO, ADRO, IRRA