MNCS Morning Navigator 22 September 2020

Global Market Highlight

DJIA dropped 509 points or -1.84% on Monday (21/09) followed by S&P500 (-1.16%) and Nasdaq (-0.13%) as market worries of further turbulence ahead. The threat of another steep decline is omnipresent due to: 1) the outlook for the U.S. economy as the prospect of an additional fiscal-stimulus package looks increasingly remote ahead of a heated U.S. election campaign season; 2) continuing tensions between the U.S. and China; 3) the threat of renewed lockdowns in many places because of higher Covid-19 infections. Moreover, market will look forward to several data releases today such as: 1) US Existing Home Sales per Jul-20; 2) UK CBI Industrial Trends Orders per Sep-20; 3) US Fed Members Speeches.

Domestic Updates

BI stated that the global and domestic economies have gradually begun to improve, with Indonesia's macroeconomic stability being maintained.The resilience of the Indonesian economy remains good. This is reflected in the trade balance which continued to record a surplus, an increase in foreign exchange reserves, and the rupiah exchange rate was relatively under control amid high pressure in August-September 2020. Meanwhile, inflation remained low in line with insufficient demand and adequate supply. The liquidity condition was more than adequate, thus driving down interest rates and was conducive to financing the economy. Financial system stability has been maintained, despite the risks from the impact of the widespread spread of Covid-19 on financial system stability. Meanwhile, the smooth operation of the Payment System, both cash and non-cash, was also maintained.

Company News

1.       MYOR IJ is optimist that the darkest storm has passed as it happened in May 2020. The consumption pattern is showing an uptrend supported by a rise in sales. Sales in June 2020 already indicated recovery followed by July and August. MYOR is targeting sales in 2H20 to grow. Growth came from increased domestic and export sales. Domestic and foreign sales growth will apply to all sales segments. The company assessed that the sales prospect of packaged processed drinks for Torabika products can still grow as seen from the stable sales in the 1H20 (Kontan).MNCS Comment: We see that MYOR can live up to its expectations as their net profit increased by 16.22% YoY in the 1H20, while stating that May has been the hardest. Their 2H20 will surely be boosted by normalized demand and economic recovery supported by increasing demand near the holiday season. MYOR is currently traded at 27.62x/4.89x PE/PBV.
2.       HOKI IJ admits that they have prepared a number of strategies to increase margins and production capacity in the future, especially when conditions have started to recover from the effects of Covid-19. The company is focused on continuing the construction of a factory in South Sumatra and adding a drying machine at the factory located in Subang. As long as the Covid-19 rolls around, HOKI must be willing to erode traditional markets due to many markets were not fully operational and there had been the closure of modern shops in shopping centers which affected rice sales (Kontan). MNCS Comment: Due to the pandemic, HOKI can only rely sales on modern market such as the supermarket, though the purchase was being limited up to 10kg per person to avoid stockpiling and uneven rice distribution. But we believe as the economic continues to recover and rice remains a staple food, HOKI’s performance may revive in the 2H20. HOKI is currently traded at 37.50x/2.68x PE/PBV.
3.       GDYR IJ said the business and operations of the company began to show improvement since last June. The implementation of the Large-Scale Social Restrictions (PSBB) in Jakarta had not directly affected demand, but it did reduce capital spending. This is because Goodyear Indonesia must seek to expand its distribution channels and add new product line-ups as a competitive offer in both domestic and foreign markets. However, management has not been able to mention the absorption of capital expenditures to date. GDYR has a production plant with a capacity of up to 12,000 tires per day. In order to maintain performance in the remainder of this year, GDYR also implements efficiency strategies on all fronts (Kontan). MNCS Comment: Car sales starts to show recovery, which will affect tire sales, while during the pandemic, mobility were very limited and people are prioritizing staple needs. Its good to see that GDYR implementing efficiency strategy to help minimize cost. GDYR is currently traded at 0.81x PBV.

IHSG Updates

JCI sliped by -1.18% to 4,999.36 on Monday (21/09) followed by net foreign sell reaching IDR311.12 billion. JCI fell again followed by the weakening on the Regional Asia Indices as two major banks in Asia got caught on illegal transactions. Investors seem to be worried about the ongoing issues related to Bank Indonesia’s independency. Meanwhile, the Rupiah exchange rate was strengthening at IDR14,700. We estimate JCI will move in the range of 4,920-4,980 while waiting for Money Supply data release. Today's recommendation: GGRM, TLKM, PTBA, PTPP.

Corporate Action

RUPS: FORZ, IPTV

Disclaimer On

GGRM, TLKM, PTBA, PTPP, MYOR, GDYR, HOKI