MNCS Morning Navigator 23 July 2020

Global Market Highlight

DJIA rose by 0.62% on Wednesday (22/07) followed by S&P (+0.56%) and Nasdaq (+0.24%). Stock rose after Pfizer and the US government agreed to pay the drug maker and partner BioNTech to secure doses of their experimental Covid-19 vaccine. Meanwhile, the US government had instructed China to close its consulate in Houston that raised the escalation in tensions between US-China. Moreover, the market will look forward to several data releases today, such as: 1) US Initial Jobless Claims; 2) Eurozone Consumer Confidence Flash.

Domestic Updates

Indonesia’s total investment from foreign and domestic in 2Q20 amounted to IDR191.9 tn, a 4.3% YoY decrease. In terms of foreign direct investment, investment in 2Q20 fell by 6.9% YoY to IDR97.6 tn (USD6.7 bn), the lowest in the last 1.5 years. Due to the ongoing pandemic, investors are stalling business decisions. China, Hong Kong, Singapore, and Japan made up the top sources of investment, investing at the sectors of power, gas and water, base metals and transportation, warehousing, and telecommunications.

Company News

1. MAIN IJ prepared IDR68.28 bn to buy back its 111.93 mn shares, which is 5% of the total outstanding share. The buyback will occur in a period of 18 months after the company gets approval from the general shareholders meeting that will be held on August 28, 2020. The decision was made after the pandemic drove down stock prices and strained corporate liquidity. With the buyback, management hopes to increase shareholder value by returning excess free cash flow to shareholders (Market Bisnis). MNCS Comment: We note that the buyback strategy will help to maintain its liquidity as MAIN already grew by 58.97% from the lowest level. MAIN is currently traded at 0.67x PBV.
2. COCO IJ plans to issue medium term notes (MTN) with a value of IDR100 bn and interest at 12%. The MTN that is issued without public offering has a period up to 3 years from issuance. Later on, the MTN will only be sold to not more than 49 parties of professional investors. The value of the MTN will be equivalent to 90.37% of the company’s current equity. Management explained that the funds will be used to pay off part of the bank’s debt and working capital to improve operating performance. COCO is just waiting for the approval from the general shareholder meeting on August 27, 2020 (Kontan). MNCS Comment: We see that their DER is still manageable at the level of 1.20x, so issuing the MTN won’t impact the debt structure. COCO is currently traded at 4.06x PBV.
3. BSDE IJ posted 1H20 marketing sales at IDR2.9 tn, a 6% YoY increase, despite the property industry being one of the industries that is negatively affected by the pandemic the most. Based on sales data, residential products are still the main contributed to pre-sales, valued at IDR1.6 trillion or 57% of the presales. The marketing sales success was attributed to its “Move in Quickly” promotion, which generated IDR650 bn (Investor Daily). MNCS Comment: We consider that the strategic plan to promote residential property within the range of IDR1 billion is favorable for first hand owner. BSDE is currently traded at 0.55x PBV.

IHSG Updates

JCI was flat by -0.09% to 5,110.19 on Wednesday (22/07)followed by net foreign sell reaching IDR218.49 billion. The index movement was in respond to the fall on Foreign Direct Investment in the 2Q20, although market sentiment improved towards the development of the Covid-19 vaccine has made the rupiah rate strengthened. Meanwhile, the Rupiah exchange rate was strengthening at the level of IDR14,650. We estimate JCI will move in the range of 5,022-5,140while waiting for Loan Growth data release.Today's recommendation: AKRA, BBRI, HMSP, ADRO.

Corporate Action

Cum Dividend: ICBP, INDF, IPCM

Disclaimer On

AKRA, BBRI, HMSP, ADRO, MAIN, COCO, BSDE