MNCS Morning Navigator 24 August 2020

Global Market Highlight

DJIA pushed higher +0.69% on Friday (21/08) by gains in Apple shares. Moreover, Nasdaq Composite rose by +0.42% followed by S&P 500 (+0.34%). The July-2020 home sales numbers were among the strongest the housing market has ever seen (+24.7% MoM). The increase was also supported by the release of US Manufacturing PMI data in August 2020 at 53.6, better than July's 50.9. On the other hand, the US Department of Labor reported US initial jobless claims, increasing by 135,000 to 1.10 million in the week ending August 15 which reflects the high unemployment rate in the country. Moreover, the market will look forward to several data releases today, such as: 1) US Chicago Fed National Activity Index; 2) US Short Term Bill Auction; 3) France Short Term Bill Auction.

Domestic Updates

1.       BI decided to maintain the 7-Day Reverse Repo Rate (7DRR) at 4.00%, the Deposit Facility rate at 3.25%, and the Lending Facility rate at 4.75%. This decision is consistent with the need to maintain external stability, amidst predicted low inflation. Bank Indonesia emphasizes on the quantity route through the provision of liquidity to encourage economic recovery from the impact of the COVID-19 pandemic, including the support to the Government in accelerating the realization of the 2020 State Budget.
2.       The Ministry of Public Works and Public Housing (PUPR) stated that the distribution of the Housing Financing Liquidity Facility (FLPP) had reached 84,080 units amounting to IDR8.54 trillion as of August 19, 2020. Furthermore, the Ministry and 13 Implementing Banks as well as 170 subsidized housing developers will hold a virtual exhibition for the First Subsidized Housing in Indonesia on August 25-29 2020.

Company News

1. MDKA IJ recorded a USD199 million of revenue in 1H20, increased by 3.75% YoY from the previous USD192 million in the first 1H19. The increase in revenue was driven by gold sales, which rose 40.1% YoY to USD188.1 million. Although overall revenue increased, the gross profit margin and operating profit margin decreased due to an increase in cost of goods sold by 16.20% YoY followed by general administrative expenses by 50% YoY. Thus, net profit only reached USD38 million, slipped by 9.4% YoY.  The decline was caused by technical problems where there was a steel content which resulted in the heap leach process being not optimal which resulted in a decline in revenue in the copper segment by 49.7% YoY (Market Bisnis). MNCS Comment: MDKA's performance will still be largely affected by gold price movements and the increase on gold sales. We believe the problems experienced will not prolonged as MDKA is still continuing the Pani Mine exploration. MDKA is currently traded at 36.68x/5.37x PE/PBV.
2. SRIL IJ recorded a decrease on revenue growth of 3.83% YoY to USD608.23 million in 1H20. While domestic sales increased 8.18% YoY to USD275.59 million,  export sales decreased by 11.93% YoY to USD332.64 million contributing to 54.69% of total sales. This caused a drop in net income by 7.98% YoY to USD49.84 million. (Market Bisnis). MNCS Comment: We see that as an effort to boost export sales, the company planned to export personal protective equipment or APD when permitted by the Government with America and Europe as their target market. SRIL is currently traded at 3.27x/0.51x PE/PBV.
3. INOV IJ will be distributing dividends of IDR13.56 billion, this equals to 59.89% dividend payout ratio from the FY19 net profit amounting to IDR22.64 billion in 2019. Dividend per share stood at IDR7.5 while the remaining net income will be used as a reserve fund and retained earnings (Market Bisnis). MNCS Comment: Dividend yield stood at 2.93%. While we note that this is the first time for INOV to distribute dividends. Meanwhile INOV is planning to build a new plastic processing plant in the future with USD10 million of Capex. INOV is currently traded at 1.43x PBV.

IHSG Updates

JCI dropped by -0.42% to 5,272.81 on Wednesday (19/08) followed by net foreign sell reaching IDR325.45 billion. JCI dropped amid various movements from the Regional Asia indices although investors already anticipate the unchanging rate from BI. While there are no more significant data release that will bring positive sentiments, investors did a profit taking in the last day of trading as fear rises for further index strengthening. Meanwhile, the Rupiah exchange rate was weakening at IDR14,773. We estimate JCI will move in the range of 5,220-5,330 while waiting for Motorbike Sales. Today's recommendation: UNTR, MAPI, BSDE, BBTN.

Corporate Action

Cash Dividend Date: MBAP, MARK

RUPS: ZINC

Disclaimer On

UNTR, MAPI, BSDE, BBTN, SRIl INOV, MDKA