MNCS Morning Navigator 24 July 2020

Global Market Highlight

DJIA dropped by -1.31% on Thursday (23/07) followed by S&P (-1.23%) and Nasdaq (-2.29%). These falls were caused by jobless claims data release which is at 1.42 million for the week ended July 18, up from 1.31 million the previous week. This is the first weekly increase since the week ended on March 28, when unemployment benefit claims reached 6.9 million due to lockdown area. This is also followed by the rising tension between the US and China as the US Government ordered to close the Chinese consulate in Houston for security reasons, in return China will close the US consulate in Wuhan. Moreover, the market will look forward to several data releases today, such as: 1) US Markit Manufacturing PMI; 2) Eurozone Markit Manufacturing PMI; 3) UK Retail Sales.

Domestic Updates

OJK predicts that bank loans at the end of 2020 will grow to a maximum of 3-4%. In May 2020, credit growth was 3%, which is much lower when compared to the same time in the previous year ar 6%. The credit decreased even more in June. However, it is predicted credit growth will start to rise in July as economic activity begins to move again, and this rise will continue until the end of the year.

Company News

1. PGAS IJ recorded growth in its monthly operational performance in June 2020 by increasing its consolidated gas distribution by 14.1% YoY to 758 Billion British Thermal Units Per day (BBTUD). The increase can be attributed to the easing of PSBB and the Idul Fitri holiday. However, the cumulative operational performance for 1H20 decreased by 9% YoY to 811 BBTUD. Nonetheless, this is close to its revised target of 870-880 BBTUD this year (Market Bisnis). MNCS Comment: The economic reopening gave positive impact to PGAS distribution, although on cumulative operation decrease in 1H20. PGAS is currently traded at 9.65x/0.71x PE/PBV.
2. ANTM IJ managed to reach 48% of both its production and sales target in 1H20, recording 12,762 TNi for cumulative production of ferronickel commodities, and 13,045 TNi for sales. When looking at 2Q20 alone, they managed to increase ferronickel output by 2% QoQ to 6,447 TNi and ferronickel sales by 11% QoQ to 6,315 TNi. The increase in production and sales performance is in line with improving global economic conditions and growing nickel demand. Now, ANTM is focusing on reducing cash cost production and optimize operations (Market Bisnis). MNCS Comment: ANTM is not just being in position of advantage from the rise in gold price but also from the increase on demand in nickel commodities. ANTM is currently traded at 0.92x PBV.
3. LPPF IJ will close several stores and will not expand new outlets in 2021. It is also targeting to close eight unprofitable large scaled shops by 2020. LPPF has also drastically controlled expenditures such as promotion costs, salary cuts, and organizational streamlining (Kontan). MNCS Comment: We believe that efficiency is one of the strategies used to maintain its margins amid the pandemic as we expect retailer will experience a sharp downturn in 2Q20. LPPF is currently traded at 3.04x PBV.

IHSG Updates

JCI increased by +0.68% to 5,145.01 on Thursday (23/07) followed by net foreign sell reaching IDR163.86 billion. The increase was in-line with the strengthening of regional Asia indices while US indices fell. Furthermore, the market should be watchful towards the earnings season which the 2Q20 is estimated to be disappointing. Meanwhile, the Rupiah exchange rate was strengthening at the level of IDR14,580. We estimate JCI will move in the range of 5,032-5,150 while waiting for Loan Growth data release. Today's recommendation: JPFA, BBNI, INCO, AALI.

Corporate Action

Cum Dividend: LSIP

Ex Dividend: INDF, ICBP

Disclaimer On

JPFA, BBNI, INCO, AALI, ANTM, LPPF, PGAS