MNCS Morning Navigator 26 August 2020

Global Market Highlight

DJIA slipped -0.21 on Tuesday (25/08) though followed by the rise of S&P500 (+0.36%) and Nasdaq (+0.76%). The unfortunate news came from the release of the US Consumer Confidence Index data which fell to 84.8 in August, a sharp decrease from 91.7 in July, this figure is also much worse than the consensus of economists who targeted at 93. Furthermore, the airline sector is still haunted by the corona crisis with its shares falling again due to the low level of travel by people using airplanes which causes further unemployment. Subsequently, the riot in Wisconsin has been declared as an emergency by the Governor Tony Evers and the National Security Force will be deployed after the City of Kenosha riots occurred for 3 consecutive nights. Moreover, the market will look forward to several data releases today, such as: 1) US Durable Goods Order; 2) US MBA Mortgage Application; 3) US Fed Daly Speech.

Domestic Updates

Indonesia's finance minister said that Indonesia’s economic recovery is very fragile and could reverse, as shown by the tax revenue data in July. Even though revenues had improved temporarily in June, the improvement stagnated in July, with some sectors deteriorating, such as trade, mining, and construction. The minister warned that avoiding a recession in the third quarter will be hard and “require an extraordinary struggle,” as she expects that July-September GDP will be in the range of -2% to 0%. Overall, the minister maintained her 2020 outlook of between -1.1% to 0.2%.

Company News

1. BMRI IJ managed to record positive performance during 1H20, pocketing a revenue of IDR2.09 trillion (+23.47% YoY) and net profit of IDR719 billion (+30.53% YoY). The increase in net profit was supported by the strengthening of low-cost funds (CASA) and increasing digital transactions, and both increased margin income and fee-based income. The ratio of low-cost funds has risen from 54.2% last year to 57.93% this year, decreasing the cost of funds for the bank and solidify liquidity (Kontan). MNCS Comment: We see that BMRI still booked a resilitent 2Q20 performance with positive profits despite lockdown effect and conservatife accounting. Management focus area in 2H20 including healthy loan growth, lowering cost of fund and opex savings. BMRI is currently traded at 14.17x/1.63x PE/PBV.
2. CPIN IJ will be distributing dividends at IDR81 per share or IDR21.42 trillion from FY19 net profit of IDR58.63 trillion, which increased by 8.67% YoY. While net profit increased, its company’s cost of goods sold actually increased from IDR44.82 trillion in 2018 to IDR50.52 trillion in 2019. Furthermore, it also recorded a drastic increase in operating expenses from IDR123.72 billion to IDR580.63 billion in 2019 (Bisnis Market). MNCS Comment: We note the dividen payout ratio was lower at 36.53% (vs 42.45% in FY19). CPIN is currently traded at 30.20x/4.40x PE/PBV.
3. ZINC IJ is focusing in current activities and investments to improve the company’s performance and future. The company is still optimistic that it can reach its sales target, despite not even reaching 50% in the 1H20. With restrictions easing, the company can continue its projects, such as refining smelter projects in lead and zinc. For example, ZINC signed a 2.5 MW Surat Perjanjian Jual Beli Tenaga Listrik (SPKBTL) with PLN to guarantee the operations of its lead smelters. In terms of investments, ZINC continues to commit to making the company’s business sustainable in the construction of lead and zinc, by investing in downstream programs to provide added value to the company’s mineral products (Investor Daily). MNCS Comment: We see that ZINC is expecting a recovery in 2H20, backed by an agreement with the government. ZINC has not released their performance in the FY20 yet, but their stock prices has plummet by -64.7% YTD. ZINC is currently traded at 46.33x/4.34x PE/PBV.

IHSG Updates

JCI rose by +1.17% to 5,338.88 on Tuesday (25/08) though followed by net foreign sell reaching IDR390.74 billion. Index rise again amid various movements from the regional Asia Indices. Although there's a negative sentiment from the Ministry of Finance as stated that the economy in 3Q20 could drop to -2% while FY20E is predicted to decrease by 1.1%. But the statement didn't seem to budge the growth in the market.  Meanwhile, the Rupiah exchange rate was strengthening at IDR14,649. We estimate JCI will move in the range of 5,220-5,350 while waiting for Loan Growth data release. Today's recommendation: RALS, GGRM, CTRA, BMRI.

Corporate Action

Cum Dividend Date: BAYU

Rights Issue: ACST

RUPS: MNCN

Disclaimer On

RALS, GGRM, CTRA, BMRI, CPIN, ZINC