MNCS Morning Navigator 27 August 2020

MNCS Morning Navigator

27 August 2020

Global Market Highlight

DJIA rose by 0.30% on Wednesday (26/08) followed by S&P 500 (+1.02%) and Nasdaq (+1.73%). S&P 500 extends the winning streak, notching a fourth-straight record close after bouncing back from its March lows. Stock rises buoyed by more data pointing to an economic recovery and a continued rally in tech shares. Data orders for durable goods in the US surged by 11.2% in Jul-2020, more than double the expected gain. Moreover, the market will look forward to several data releases today, such as: 1) US GDP Growth Rate 2Q20; 2) US Initial Jobless Claims; 3) US Pending Home Sales.

Domestic Updates

1. Ministry of Finance stated that the economic recovery trend in Jul-2020 continued, with the global manufacturing PMI in Jul-2020 shown an upward trend towards expansion, at 50.3. Thus, these various indicators make the government confident that the economy will improve marked by the Consumer Confidence Index (IKK) which shows optimism.

2. Ministry of Finance also stated that the realization of the health budget in the National Economic Recovery (PEN) program as of August 19, 2020 was only 8.4% of the total budget or equals to IDR7.36 trillion. It is still far from the planned budget of IDR87.55 trillion. The progress of the health budget is in a slowing trend. Therefore, the minister arranged some strategies to accelerate the absorption of the health budget such as: 1) a shifting program to utilize funds that had no proposed use; 2) accelerate verification of incentives for health workers and compensation for death; 3) accelerate the process of procuring medical devices to encourage recovery rates and reduce mortality rates.

Company News

1. SMGR IJ recorded a cement sales volume of 17.96 million tons in 1H20, increased by 3% YoY from 17.43 million tons in 1H19. SMGR's subsidiary, SMCB managed to sell 5.29 million tons (+2% YoY) in 1H20. Thus, SMGR has managed to maintain its position as the market leader with 53.1% share of the domestic cement market. The management estimate there will be a 13%-15% decrease on cement demand in FY20E (Kontan). MNCS Comment: The increase in 1H20 sales volume is a good thing amid the decline in domestic cement consumption by 27.15 million tons (-7.72% YoY vs 29.42 million tons 1H19). This is also in line with 1H20 profit growth of 26.19% to IDR612 billion (vs IDR485 billion in 1H19) which occurred due to the company's efficiency. SMGR is currently traded at 24.60x/1.89x PE/PBV.
2. INCO IJ recorded production and shipment of nickel matte of 18,701/19,887 tons in 2Q20 which grew by 6%/19% respectively, the shipment is equivalent to USD185.7 million of sales in 2Q20. INCO revised its production target for nickel in matte throughout FY20E from around 71,000 to 73,700 ton, 4% higher than production in FY19 (Emiten News). MNCS Comment: We see that the sales increased by 19% YoY although the nickel price has fell by -4.37% YoY but it is still supported by a higher shipping volume. Nickel is still in demand for the components of electric vehicle that is being developed worldwide. INCO is currently traded at 24.72x/1.32x PE/PBV.
3. BNBA IJ plans to distribute Interim Dividend of IDR 5.75 per share. The total amounted to IDR13.28 billion of the company's net profit with a dividend payout ratio reaching 25.95% and yield reaching 1.78%. Cum date will fall on August 31, 2020 (Emiten News). MNCS Comment: As it is an interim dividend, the amount is only around half of the dividend in FY19 which is IDR11/share. Although net profit dropped by 45.16% YoY in FY19 but BNBA managed to still distribute dividends. BNBA is currently traded at 15.05x/0.49x PE/PBV.

IHSG Updates

JCI rose slightly by +0.03% to 5,340.32 on Wednesday (26/08) though followed by net foreign sell reaching IDR521.22 billion. Index movement was flat amidst the various movements from Regional Asia indices. This was due to minimum sentiment from the domestic market, though Agriculture sector became the largest contributor yesterday. Moreover, Jakarta's governor is compiling a set of regulation regarding the reopening of cinemas in the near future.  Meanwhile, the Rupiah exchange rate was weakening at IDR14,678.We estimate JCI will move in the range of 5,220-5,350 while waiting for Loan Growth data release. Today's recommendation: SMGR, PWON, ICBP, ADRO.

Corporate Action

IPO: TRJA

Cum Dividend Date: TBLA, RALS

Disclaimer On

SMGR, PWON, ICBP, ADRO, INCO, BNBA, TRJA, TBLA, RALS