Global Market Highlights
DJIA weakened by -0.15% on Friday (08/07), followed by S&P 500 (-0.08%) while Nasdaq (+0.12%). Wall Street closed mixed. The release of data on Jun-22 Non Farm Payrolls of 372,000 which exceeded the consensus at 268,000 received a negative response by the market as concerns for the Fed could trigger more aggressive interest rate tightening (FFR) amid high inflation. Today, the market will be looking toward several data releases such as: 1) US Fed Williams Speech; 2) UK BRC Retail Sales Monitor YoY; 3) Japan PPI YoY.
Domestic Update
• Outflows continued in the domestic financial market as reflected by foreign investors net selling of IDR3.54 trillion in the SBN market and net selling off IDR2.66 trillion in the stock market on 4-7 July 2022. MNCS Comment: Factors triggering the outflows: 1) the increased risk of global stagflation and 2) the aggressiveness of the Fed in raising the benchmark interest rate. Looking ahead, we view that the outflows may persist and pose a risk in the domestic financial market.
• Furthermore, the national Covid-19 daily rate had increased by 2,576 active cases (10/07).
Company News
1. WIKA IJ reported an underperforming -19.4% YoY revenue decline in 1Q22 to IDR3.16 trillion (vs IDR3.92 trillion in 1Q21), while WIKA's net profit fell -98.3% YoY to IDR1.32 billion (vs IDR78.16 billion in 1Q21) (CNBC Indonesia). MNCS Comment: The decrease in revenue was in line with the lower infrastructure and building segment revenue (-40.78% YoY) which contributed to the company's total revenue of 47.97% in 1Q22. Meanwhile, the decrease in net profit was in line with the increase in operating expenses (+20.47% YoY), other expenses (+57,32% YoY) and the decrease in joint venture profits (-55.39% YoY) which suppressed profit before tax ( -84.03% YoY). As for the liquidity difficulties of employers, it hampered the company's collection period. WIKA is currently traded at the level of 70.13x/0.63x PER/PBV.
2. WEGE IJ recorded a -39.62% YoY decrease in revenue in 1Q22 to IDR470.35 billion (vs. IDR779.02 billion in 1Q21), while 1Q22 net profit decreased -44.45% YoY to IDR29.5 billion (CNBC Indonesia). MNCS Comment: The decrease in revenue was in line with the decrease in the construction services segment revenue by -48.66% YoY which contributed to the total revenue in FY21 of 84.30%. GPM and OPM fell to 7.59% and 3.77% (vs 8.54% and 6.76% in 1Q21). Meanwhile, NPM recorded an increase to 7.44% (vs 6.88% in 1Q21) as the financial burden and final tax expense decreased by -25.26% YoY and -30.01% YoY, respectively. WEGE is currently traded at 7.74x/0.52x PER/PBV.
3. WOOD IJ targeted sales growth in FY22E by +25% YoY supported by sales in export markets, especially the US, as well as competitive product selling prices (Kontan). MNCS Comment: With this target, the company's revenue has the potential to grow to IDR6.77 trillion in FY22E. Meanwhile, in 1Q21 the company recorded revenue of Rp1.98 trillion (+116.62% YoY) or the realization reached 29.18% of the target set. Although revenue in 1Q22 was still dominated by the building component segment (74.32%), cyclically, the furniture segment revenue would tend to increase in 2H and support the company's target. The strategy through the application of competitive prices can support companies to increase their selling power in the midst of a potential recession in importing countries. WOOD is currently traded at 4.50x/0.97x PER/PBV levels.
IHSG Updates
JCI strengthened by +1.32% to 6,740.22 on Friday (08/07), followed by net foreign buy which reached IDR119.91 billion. The majority of sectors experienced strengthening and boosted the index rate, led by the technology sector (+2.99%) followed by the raw materials sector (+2.55%). On the other hand, the weakening sectors were led by the property sector (-0.16%) followed by the health sector (-0.08%). The index continued to strengthen in line with Asian markets. Investors were also watching the release of the Jun-22 Consumer Confidence Index (CCI) data which was at the level of 128.2, decreased from May-22 at the level of 128.9 but remained at the optimistic level (>100). On the other hand, the Rupiah exchange rate closed higher at IDR14,977/USD. We estimate that the JCI will move in the price range of 6,678-6,800 pending the release of Retail Sales YoY MAY data. Today's recommendation: AALI, ANTM, MDKA, PTBA.
Corporate Action
Cum Dividend: MTLA (IDR8.5/share), BALI (IDR31.15/share)
RUPS: PMMP
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