MNCS Morning Navigator

02 Juli 2024

MNCS Morning Navigator July 2, 2024

Global Market Highlights
The DJIA finished higher by +0.13% on Monday (01/07), followed by the S&P 500 (+0.27%) and the Nasdaq (+0.83%). Wall Street strengthened as the market is waiting for the speech from Fed Chair Powell scheduled today. Additionally, the maintained manufacturing PMI of the S&P Global at 51.6bps (vs 51.3/51.7 bps in May-2024/Consensus) also acted as positive incentive towards the index. Today the market will be looking forward to several data releases such as: 1) Korea Inflation Rate Jun-2024; 2) EA Core Inflation Rate Flash Jun-2024; 3) US Fed Chair Powell Speech.

Domestic Update
BPS reported a deflation (-0.08% MoM) of the CPI inflation in Jun-2024. On the YoY basis, the inflation rate softened to 2.51% from 2.84% in May-2024. Additionally, the core inflation was recorded lower at 0.10% MoM (vs 0.17% in May-2024) or 1.90% YoY (vs 1.93% YoY in May-2024). MNCS Comment: The lower core inflation was mainly influenced by the inflation of gold jewellery and ground coffee commodities. Meanwhile, based on the expenditure group, the food, beverages, and tobacco acted as the biggest contributor towards the deflation (0.49% MoM) with a contribution of 0.14% MoM. We anticipate the slower but manageable inflation to continue in 2H24 considering the increasing food supplies during harvest season, which is also balanced by the government’s policies to increase rice imports and market operations.

Company News
1. INOV IJ expands a new business segment, resin manufacturing, to increase revenue up to IDR114 billion per year (Emiten News). MNCS Comment: This new business segment potentially contributes ~19% of total revenue. The company is eyeing resin sales of 30% of the maximum production amount or around 3.6 kg per year. Furthermore, the company also allocated capex of IDR20 billion for this new segment expansion. INOV is currently trading at 0.70x PBV.
2. ISSP IJ will distribute dividends for the FY23 amounting to IDR 105.98 billion (Kontan). MNCS Comment: We estimate this dividend distribution will offer a potential dividend yield of ~5.2%. The DPS/DPR is higher than the previous year, amounting to IDR15 per share and DPR at 21.3% (vs. IDR 6 per share and DPR at 13.9% in FY22) ini line with a rise in net profit in FY23 of +62.9% YoY driven by an increase in revenue (+3.2% YoY) and a decrease in COGS (-2% YoY). As a result, GPM/NPM increased to 16.6%/7.7% in FY23 (vs. 12.1%/4.9% in FY22). ISSP is currently trading at 5.24x/0.43x PER/PBV.
3. INCO IJ experienced a significant decline in net profit of -96.3% YoY in 1Q24 (Kontan). MNCS Comment: The decrease in net profit was mainly driven by a decrease in sales to VCL of -36.7% and sales to SMM of -36.6%. As a result, GPM/NPM fell to 8.7%/2.6% respectively (vs. 35.2%/46.5% in 1Q23). Meanwhile, from the operational production perspective, the company is aiming to maintain its nickel production volume in FY24 at 70,800 tonnes (vs. 70,728 tonnes in FY23). INCO is currently trading at 1.03x PBV.

IHSG Updates
The JCI strengthened by +1.08% to 7,139.63 on Monday (01/07), followed by a net foreign buy of IDR185.44 billion. Most sectors experienced gains and supporting the index, led by the transportation sector (+4.14%) and followed by the basic materials sector (+3.15%). On the other hand, sectors that experienced declines were led by the healthcare sector (-0.45%) and followed by the property and real estate sector (-0.21%). The index's rise was in line with most other Asian markets, whereas investors responded positively to the domestic inflation rate in Jun-2024, which slowed to +2.51% YoY, lower than the consensus estimate of +2.70% YoY. Alongside the inflation rate remaining manageable, it is expected to strengthen the Rupiah's fundamentals going forward. The Rupiah closed higher at IDR16,322/USD. We estimate that the JCI will move in the price range of 7,100-7,150. Today's recommendations: BMRI, INCO, MDKA, MEDC.

Corporate Actions
Cum Dividend: AGII (IDR10.8/share), RDTX (IDR360/share), SAMF (IDR41/share)

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