Global Market Highlight
DJIA rose by +1.62% on Tuesday (20/07) followed by S&P 500 (+1.52%), and Nasdaq (+1.57%). Wall Street closing was higher due to several sentiments such as, release of financial reports of listed companies which were relatively improving in the 2Q21, government stimulus in tackling economic recovery, and loose monetary policy. The market will look forward to several data releases today, such as: 1) US MBA Mortgage Applications; 2) UK Public Sector Net Borrowing; 3) Japan Balance of Trade.
Domestic Update
• The latest Banking Survey conducted by Bank Indonesia in June 2021 indicated positive growth of new loans disbursement in the 2Q21, as confirmed by a weighted net balance (WNB) of demand for new loans of 53,9%. By loan type, growth of new loans indicated across all loan types, led by working capital loans (WNB 45.0%), followed by consumer loans (WNB 31.3%) and investment loans (WNB 13.3%). MNCS comment: After experiencing a contraction in 1Q21, loan growth seems to flip out into a positive territory in 2Q21. Although the banking industry expects stronger loan growth in 3Q21 the impact of PPKM Darurat implementation should be taken into account that could impact both credit supply and demand. Besides loan growth that matters, we also see that banks interest rate declines remained limited compared to deposit rate declines and BI 7DRR cut since the pandemic strike, therefore the banking industry still has room to further lower interest rates.
• Furthermore, there was an addition of 6,213 new Covid-19 cases in Jakarta yesterday.
Company News
1. INCO IJ recorded matte nickel production of 30,246 tons in 1H21 or down -16.7% YoY (vs. 36,515 tons in 1H20). INCO still maintains its production target of 64,000 tons in FY21E, as for the details of nickel in matte production in 1Q21 of 15,198 tons, while production in 2Q21 was recorded at 15,048 tons, or down -19.5% YoY (vs 18,701 tons in 2Q20) (CNBC Indonesia). MNCS Comment: INCO's production is slightly below our estimate but we hope the production can pick up in the 2H21E. We see that one of the causes is the weather that disrupt mining activities. Currently INCO is trading at 27.08x/1.78x PE/PBV levels.
2. KRAS IJ posted revenue of USD1.05 billion in 1H21 or up +90.88% YoY (vs USD552.82 million in 1H20). COGS rose from USD465.89 million in 1H20 to USD926.30 million in 1H21. KRAS recorded a net profit of USD32.46 million in 1H21 which increased by +619.73% YoY (vs USD4.51 million in 1H20) (Bisnis Indonesia). MNCS Comment: KRAS' performance is supported by the 43.8% YoY increase in volume production and a tremendous export growth by 1,499% YoY. KRAS is also providing oxygen tanks amid the shortage. Currently KRAS is trading at 7.15x/1.03x PE/PBV levels.
3. ARNA IJ recorded net sales of IDR1.25 trillion in 1H21 or up +25.33% YoY (vs IDR995.68 billion in 1H20). COGS increased from IDR721.68 billion in 1H20 to IDR805.86 billion in 1H21. ARNA posted a net profit of IDR220.91 billion in 1H21 which increased +83.12% YoY (vs IDR120.64 billion in 1H20) (Bisnis Indonesia). MNCS Comment: The net profit achievement was relatively in line with our forecast which reflected 52% of the FY21E target. We believe ARNA is able to maintain its performance in FY21E with earnings growing by 30% YoY. Efficiency in the use of raw materials, gas costs and fixed costs will support strong margins. Currently ARNA is trading at 11.79x/4.67x PE/ PBV levels.
IHSG Updates
JCI fell by -0.91% to 6,017.39 on Monday (19/07) while net foreign buy reaching IDR261.36 billion. JCI closing was lower along with most sectors led by the industrial sector -1.59% followed by basic industries (-1.56%). On the other hand, the infrastructure sector strengthened by +0.25%, followed by energy (+0.07%). As Asian indices closed lower after the OPEC+ forum meeting which halted crude oil production which is now at the level of 5.8 million barrels/day, so does JCI which is closed at the red zone ahead of Eid al-Adha. It seems that investors chose to hold cash, anticipating the extent of the Emergency Community Activity Restrictions (PPKM). Meanwhile the Rupiah exchange rate was weakening at Rp14,518. We estimate the JCI will move in the range of 5,950-6,070 while waiting for the interest rate decision. Today's recommendation: INKP, ACES, LSIP, JSMR.
Corporate Action
RUPS : BPII, ELSA, IATA
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