Global Market Highlights
DJIA strengthened by +0.15% on Wednesday (20/07), followed by the S&P 500 (+0.59%) and the Nasdaq (+1.58%). Wall Street continued to strengthen amid the release of data on Existing Home Sales Jun-22 which fell -5.36% MoM to 5.12 million units. The driving catalyst was from the release of the company's financial statements in 2Q22 that performed well and exceeded estimates. Today, the market will be looking toward several data releases such as: 1) US CB Leading Index MoM; 2) Japan BoJ Interest Rate Decision; 3) Japan BoJ Quarterly Outlook Report.
Domestic Update
• The Bloomberg survey shows the majority of economists (22/61%) expect BI to hold the 7-day reverse repo rate at 3.5% in the July-22 RDG. MNCS Comment: We view BI raising the benchmark interest rate by 25 bps to 3.75% as a pre-emptive measure to anchor inflation in line with: 1) oil price of USD100/bbl; 2) IDR weakening trend; 3) strengthening consumption & accelerating credit growth; 4) potential pass-on increase in input costs as well as 5) the increase in inflation expectations.
• Furthermore, the national Covid-19 daily rate had increased by 5,653 active cases (20/07).
Company News
1. ELSA IJ announced the distribution of dividends for the financial year FY21 of 50% of FY21 net profit with IDR55.91 billion (Kontan). MNCS Comment: ELSA maintained FY21 net profit of IDR111.81 billion. With 7.30 billion outstanding shares, the dividend per share is IDR7.66. That way, ELSA offers a dividend yield of 2.55%. Meanwhile, the dividend payout ratio increased from the FY20 fiscal year of 30.11%, in line with the increase in performance, as well as with the rising global commodity prices. Currently, ELSA is traded at 7.30x/0.57x PER/PBV.
2. ROTI IJ again made a buyback for the 6th period from 21-Jul'22 to 20-Oct'22. The estimated maximum buyback fund allocation is IDR214.21 billion with a maximum absorption of 126 million shares. The maximum buyback limit is IDR1,700 per share (Kontan). MNCS Comment: With the number of outstanding shares available to the public as many as 593.42 million shares (9.59%) and a maximum absorption potential of 126 million shares, the percentage of public ownership will be 7.56% or a slight difference with the minimum amount of free float of 7.5%. Currently, ROTI is traded at 22.59x/2.92x PER/PBV.
3. ARNA IJ allocated a capex of IDR300 billion to increase production capacity by building a 5C factory which is targeted to operate in FY23E, while the 5C production capacity will be 4.4 million m2 (Kontan). MNCS Comment: In the long term, the company will continue to expand to increase production capacity of up to 78.4 million m2 per year (vs 64.37 million m2 in FY21) with a total capex allocation of IDR1 trillion. Meanwhile, to achieve this target, the company is currently building a 4C and 5C plant which is targeted to operate in FY23F, and a 6A plant which is estimated to operate in FY25F. Furthermore, we also project ARNA's top-bottom line growth in FY22E to be +9.67% YoY/+30.41% YoY. ARNA is currently traded at 11.64x/4.66x PER/PBV.
IHSG Updates
JCI strengthened by +2.06% to 6,874.74 on Wednesday (20/07), followed by net foreign buy which reached IDR372.60 billion. All sectors strengthened and pushed up the index, led by the industrial sector (+2.45%) followed by the financial sector (+2.41%). The index's gains were in line with Wall Street and Asian bourses. Investors were watching the release of overseas direct investment data in 2Q22 which grew +39.7% YoY (vs. 31.78% YoY in 1Q22). In addition, the Chinese central bank's decision to maintain its 1Y lending rate at 3.7% received a positive response from the market in line with the need for stimulus to maintain economic recovery amid global uncertainty. On the other hand, the Rupiah exchange rate closed lower at IDR14,988/USD. We estimate that the JCI will move in the price range of 6,757-6,900 pending the release of Interest Rate Decision, Deposit Facility Rate JUL and Lending Facility Rate JUL data. Today's recommendation: AKRA, BIRD, ICBP, JPFA.
Corporate Action
Cum Dividend: PANS (IDR150/share)
RUPS: BBYB, BNBR
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