Global Market Highlights
DJIA strengthened by +0.51% on Thursday (21/07), followed by the S&P 500 (+0.99%) and the Nasdaq (+1.36%). Wall Street rose amid the release of initial jobless claims data as of July 16-22 which rose to 251,000 (vs 244,000 previously) and marked an 8th straight month of gains. The optimism regarding the release of the issuer's positive financial reports in 2Q22 and the decline in the yield on the US T-note 10Y to the level of 2.92% were the driving forces for Wall Street. Today, the market will be looking toward several data releases such as: 1) US S&P Global Composite PMI Flash; 2) UK S&P Global/CIPS Manufacturing PMI Flash; 3) Germany S&P Global Manufacturing PMI Flash.
Domestic Update
• BI expects the headline inflation to overshoot from the ITF target at 4.5% YoY in FY22E. However, core inflation is projected to remain in the range of 2-4% YoY. MNCS Comment: The rising inflationary pressure in Indonesia was largely driven by a supply shock. We consider that core inflation pressure will increase in line with the pass-on higher input cost from producers. Therefore, we expect BI to raise the benchmark interest rate as soon as in Aug/Sep 2022 to anchor inflation.
• Furthermore, the national Covid-19 daily rate had increased by 5,410 active cases (21/07).
Company News
1. RALS IJ planned to conduct a buyback with an allocation of IDR200 billion. The maximum absorption of shares reaches 360 million shares or 5% of the paid-up capital, while the buyback action still has to wait for the decision of the EGMS on 29-Aug (CNBC Indonesia). MNCS Comment: In 1Q22, the company's cash and cash equivalents reached IDR1.17 trillion. We look at this buyback action where the share price is -12.21% YTD. We also consider this effort to be carried out in line with the company's optimism that performance recovery in FY22E will be supported by the post-pandemic which increases people's mobility along with the recovery of welfare for people's consumption. Currently, RALS is traded at 33.99x/1.13x PER/PBV.
2. TAPG IJ targeted the construction of Palm Kernel Oil (PKO) to be completed by the end of FY22E, while the palm oil mill would be completed on May 22. The capacity of the PKO factory reached 300 tons/day (Market Bisnis). MNCS Comment: It is hoped that the end of the factory will improve the company's performance in the future. Currently, TAPG is traded at 3.69x/1.54x PER/PBV.
3. INTP IJ reported a decrease in sales volume to -3% YoY in 1H22 with 7.4 million tons. The decline was due to the weakening market share in Central Java as development progressed where cement growth was recorded at -8% (Kontan). MNCS Comment: In 1H21, total sales volume reached 8.19 million tons. We believe this weakening of market share was in line with adjusting product prices to increase energy costs, especially coal prices which are still high. Currently, INTP is traded at 47.39x/1.68x PER/PBV.
IHSG Updates
JCI weakened by -0.15% to 6,864.13 on Thursday (21/07), followed by net foreign buy which reached IDR540.32 billion. The majority of sectors weakened and weighed on the index, led by the health sector (-1.19%) followed by the raw materials sector (-0.56%). On the other hand, the strengthening sectors were led by the non-cyclical sector (+0.73%) followed by the financial sector (+0.26%). The weakening of the index occurred amid the release of the BI7DRR benchmark interest rate which was maintained at 3.5%. We see a number of market participants were worried about the potential for inflation to rise in Jul-22 as well as outflows as BI7DRR is maintained. On the other hand, the Rupiah exchange rate closed lower at IDR15,033/USD. We estimate that the JCI will move in the price range of 6,757-6,900 pending the release of M2 Money Supply YoY JUN data. Today's recommendation: CPIN, INKP, LPPF, TINS.
Corporate Action
Cum Dividend: BSML (IDR1.08/share)
RUPS: INDF, ICBP
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