Global Market Highlights
The DJIA fell -0.69% on Tuesday (23/05), followed by the S&P500 (-1.12%) and the Nasdaq (-1.26%). Wall Street closed lower as the market is watching the settlement of the debt ceiling which is still far from being agreed between the Government and the House Speaker. In addition, the Fed's hawkish tone which suggests the benchmark interest rate will be high for longer also adds to the negative sentiment. Today, the market will be looking toward several data releases such as: 1) US FOMC Minutes; 2) Germany Ifo Business Climate May; 3) UK Inflation Rate YoY Apr.
Domestic Update
• The realization of the sosial protection budget up to 4M23 was recorded at IDR122.4 trillion, down -5.1% YoY (vs IDR129 trillion in 4M22). MNCS Comment: With the Perlinsos budget in FY23 worth IDR476 trillion, realization up to 4M23 was 25.7%. We view an adequate allocation of funds going forward in line with the anticipation of rising food commodity prices from El Nino exposure in 2H23.
Company News
1. MEDC IJ recorded a decrease in net profit -8.9% YoY to USD 82.1 million (vs USD 90.0 million in 1Q22) (Investor ID). MNCS Comment: Decreased net profit amid revenue performance which increased +18.4% YoY to USD558.1 million in 1Q23 (vs USD471.3 million in 1Q22), as costs increased, where cost of revenue increased significantly +40.5% YoY followed by OPEX +14.7% YoY. In addition, all margins decreased, where OPM/NPM was 19.9%/14.7% (vs 28.4%/19.1% in 1Q22). Currently, MEDC is traded at the level of 4.27x/0.84x PER/PBV.
2. PWON IJ targets the growth of the recurring income business segment to reach +15% YoY in FY23E, one of which is supported by the normalization of tariffs which ended in FY23E (Market Bisnis). MNCS Comment: The recurring income segment contributes 65% to revenue consolidation. We are optimistic that PWON can achieve this target in line with the relaxation of post-pandemic mobilization, which has led to an increase in occupancy at outlets, hotels and offices. We also believe that tenants can anticipate the normalization of tariffs in line with the solid performance improvement in 1Q23. Currently, PWON is traded at the level of 9.71x/1.29x PER/PBV.
3. KLBF IJ has absorbed capex of up to IDR300 billion in 1Q23, of which the majority was intended for increasing the production capacity of drugs and medical devices (Kontan). MNCS Comment: With a capex allocation target in FY23E of IDR1 trillion, realization up to 1Q23 reached 30%. We anticipate higher capex realization in the next quarter in line with issuers' readiness to prepare products with 40% TKDN, to comply with government regulations. Currently, KLBF is traded at the level of 29.03x/4.69x PER/PBV.
IHSG Updates
JCI strengthened +0.10% to 6,736.68 on Tuesday (24/05), followed by net foreign buys reaching IDR 787.77 billion. The majority of sectors experienced strengthening and boosted the index rate, led by the transportation sector (+1.43%) followed by the cyclical sector (+1.37%). On the other hand, sectors that experienced weakness were led by the technology sector (-0.96%) followed by the energy sector (-0.82%). The movement of the index outperformed other Asian exchanges which closed in red, where investors responded positively to the current account surplus in 1Q23 of USD3.0 billion, making Indonesia's balance of payments performance a surplus of USD6.5 billion (vs. USD4.7 billion in 4Q22). The rupiah closed higher at IDR14,880/USD. We estimate that the JCI will move in the price range of 6,686-6,746. Today's recommendation: ASSA, BBCA, ELSA, INDF.
Corporate Actions
Cum Dividend: PTRO (USD0.08/share), ISAT (IDR255.7/share), SRTG (IDR75/share)
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