MNCS Morning Navigator

18 November 2021

MNCS Morning Navigator November 18, 2021

Global Market Highlights

DJIA fell by -0.58% on Wednesday (17/11) followed by S&P 500 (-0.26%) and Nasdaq (-0.33%). Wall Street ended lower due to investor’s concerns towards inflation and supply chain problems impacting retail business operations and consumer spending. UK’s Inflation Rate went up by 4.2% YoY on October-21 from previously at 3.1% YoY due to rising fuel and energy prices, higher bills in restaurants and hotels, as well as the costs of raw materials and goods in factories. In addition, US Building Permits grew by +4% MoM on October-21 from previously contracted by -7.8% MoM indicating a high housing demand in the future. Today the market will be looking forward to several data releases such as: 1) US Continuing Jobless Claims; 2) US Initial Jobless Claims; 3) US Philadelphia Fed Manufacturing Index.

Domestic Update
• Bank Indonesia (BI) will announce its policy rate today and is expected to leave interest rates unchanged, BI 7 Day Reverse Repo Rate at 3.50%; Lending Facility Rate at 4.25% and Deposit Facility Rate at 2.75%. MNCS Comment: Low inflation, stable Rupiah and the need to spur growth, maintaining interest rates at current level is the right policy despite rising concern on higher inflation globally. We expect the interest rates to be kept unchanged at least until the end of this year before normalization and tightening is likely to take place next year.
• Furthermore, the second dose of vaccination rate nationally has reached 41.2% or equivalent to 85.76 million people.

Company News
1. ERAA IJ recorded IDR31.18 trillion net sales in 9M21 increased by +34.57% YoY (vs IDR23.17 trillion in 9M20). COGS increased from IDR20.99 trillion in 9M20 to IDR28.16 trillion in 9M21. ERAA recorded IDR719.21 billion net profit in 9M21 or rose by +143.70% YoY (vs net profit of IDR295.12 billion in 9M20) (Market Business). MNCS Comment: ERAA’s increasing top line and bottom line were driven by an increase in sales of cellular phones and tablets to IDR24.77 trillion or up to +42.95% YoY. The existence of ERAA as a reseller of Apple’s latest product release, Iphone 13, is projected to improve financial performance in FY21E. ERAA is trading at the level of 11.14x/1.83x PER/PBV.
2. PRDA IJ has realized capex up to 9M21 of IDR80 billion or equivalent to 40% of the company’s FY21E target of IDR200 million. Capex is allocated for the development of the company’s information technology (IT) (Market Business). MNCS Comment: We see that PRDA is starting to shift its focus by building the digitization of laboratory services combined with home services to efficiently improve the company’s performance. Also, PRDA is optimistic that the company can absorb the company’s capex for FY21E because there are still additional expenditures for IT that have not been realized. Currently, PRDA is trading at level 10.94x/3.48x PER/PBV.
3. ADHI IJ recorded new contract growth by +68.93% YoY to IDR12.67 trillion in 10M21 (vs IDR7.5 trillion in 10M20). The contract value includes the infrastructure business line of IDR5.5 trillion, buildings of IDR3.3 trillion, property of around IDR1 trillion, and the rest from other business lines (Business Tempo). MNCS Comment: We see an increase in ADHI’s new contracts driven by the relaxation of PPKM policy. On the other hand, ADHI is optimistic with the targets of new contract value growth by +20% YoY for FY21E. ADHI currently has 195 active projects including tenders for infrastructure projects, trains, building and others. Overall ADHI has a total project order book worth IDR46 trillion. ADHI is trading at the level of 174.17x/0.71x PER/PBV.

IHSG Updates
JCI strengthened by +0.37% to 6,675.80 on Wednesday (17/11) followed by net foreign sell reaching IDR824.89 billion. JCI closed higher, with the strong sector led by the industrial sector (+1.51%), followed by the transportation sector (+1.40%). On the other hand, the non-cyclical consumer sector weakened -0.45%, followed by the basic industrial sector (-0.44%). The strengthening of the JCI was driven by the strengthening of the Wall Street market last night and the market's optimism about the BI board of governors meeting which is expected to keep interest rates at a low level until the end of next year. On the other hand, the Rupiah weakened at IDR14,243 level in the spot market. We estimate the JCI will move in the range of 6,630-6,680 while waiting for the interest rate decision. Today's recommendations: ADHI, IMAS, AISA, EXCL.

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