MNCS Morning Navigator

12 September 2023

MNCS Morning Navigator September 12, 2023

Global Market Highlights
The DJIA strengthened by +0.25% on Monday (11/09), followed by the S&P500 (+0.67%) and Nasdaq (+1.14%). Wall Street continued its upward trend as investors reacted positively to China's loan growth developments in Aug-2023. Additionally, optimistic comments from the U.S. Treasury Secretary about the U.S. economy acted as a positive catalyst. Today, the market will be looking toward several data releases such as: 1) Germany ZEW Economic Sentiment Index Sep-2023; 2) UK Unemployment Rate Jul-2023; 3) UK Unemployment Change Jun-2023.

Domestic Update
Bank Indonesia (BI) reported a positive retail sales performance in Jul-2023, growing by +1.6% YoY. Moreover, retail sales in Aug-2023 are expected to remain robust with an increase of +1.3% YoY. MNCS Comment: We note a slowdown in retail sales performance in Jul-2023 (vs +7.9% YoY in Jun-2023), in line with the normalization of public consumption post the festive season in 2Q23 and the end of the extended holiday period. Moving forward, we anticipate the retail sales performance to maintain its positive trend, supported by manageable inflation rates and the year-end festive season.

Company News
1. INTP IJ has signed an MoU with Krakatau Posco to utilize steel by-products as alternative raw materials for eco-friendly cement (Kontan). MNCS Comment: We view this strategic partnership as beneficial for both parties. The increasing use of alternative energy is expected to reduce input costs and have a positive impact on profitability. Currently, INTP is traded at the level of 29.05x/2.06x PER/PBV.
2. ARNA IJ plans to conduct a buyback with a fund allocation of up to IDR150 billion. The buyback execution will take place over 18 months, from 19 October 2023 to 18 April 2025. Based on the company's historical 10Y PER, the minimum PER is at 15x of EPS (Kontan). MNCS Comment: We expect this buyback action to act as a positive catalyst, bringing added value for investors amidst the declining performance in FY23E. The annualized EPS in FY23E is IDR66 per share, with a target PER of 15x, positioning the fair price at IDR995 per share. Currently, ARNA is traded at the level of 11.45x/3.39x PER/PBV.
3. MDKA IJ, through PT Bumi Suksesindo (BS), is making efforts to accelerate gold production in the Tujuh Bukit Operations mining area and to explore new revenue sources from the copper project (Kontan). MNCS Comment: For FY23E, MDKA targets the Tujuh Bukit gold mine production to reach between 120k-140k ounces of gold, with an AISC ranging between USD1,100-1,300 per ounce of gold. The realization up to 1H23 stands at 46%-53%. We are optimistic that the company can achieve this target, which should bolster its future profitability. Currently, MDKA is traded at the level of 5.09x PBV.

IHSG Updates
JCI strengthened +0.56% to 6,963.39 on Monday (11/09), followed by net foreign buy reaching IDR891.4 billion. A number of sectors experienced weakening and weighed on the index, led by the healthcare sector (+2.51%) followed by the non-cyclical sector (+1.38%). On the other hand, the sectors that weakened were led by the energy sector (-0.60%) followed by the industrial sector (-0.03%). The JCI’s strengthening rise aligned with most Asian stock exchanges, as investors observe China's economic recovery, indicated by an inflation rate in Aug-2023 of +0.1% YoY (vs deflation of -0.3% YoY in Jul-2023). The Rupiah closed at IDR15,325/USD. We estimate the IHSG will move within the price range of 6,926-6,974. Today's Recommendations: ADRO, ARTO, CPIN, PNLF.

Corporate Actions

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