Global Market Highlight
DJIA sharply fell by -1.78% on Monday (20/09) followed by S&P 500 (-1.70%), and Nasdaq (-2.19%). Wall Street ended weakened as fear of contagion from potential collapse of China's Evergrande drove investors out of equities in a flight for safety. China's Evergrande has more than USD300 billion in liabilities, and reports suggest it won’t hit an interest payment deadline on its offshore bonds due Thursday. Subsequently, fears of the potential economic crisis in China sent oil prices tumbling, and triggered a more than -4% drop in energy. Today the market will be looking forward to several data releases such as: 1) US Building Permits MoM; 2) Canada New Housing Price Index YoY; 3) UK Public Sector Net Borrowing.
Domestic Update
• Bank Indonesia (BI) will announce its policy rates today. Consensus agreed without any dissenting opinion that BI will hold a 7-day reverse repo rate at 3.5%. MNCS Comment: It is clear that BI has no room for further rate cuts this year as global monetary policy normalization will likely occur this year with some emerging market economies have taken the first move to tighten their monetary policy amid rising inflation and ahead of Fed's tapering announcement. We believe that by keeping interest rates unchanged, rupiah stability could be maintained while at the same time the central bank can still follow a pro-growth policy mix.
• Furthermore, there was an addition of 91 new Covid-19 cases in Jakarta yesterday.
Company News
1. ERAA IJ cooperated with JD Sports Fashion Plc. to expand business in the fashion retail segment. Through its subsidiary, PT Erajaya Active Lifestyle, ERAA will open a JD Sports outlet in 2022 (Bisnis Indonesia). MNCS Comment: JD as an old player in high end sports fashion is expected to support the improvement of ERAA's performance and product portfolio. Currently ERAA is trading at 8.57x/1.68x PE/PBV levels.
2. GGRM IJ injected capital to its subsidiary, PT Surya Dhoho Investama (SDHI) by 1 million shares, with a value of IDR1 trillion, the total issued and paid-up capital currently reaching IDR6 trillion. The purpose of this affiliate transaction is to support the development process for the Integrated Airport in Kediri, East Java (Emitennews). MNCS Comment: We see that this additional capital is useful to accelerate the construction of an integrated airport in Kediri. However, the addition has the potential to disrupt GGRM’s cash flow, where the current number is IDR10.06 trillion in 1H21. Currently GGRM is trading at 13.28x/1.01x PE/PBV levels.
3. WSKT IJ continued to divest their own toll road with a target of 6 to 7 segments, currently WSKT is in the process of releasing the Cimanggis-Cibitung toll road. So far, WSKT has divested 3 toll roads with a value of IDR4.3 trillion. On the other hand, WSKT received support from 21 banks in the process of restructuring the parent company's debt with a total credit facility of IDR29.2 trillion or 100% of the total debt restructured. WSKT targets a CAGR of 25% in the next 3 to 5 years (Kontan). MNCS Comment: We see that WSKT is running eight financial restructuring programs. WSKT’s performance will be able to survive in the future if the company manages to run them optimally and supported by economic recovery. WSKT is currently trading at 133.19x/1.43x PE/PBV.
IHSG Updates
JCI weakened by -0.93% to 6,076.32 on Monday (20/09) followed by net foreign sell reaching IDR242.90 billion. JCI closed lower in almost all sectors, led by the technology sector (-2.55%), followed by the basic industry sector (-1.78%). Meanwhile, the transportation and logistics sector strengthened by +2.35%. The JCI weakened due to negative sentiment from investors' anxiety about the default of Hong Kong's property giant Evergrande. On the one hand, market participants are still waiting for the FOMC meeting and the US interest rate benchmark decision on (23/09). On the other hand, the Rupiah weakened at IDR14,242 level per USD on the spot market. We estimate the JCI will move in the range of 6,020-6,080 while waiting for BI interest rate decision. Today's recommendation: SMRA, BBRI, BIRD, MYOR.
Corporate Action
RUPS: WSKT, AKKU
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