MNCS Morning Navigator 03 September 2020

Global Market Highlight

DJIA grew by +1.59% on Wednesday (02/09) followed by the strengthening of S&P 500 (+1.54%) and Nasdaq (+0.98%). The rally continues despite the drop on Apple and Tesla's stock by 2.1% and 5.8% due to profit taking by investors. Moreover, The private wage slips in the US only increased by 428,000 in August, which is below economists' expectations of 1.17 million. The rate of employment had actually slowed down in the last two months, where the figure hovered around 320,000. Moreover, the market will look forward to several data releases today, such as: 1) US Balance of Trade; 2) US Initial Jobless Claims; 3) China Caixin Composite PMI.

Domestic Updates

Finance Minister Sri Mulyani predicts that Indonesia’s economy will contract again in the 3Q20, making a recession inevitable. In Q2, the Central Statistics Agency (BPS) recorded that Indonesia’s economy contracted by 5.32%. A recession will occur if the economy contracts again in 3Q since it will indicate a contraction for two consecutive quarters with negative growth. She even predicts that the growth in 4Q still be below the neutral zone, even if it is not negative. Until the end of 2020, economic growth is expected to be in the range of -1.1% to 0.2%. Next year, it is predicted that economic growth will be in the field of 4.5% to 5.5%.

Company News

1. PPRO IJ completed the payment of medium-term notes worth IDR287 billion, even though amid a pandemic situation. It is still committing to pay off the other MTN that is due until December 2020 to maintain investor trust. The company’s strategy is to focus on projects spread in Bekasi, Surabaya, Depok, and Semarang. Furthermore, it is strengthening its cooperation with banks to get KPA interest of 1.75%. It is also strengthening digital marketing through e-commerce ad increase liquidity through land, subsidiary, and mall divestments (Market Bisnis). MNCS Comment: We think that this should be observed by investors, whether this will be a positive catalyst in the future.  In addition, investors must also pay attention to the marketing sales that will be achieved by PPRO in FY20E. PPRO is currently traded at 25x/0.72x PE/PBV.
2. TOTL IJ obtained new contract amounted to IDR414 billion from educational buildings, offices, shopping centers, hotels, and industry. This achievement has not changed since the beginning of August 2020. The largest contract acquisition was obtained in 2Q20, amounting to IDR355 billion. Meanwhile, TOTL is aiming for a contract tender of IDR6.4 trillion in FY20E. (Kontan). MNCS Comment: We consider that the acquisition of new contracts produced by private construction companies is quite good in the midst of a fairly challenging industry today. TOTL is currently traded at 9.80x/0.89x PE/PBV.
3. TEBE IJ will distribute dividends from FY19 net profit at IDR4 per share, totaling to IDR5.15 billion. Last year’s net profit is IDR45.55 billion, so the company’s payout ratio is 11.28%. The remaining IDR40.40 billion will be used as retained earnings to strengthen capital. TEBE’s current price is IDR1,400, so the dividend yield is 0.28%. The recording date for this distribution is September 9, 2020 with distribution taking place at September 30, 2020 (Kontan). MNCS Comment: This dividend distribution is the first in the last 3 years.  investors should pay attention to the profit generated by the company in FY20E which recorded a net loss in 1H20. TEBE is currently traded at 2.83x PBV.

IHSG Updates

JCI only increased by +0.02% to 5,311.97 on Wednesday (02/09) followed by net foreign sell reaching IDR671.05 billion. JCI was flat due to minimum domestic sentiment while Agriculture Sector strengthened amid the increase on the soft commodity price. Furthermore, the market are worried about the discourse of revoking the independence of Bank Indonesia (BI) through the legislation that is currently being prepared. This triggered a varied response on the stock exchange, so that the stock market was swaying up and down. Meanwhile, the Rupiah exchange rate was weakening at IDR14,745. We estimate JCI will move in the range of 5,220-5,350 while waiting for foreign exchange reserve data release. Today's recommendation: JPFA, BRPT, AKRA, SMRA.

Corporate Action

Cum Dividend Date: DLTA, BYAN, AMAR

Disclaimer On

JPFA, BRPT, AKRA, SMRA, TOTL, TEBE, MEDC