MNCS Morning Navigator 07 September 2020

Global Market Highlight

DJIA dropped by -0.56% on Friday (04/09) followed by S&P 500 (-0.81%) and Nasdaq (-1.27%). Stock price drop continues, caused by the sell-of on several technology stocks due to investor concerns about high valuations and an uneven economic recovery. Although, the employment report showed that the unemployment rate in August managed to fall to 8.4% from 10.2% in the previous month. This position was better than analysts anticipated. Meanwhile, data on non-agricultural wages also increased, but the figure was less than estimated. Moreover, the market will look forward to several data releases today, such as: 1) China Balance of Trade; 2) China Foreign Exchange Reserves; 3) Japan Leading Economic Index.

Domestic Updates

1.       Based on data from the Coordinating Ministry for Economic Affairs, since batch I to VI, 15.9 million people have registered through the official website of the Pre-Employment Card Program. After running for about five months, based on the results of the first evaluation survey of more than 450,000 Pre-employment Card recipients, the government concluded that the Pre-Employment Card Program was right on target. This is because 100% are targeting the unemployed and informal workers. Currently there are seven digital platforms, four payment partners, and 165 training institutions that provide more than 2,000 types of training to participants. This number will continue to increase as the number of partners and types of training increases.
2.       The Confederation of Indonesian Workers Unions (KSPI) has asked the government to increase the Regency or City Minimum Wage (UMK) and District or City Sectoral Minimum Wage (UMSK) in 2021 by at least 8%. The increase of 8% is equivalent to the increase in the minimum wage in the last three years. On the bright side even though the economic growth was minus, consumption can be maintained.

Company News

1.       PGAS IJ posted revenue of USD1.46 billion in 1H20, which dropped by 17.97% YoY from USD1.78 billion in 1H20. Management revealed that PGAS 'financial performance was strongly influenced by the triple down effect, namely the impact of the Covid-19 impact, the decline in world oil and gas prices, and the weakening of the rupiah exchange rate against the US dollar. This condition affects the PGAS business, especially the upstream sector, which depends on oil and gas prices and the price of liquefied natural gas (LNG). The low oil and gas prices have resulted in a decrease in revenue in the upstream sector despite the decrease on operating cost. Thus, net profit fell significantly by 87.56% YoY to USD 6.72 million in 1H20. (Kontan). MNCS Comment: The pandemic has certainly impacted the commodity sectors big time, as oil price used to swing to the negative zone. We believe the economic recovery and the stabilizing of the oil price will revive PGAS performance in the 2H20E. PGAS is currently traded at 163.99x/0.87x PE/PBV.
2.       INKP IJ has used up to USD54 million of capital expenditure through 1H20 from the budgeted USD100 million in FY20E. INKP is quite positive that the revenue composition will be 54% export and 46% domestic sales. INKP’s net profit is quite stellar at USD1.57 billion (+38.42% YoY) in 1H20 (Investor.id). MNCS Comment: INKP still score a solid performance, while the usage of the capex is still inline with the budgeted. INKP is also benefited from the movement in plastic reduction on daily life making demands for plastic replacement such as paper bags increases. INKP is currently traded at 8.09x/0.78x PE/PBV.
3.       STTP IJ will use IDR319 billion to purchase land in Pasuruan in line with business expansion plans. STTP has also revised the company's capital expenditure from IDR569 billion to IDR469 billion. Management said that the capex was reduced because the company failed to use the IDR50 billion debt repayment fund. In addition, dividends distributed to shareholders was also reduced by IDR50 billion to IDR100 billion. (Market Bisnis). MNCS Comment: STTP seems to continue expansion amid the pandemic but implementing strategies to reserve cash flow. Meanwhile we note that STTP is stil pretty solid in distributing dividends despite the reduction. STTP is currently traded at 17.88x/4.17x PE/PBV.

IHSG Updates

JCI slipped by -0.78% to 5,239.85 on Friday (04/09) followed by net foreign sell reaching IDR990.86 billion. JCI drop following the slump on Regional Asia indices. Basic industry, infrastructure and finance sector led the fall on the index while consumer sector remains defensive. Seems that investors prefer profit taking over uncertain economy impact within the market. Meanwhile, the Rupiah exchange rate was strenthening at IDR14,750. We estimate JCI will move in the range of 5,220-5,350 while waiting for Foreign Exchange Reserves data release. Today's recommendation: HOKI, UNVR, WIKA, AALI.

Corporate Action

IPO: KMDS (IDR300/share), BBSI (IDR480/share), SCNP (IDR110/share)

Disclaimer On

HOKI, UNVR, WIKA, AALI, PGAS, INKP, STTP