MNCS Morning Navigator 08 September 2020

Global Market Highlight

DJIA was closed due to labor day on Monday (07/09). Meanwhile, Asian markets opened in the green zone following European market movements, amid sluggish US technology shares, as well as tensions between US and China. Investors will re-enter the US market after Monday's holiday considering circumstances where positive rallies suggest a slowdown. US tech shares, which have been the motor of the stock exchange movement, weakened last week. Moreover, the market will look forward to several data releases today, such as: 1) Japan GDP Growth; 2) Japan household Spending; 3) Eurozone GDP Growth Estimation.

Domestic Updates

Indonesia's foreign exchange reserves amounted to USD137 billion as of August 2020, which increased compared to the position as of July 2020 of USD135.1 billion. The increase in foreign exchange reserves in August 2020 was influenced, among others, by the withdrawal of government foreign loans, as well as tax revenues and oil and gas foreign exchange. The position of foreign exchange reserves is equivalent to financing 9.4 months of imports or 9.0 months of imports and servicing of government external debt and is above the international adequacy standard of around 3 months of imports. Bank Indonesia considers that the foreign exchange reserves can support external sector resilience and maintaining macroeconomic and financial system stability.

Company News

1.          ROTI IJ continue to complete building factories in Banjarmasin and Pekanbaru, where the company has spent a budget of IDR182 billion to 1H20. The use of capex is equivalent to 45% of the total capex budget of IDR400 billion in FY20E. The factory is planned to start operating at the end of the year. Currently, ROTI has 13 domestic factories and 1 factory in the Philippines(Investor.id). MNCS Comment: Remain expanding amid the pandemic despite their weakening performance from quarter to quarter. ROTI also still solid in distributing dividend as the amount reached IDR24.73/share this year compared to IDR9.78 last year. ROTI is currently traded at 40x/2.64x PE/PBV.
2.          AISA IJ will conduct a private placement by issuing 6 billion series B shares with an exercise price of IDR210/share. The number of shares issued is equivalent to 55.62% of the company's issued and fully paid-up capital whereas AISA will receive IDR1.26 trillion from private placement. According to the company, the additional capital will increase equity by 186% from -IDR1.32 trillion to IDR1.13 trillion. The proceeds from the private placement will be used to pay a number of debts, including bonds and Sukuk Ijarah TPS Food I, Sukuk Ijarah TPS Food II, and bank loans to Citibank, Standard Chartered, and JP Morgan(Market Bisnis). MNCS Comment: After the return on the market, AISA is trying to get funding to ease up their debt. While we note that in the 1Q20 AISA managed to socre a positive net profit of IDR3 billion from a loss of IDR11 billion in 1Q19. AISA is currently traded at 117xPE.
3.          GIAA IJ received IDR8.5 trillion from the government budget allocation of IDR19.7 trillion to support government investment for 5 SOEs. Among the five BUMNs, Garuda Indonesia and Krakatau Steel are currently bearing a sizable financial burden. Garuda Indonesia's debt has almost reached IDR32 trillion. Meanwhile, Garuda Indonesia reported a 50% MoM growth in the number of passengers in August 2020. According to him, a significant increase in the number occurred during the long holiday period of August 2020. In addition, GIAA also opened several new routes(Market Bisnis). MNCS Comment: The aid from the government will surely be a breath of fresh air as the aviation sector took a deep toll from the pandemic. This is reflected in GIAA’s 2Q20 performance as revenue and net profit plunged.

IHSG Updates

JCI slipped by -0.18% to 5,230.19 on Monday (07/09) followed by net foreign sell reaching IDR786.07 billion. JCI drop continues along with the weakening on Regional Asia indices despite optimism for Asian markets began to emerge after China released its export-import data in August, which shot up by 9.5% YoY. Furthermore, Singapore’s economy is estimated to worsen in the 3Q20, weighing the Asian market further down. Meanwhile, the Rupiah exchange rate was strengthening at IDR14,740. We estimate JCI will move in the range of 5,187-5,330 while waiting for Consumer Confidence data release. Today's recommendation: WSKT, EXCL, TINS, BBTN.

Corporate Action

IPO: SOHO(IDR1.820/share), PURI (IDR170/share)

Cum Date Rights Issue: MEDC (IDR250/share)

Disclaimer On

WSKT, EXCL, TINS, BBTN, ROTI, GIAA, AISA