MNCS Morning Navigator 10 August 2020

Global Market Highlight

DJIA rose by +0.17% on Friday (10/08) followed by various movements of S&P 500 (+0.06%) and Nasdaq (-0.87%). The rise was supported by a good news from the data release, in which the US Department of Labor reported the unemployment rate in July fell sharply to 10.2% from 11.1% previously. In addition, over the past month, the US absorbed workers outside the agricultural sector, known as non-farm payrolls, totaling 1.763 million people, more than the forecast of 1.53 million. Not only that, the average hourly wages also increased 0.2% in July after declining for 2 consecutive months. The rising wages is likely to increase consumer spending or household spending, which is the backbone of the US economy and contributes about 70% to US GDP. Furthermore, US President signed four executive orders, one of which contains direct assistance to the unemployed of USD400 per week. This is done in order to move the US economy, so that the US economic revival will be gradual. Moreover, the market will look forward to several data releases today, such as: 1) US Consumer Inflation Expectations; 2) China Inflation Rate; 3) China PPI.

Domestic Updates

The position of Indonesia’s foreign exchange reserves at the end of July 2020 amounted to USD135.1 billion, an increase compared to the end of June 2020 at USD131.7 billion. This increase is influenced by the issuance of global bonds and the withdrawal of government loans. This new level is equivalent to financing 9.0 months of imports or 8.6 months of imports and government external debt. Meanwhile, the international adequacy standard is only 3 months of imports. Bank Indonesia considers the foreign exchange reserves to be able to support external resilience and maintain financial stability.

Company News

1. TLKM IJ obtained IDR66.85 trillion of revenue as of 1H20 which slipped by 3.58% YoY IDR69.34 trillion in the same period last year. This is followed by a number of cost efficiency in which operational, maintenance, and telecommunication services expenses decreased by 25.53% YoY, marketing expenses also decreased by 26.90% YoY, general and administrative expenses also decreased by 2.89% YoY to Rp2.89 trillion in the first semester of 2020. Unfortunately, the financing expense increased by 12.92% YoY and posted an impairment loss of investment value of IDR342 billion. Thus, TLKM posted a net profit of IDR10.98 trillion (-0.80% YoY) in 1H20 (Market Bisnis). MNCS Comment: This result in net profit translating 53%/57% of Street/MNCS FY20E estimate, slightly above the expectation. TLKM will take a multi prolonged approach in terms of managing competition, which is continue to focus on high-value customers as well as adjusting and calibrating prices. BUY TP:IDR3,600. TLKM is currently traded at 12.57x/2.77x PE/PBV.
2. SILO IJ recorded a decrease of 5.92% YoY in revenue which amounted to IDR 3.18 trillion in 1H20. This was due to the decreasing volume of inpatients and outpatients whereas the volume of inpatients dropped by 44.8% YoY in th 2Q20 while the volume of outpatients was also depressed by 18.7% YoY because patients delayed hospitalization due to Covid-19. As a result, SILO incurred a loss of IDR130.04 billion in 1H20 (Kontan). MNCS Comment: the decrease in patient volume was due to the hospital being an object with a high risk of spreading covid-19.  In addition, the development of digital health has also decreased the volume of hospital patients. SILO is currently traded at 1.31x PBV.
3. MNCN IJ scored a net income of IDR3.96 trillion in 1H20 which was decreased by 6.70% YoY. The decrease was due to non-digital advertising revenue or conventional advertising, which was the company's main contributor, shrinking by 13.51% YoY. Likewise, revenue from content also decreased by 10.34% YoY. However, at the same time, digital advertising revenue was recorded to have increased by 25.85% YoY. Moreover, net profit was recorded to have dropped 17.37% YoY to IDR956 billion in 1H20 (Market Bisnis). MNCS Comment: We believe that through the digitalization breaktrough MNC will be able to increase their performance. Furthermore, management is optimist that non digital advertising will increase in 2H20. MNCN is currently traded at 6.64x/1.01x PE/PBV.

IHSG Updates

JCI slipped by -0.66% to 5,143.89 on Friday (10/08) followed by net foreign sell reaching IDR1.33 trillion. The market dropped despite the increase on foreign exchange reserves. The movement is in-line with the weakening on regional Asia indices. Meanwhile, the cumulative total of Covid-19 case reached 125,396 in Indonesia. In the Southeast Asia region, Indonesia is in second place after the Philippines with a total of 129,913 cases. It is feared that the increase in cases in the country tends to increase to around 2,000 cases per day and the restrictions will be tightened. Cases in DKI Jakarta also tend to keep setting records so that the DKI Jakarta provincial government has decided to extend the transitional PSBB period until August 13.  Moreover, the Rupiah exchange rate was weakening at IDR14,625. We estimate JCI will move in the range of 5,080-5,187 while waiting for the release of current account data as of 2Q20. Today's recommendation: BMRI, TOWR, ACES, ANTM.

Corporate Action

IPO: SGER

Cash dividend date: CTRA, TPMA

Disclaimer On

BMRI, TOWR, ACES, ANTM, TLKM, SILO, MNCN