MNCS Morning Navigator 18 August 2020

Global Market Highlight

DJIA fell by 0.31% on Monday (17/08). Meanwhile, Nasdaq rose by 1%, followed by S&P 500 (+0.27%) extending a gradual Aug-2020 rally that has pushed the benchmark to a new high level. The market has slowed in recent weeks as investors waiting for the economic recovery especially from the negotiations over a new stimulus package. Moreover, the market will look forward to several data releases today, such as: 1) US Foreign Bond Investment; 2) UK Europe Brexit Talks; 3) US Overall Net Capital Flows.

Domestic Updates

The Key Takeaways from the State Budget 2021 Meeting are as the following: 1) Economic growth is expected to reach 4.5% -5.5%; 2) Inflation at 3%; 3) Rupiah is estimated to move in the range of IDR14,600 per US Dollar; 4) The 10-year SBN interest rate is estimated at around 7.29%; 5) Budget deficit is planned at around 5.5% of GDP or IDR971.2 trillion; 6) The health budget is planned at IDR169.7 trillion or 6.2% of the state budget; 7) The infrastructure for 2021 is budgeted at around IDR414 trillion; 8) National Economic Recovery Program, in the 2021 Draft State Budget a budget of around IDR 356.5 trillion is allocated; 9) State revenue of IDR1,776.4 trillion, mainly from tax revenues of IDR1,481.9 trillion and non-tax state revenues of IDR293.5 trillion; 10) State Expenditure at  IDR2,747.5 trillion.

Company News

1. ADRO IJ recorded a decline in coal production only reaching 27.29 million tons in 1H20, or decreased by 4% YoY. In addition, coal sales volume reached 27.13 million tons down by 6% YoY. Furthermore, stripping ratio was recorded at 3.77x due to the long rainy season in the operating area which affected the company's activities. Unfavorable market conditions have prompted the company to revise its FY20E guidelines to produce 52 - 54 million tons (Market Bisnis). MNCS Comment: The mining sector started to take a deep toll in the 2Q when the pandemic is it's peak. ADRO's performance will be affected in the 2Q20 although the financial statement is still unreleased, but revising their target in FY20E is a wise start. ADRO is currently traded at 5.55x/0.58x PE/PBV.
2. RALS IJ will be distributing IDR337.22 billion or equals to 52% dividend payout ratio. This means that each shareholder gets IDR 50 per share while the remaining net profit of IDR310.77 billion will be recorded as retained earnings. Cum date will be on August 31, 2020 and payment will be on September 18, 2020 (Market Bisnis). MNCS Comment: Dividend yield stood at 7.69% which is relatively high and quite attractive for investors. While net profit grew by 10.39% YoY, RALS maintained their dividend per share at IDR50, which is the same amount as last year. RALS is currently traded at 1.11x PBV.
3. SIDO IJ recorded an increase in sales of 3.52% YoY to IDR1.46 trillion in 1H20. Export contribution remains under 5% with Malaysia being the largest export destination. Problems arise such as not being able to send goods abroad during the first semester of this year. Apart from the fact that all borders are closed, export destination countries also experience weakening in distribution and sales, which causes export sales to decline driven by weak sales from the Philippines. However net profit still rose by 10.60% YoY to IDR413.79 billion in 1H20 (Market Bisnis). MNCS Comment: Being a consumer stock, SIDO still faces struggles in abroad sales. Despite the trouble, SIDO remains strong domestically, as their products are highly sought by the market resulting in a solid performance. SIDO is currently traded at 24.55x/6.59x PE/PBV.

IHSG Updates

JCI rose by +0.16% to 5,247.69 on Friday (14/08) followed by net foreign buy reaching IDR127.26 billion. JCI return to rise in closing the market last week. This is supported by the national economic recovery fund that is set for next year, amounting to IDR356.5 trillion, as stated by the President last Friday. Furthermore, the budget deficit in FY21F is set at 5.5% out of GDP or equals to IDR971.2 trillion, lower than 6.34% in FY20E. These sentiments are lifting the market. Meanwhile, the Rupiah exchange rate was weakening at IDR14,795. We estimate JCI will move in the range of 5,170-5,280 while waiting for Current Account and Balance of Trade data release. Today's recommendation: EXCL, RALS, PWON, INKP.

Corporate Action

RUPS: MSIN

Cum Date: PEGE, LPGI

Disclaimer On

EXCL, RALS, PWON, INKP, ADRO, SIDO