MNCS Morning Navigator 21 September 2020

Global Market Highlight

DJIA slipped by -0.88% on Friday (18/09) followed by S&P500 (-1.12%) and Nasdaq (-1.07%). Tech stocks continue to drag the market down as Apple, Microsoft, Amazon, and Alphabet tumbled down. Furthermore, the investors are anticipating over the latest issue on Covid-19 as London is said to have another lockdown after rising cases, while US-China tension rises on WeChat and TikTok Apps ban on the US. Moreover, the market will look forward to several data releases today, such as: 1) Chicago Fed National Activity Index; 2) China Loan Prime Rate; 3) Spain balance of Trade.

Domestic Updates

BI reported the price development is estimated to have deflation of -0.01% MoM in September 2020. With these developments, the inflation forecast for September 2020 is 0.92% YTD/1.46% YoY. Bank Indonesia will continue to strengthen coordination with the Government and relevant authorities to closely monitor the dynamics of the spread of COVID-19 and its impact on the Indonesian economy from time to time, as well as further policy coordination steps that need to be taken to maintain macroeconomic and financial system stability, as well as sustain Indonesia's economic growth remains good and resilient.

Company News

1.       INDY IJ plans to issue global bonds worth up to USD650 million on the Singapore Stock Exchange (SGX-ST). The principal amount is more than 50% of INDY’s equity value based on the Consolidated Financial Statements as of June 2020. Meanwhile, the maturity of the bonds is not later than 2027 or other period as agreed by the parties. For the coupon rate, INDY is still in discussion with related parties. The company plans to use the proceeds from transactions, including, but not limited to, for the purpose of business development, business diversification financing, settlement of the Company's obligations, as well as corporate financing in general (Market Bisnis). MNCS Comment: While the bond has not been settled yet, we see that this is a bold move from INDY as they still record poor performance with net losses as of June 2020. Meanwhile, INDY’s debt to equity ratio stood at around 3x which is quite high especially to issue an additional bond. INDY is currently traded at 0.36x PBV, lower than peers.
2.       DSNG IJ posted a brilliant performance with revenue growth of 21.9% YoY IDR3.15 trillion in 1H20. Meanwhile, domestic sales were still the company's largest contribution, amounting to IDR2.67 trillion, while export sales were IDR479.3 billion. In fact, DSNG sales expenses also increased; however, it seems that the company managed to suppress other expenses. Thus, net profit reached IDR181.73 billion which staggeringly increased by 165.16% YoY (Market Bisnis). MNCS Comment: DSNG is definitely benefited from the increase on CPO price, as La Nina coming closer as well as China’s and India’s CPO demands rise, the future performance for DSNG is estimated to rise especially DSNG is backed by the ESG lending facility. DSNG is currently traded at 14.18x/1.35x PE/PBV.
3.       PURE IJ will build a nickel smelter plant in the special economic zone (KEK) Palu. The 200-hectare nickel smelter factory is expected to be completed in October 2021. The construction of the factory is in collaboration with PT Bangun Palu Central Sulawesi (PT BPST). Meanwhile, the operation of the plant will later utilize the Hydrometallurgical Step Temperature Acid Leach (STAL) technology which is being developed by the company (Market Bisnis). MNCS Comment: We see that the construction plan will benefit PURE as the government plans on a tax incentive for companies with smelting plants. PURE is currently traded at 2.42x PBV.

IHSG Updates

JCI rose by +0.41% to 5,059.22 on Friday (18/09) though still followed by net foreign sell reaching IDR998.56 billion. JCI rebounded after the fall out on previous days; this was also in line with the strengthening on regional Asia indices. Despite the continuous foreign outflow, the domestic investor managed to drive our index up with the Trade Sectors leading the movement. Meanwhile, the Rupiah exchange rate was strengthening at IDR14,735. We estimate JCI will move in the range of 5,000-5,187 while waiting for Motorbike Sales data release. Today's recommendation: JSMR, TOWR, WIKA, HMSP.

Corporate Action

RUPS: SFAN

Disclaimer On

JSMR, TOWR, WIKA, HMSP, PURE, INDY, DSNG