Global Market Highlights
The DJIA rebounded +0.64% on Thursday (25/01), followed by further gains from S&P 500 (+0.53%) and the Nasdaq (+0.18%). Wall Street stocks rejoiced on the newly found optimism in the market following US 4Q23 GDP growth beat at +3.3% YoY, far-exceeding expectations of a mere +2.0% YoY. That key data, along with the loosened labor market (US Initial Jobless Claims at 214k vs. the expected 200k) and solid US home sales Dec-2023 (at 664k vs. the expected 649k) had effectively solidified the soft-landing narrative and made risk-assets all the while alluring. Today the market will be looking forward to several data releases such as: 1) US Core PCE Price Index MoM Dec-2023; 2) US Personal Income MoM Dec-2023; 3) US Personal Spending MoM Dec-2023.
Domestic Update
The National Poultry Farmers Association (Gopan) sees the increase in feed prices as having the potential to affect the broiler supply due to the resulting domino effect. It is noted that the feed prices stood at IDR9,200/kg (vs IDR8,800/kg previously). MNCS Comment: We assess that the increase in feed prices is in line with the adjustment in the composition of the main ingredient, namely corn, which has also experienced an increase. We note that the average national corn price until 25 Jan-2024 hovered at IDR8,220/kg, or increasing by +11.8% YTD. We see policy relaxation as necessary to curb the rise in corn prices, considering the El-Nino effect. On the other hand, we anticipate a decline in margins for poultry issuers in 1H24 due to rising input costs.
Company News
1. DRMA IJ is set to complete constructions of the Dharma Controlcable Indonesia (DCI) factory in 1Q24 and Dharma Precision Parts (DPA) factory in 2Q24, to support revenue growth of ~10% YoY in FY24E (Kontan). MNCS Comment: We note that the two factories will be focused towards developing new components for electric vehicles, with a total estimated capex prepared during FY24E of IDR300 billion. We assess that this proactive step will strengthen the company's position in the supply chain of the EV vehicle market in Indonesia, which has been picking up pace in growth. DRMA is currently trading at 8.56x/3.27x PER/PBV.
2. BBCA IJ recorded consolidated net profit growth in FY23 of +19.4% YoY to IDR48.6 trillion (Emiten News). MNCS Comment: BBCA's net profit in FY23 exceeded our expectations, reflecting 105% of the FY23 target. This figure is attributed to credit growth of +13.9% YoY (vs industry +10.4% YoY), which drove a +17.5% YoY increase in net interest income. In addition, provision expenses decreased by -50.0% YoY. On the other hand, the company has set loan growth guidance at 8%-10% YoY in FY24E. We assess this lower target than the realization as a cautious approach ahead of the elections. Currently, BBCA is traded at a level of 4.83x PBV.
3. GEMS IJ aims for 50mn tons of coal production in FY24 or +25% compared to the target in FY23. Additionally, the company projects capex of USD60 mn for this year (Kontan). MNCS Comment: GEMS successfully exceeded the coal production target in previous year with realization of +15% from the target (46mn tons). We see the company’s increasing production target as a positive effort from the management to improve its financial performance, after experiencing slight decline -0.46% YoY revenue growth in 9M23 due to the pressure of coal prices. GEMS is currently traded at 5.53x/3.45x PER/PBV.
IHSG Updates
The JCI weakened by -0.69% to 7,178.04 on Thursday (25/01), followed by net foreign sell of IDR49.02 bn. Most sectors declined and weighed the index down, led by the financials sector (-1.78%) and followed by the transportation & logistic sector (-0.92%). Conversely, some strengthened sectors were led by the energy sector (+1.04%) and followed by the industrials sector (+0.63%). The index continued to underperform the other Asian markets due to the plummet of Foreign Direct Investment (FDI) in Indonesia in 4Q23 where investors still tend to wait and see approaching the upcoming general elections in Feb-24. The Rupiah closed lower at IDR15,825/USD. We estimate the IHSG will move within the price range of 7,170-7,226. Today's Recommendations: AMRT, DOID, ERAA, INDF.
Corporate Actions
EGMS: AISA, DGNS, TBMS
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