The JCI July 7, 2020
Jᴜʟʏ 7, 2020
* Tʜᴇ JCI ᴛʀᴀᴅɪɴɢ ʀᴀɴɢᴇ: 4,975ᴘᴛ – 5,125ᴘᴛ (Yᴇsᴛᴇʀᴅᴀʏ ᴄʟᴏsᴇ: 4,989ᴘᴛ)
* Wᴀʟʟ Sᴛʀᴇᴇᴛ ᴇɴᴅᴇᴅ ʜɪɢʜᴇʀ ʙʏ sᴏᴍᴇ 2% ᴏɴ ᴛʜᴇ Uɴɪᴛᴇᴅ Sᴛᴀᴛᴇs (US) ʜɪɢʜᴇʀ-ᴛʜᴀɴ-ᴇxᴘᴇᴄᴛᴇᴅ sᴇʀᴠɪᴄᴇ ᴀᴄᴛɪᴠɪᴛɪᴇs ɪɴ Jᴜɴᴇ ᴅᴇsᴘɪᴛᴇ sᴛɪʟʟ-ɪɴᴄʀᴇᴀsɪɴɢ Cᴏᴠɪᴅ-19 ɴᴇᴡ ᴄᴀsᴇs
* Tʜᴇ JCI ɪs ᴇxᴘᴇᴄᴛᴇᴅ ᴛᴏ ɢᴀɪɴ ᴇᴅɢᴇs, ʙᴜᴛ ᴄᴀᴜᴛɪᴏᴜs ᴍᴏᴅᴇ ғᴏʀ ᴛʜᴇ ʀᴇʟᴇᴀsᴇ ᴏғ 2Q20 ᴇᴀʀɴɪɴɢ ʀᴇsᴜʟᴛs ʜᴏʟᴅ ʙᴀᴄᴋ
Morning,
The Jakarta Composite Index (JCI) today (7/7) is expected to be in the range of 4,975pt – 5,125pt to gain edge but restrained by investors’ cautious stance for 2Q20 earnings release hold back. Companies’ 2Q20 earnings report will give a more clear profile of how earnings this year would look like, in our view. For most major cities in Indonesia, 2Q20 will see a 3-month full financial impact of limited lock-down . Meanwhile, yesterday (6/7) in Wall Street the DJIA ended higher by 460 points or 1.8% at 26,287pt, while the S&P500 and the Nasdaq both ended higher by 1.6% and 2.2%, respectively.
𝐈𝐧𝐝𝐨𝐧𝐞𝐬𝐢𝐚 𝐂𝐨𝐧𝐬𝐮𝐦𝐞𝐫 𝐒𝐞𝐜𝐭𝐨𝐫, 𝐔𝐋𝐓𝐉
𝟏𝐐𝟐𝟎 𝐑𝐞𝐬𝐮𝐥𝐭𝐬 : 𝐒𝐡𝐢𝐧𝐢𝐧𝐠
- 𝐑𝐞𝐯𝐞𝐧𝐮𝐞 𝐠𝐫𝐨𝐰𝐭𝐡 𝐢𝐧 𝟏𝐐𝟐𝟎 𝐨𝐟 𝟏𝟑.𝟏% 𝐘𝐨𝐘
- 𝐆𝐫𝐨𝐬𝐬 𝐦𝐚𝐫𝐠𝐢𝐧𝐬 𝐢𝐧 𝟏𝐐𝟐𝟎 𝐡𝐢𝐠𝐡𝐞𝐫 𝐭𝐨 𝟑𝟖.𝟗% 𝐯𝐬. 𝟑𝟓.𝟏%
- 𝐖𝐞𝐚𝐤𝐞𝐧𝐢𝐧𝐠 𝐔𝐒𝐃𝐈𝐃𝐑 𝐢𝐧 𝐭𝐡𝐞 𝟏𝐐𝟐𝟎 𝐥𝐞𝐚𝐝 𝐭𝐨 𝐬𝐢𝐠𝐧𝐢𝐟𝐢𝐜𝐚𝐧𝐭𝐥𝐲 𝐡𝐢𝐠𝐡𝐞𝐫 𝐎𝐭𝐡𝐞𝐫 𝐈𝐧𝐜𝐨𝐦𝐞, 𝐦𝐨𝐬𝐭𝐥𝐲 𝐟𝐫𝐨𝐦 𝐔𝐒𝐃-𝐛𝐚𝐬𝐞𝐝 𝐟𝐢𝐧𝐚𝐧𝐜𝐢𝐚𝐥 𝐚𝐬𝐬𝐞𝐭𝐬
- 𝐓𝐡𝐞 𝐜𝐨𝐦𝐩𝐚𝐧𝐲 𝐩𝐮𝐛𝐥𝐢𝐬𝐡𝐞𝐝 𝐚 𝐩𝐮𝐛𝐥𝐢𝐜 𝐚𝐥𝐞𝐫𝐭 𝐭𝐡𝐚𝐭 𝟏𝐐𝟐𝟎 𝐫𝐞𝐬𝐮𝐥𝐭𝐬 𝐬𝐡𝐨𝐮𝐥𝐝 𝐧𝐨𝐭 𝐛𝐞 𝐮𝐬𝐞𝐝 𝐚𝐬 𝐫𝐞𝐟𝐞𝐫𝐞𝐧𝐜𝐞 𝐝𝐮𝐫𝐢𝐧𝐠 𝐭𝐡𝐞 𝐍𝐞𝐰 𝐍𝐨𝐫𝐦𝐚𝐥 𝐭𝐢𝐦𝐞𝐬
- 𝐍𝐞𝐯𝐞𝐫𝐭𝐡𝐞𝐥𝐞𝐬𝐬, 𝐰𝐞 𝐯𝐢𝐞𝐰 𝐔𝐋𝐓𝐉 𝐚𝐬 𝐚 𝐟𝐮𝐧𝐝𝐚𝐦𝐞𝐧𝐭𝐚𝐥𝐥𝐲 𝐩𝐫𝐮𝐝𝐞𝐧𝐭 𝐜𝐨𝐧𝐬𝐮𝐦𝐞𝐫 𝐜𝐨𝐮𝐧𝐭𝐞𝐫
Ultrajaya Milk Industry and Trading Company (ULTJ) posted a higher-than-industry average sales growth during 1Q20, mostly from domestic sales of UHT milk drinks. We suspect growth came mainly from higher selling price, while cost of products have been tamed and thus leading to some 500bp higher margins. At the other end, in 1Q20 ULTJ is a debt-free company which ease the company of interest burden (1), while USD-based financial assets benefitted from the weakening USDIDR during the 1Q20 (2), both of which led to higher operational income that grew by 53.4% YoY in the 1Q20. All in all, net profit of ULTJ during 1Q20 came in at IDR440.3bn, representing an increase of 44.7% as compared to the same period last year.
Cognizant that 1Q results owed only for some 2 weeks of limited lock-down during the Covid-19 pandemic, management of the company issued an official statement to alert investors not to be misled by current results.
Nevertheless, we view ULTJ as a fundamentally prudent consumer counter both in terms of financial management and of being involved in strategic domestic beverages industry. ULTJ main product, for example of UHT milk of 200ml come in at retail price of around IDR5,000/pack which we consider very much afforded by the population of per capita income of USD4,451 last year. We further suspect that ULTJ mostly benefitted from the young demographic profile of the country whereby the population of 0-15 years accounted of some 27% (Europe of 17%: USA 19%) and thus milk is considered a necessary nutrition. ULTJ has room to grow in the adult segment consumers of 15-64 years in Indonesia, as for this segment, daily milk consumption has not been an established tradition, we observed.
At the other end, yesterday the WTI price increased by 0.9% to close at USD40.7/barrel, mainly on technical reverse, in our view. Meanwhile the USDIDR closed at IDR14.547 vs. IDR14.566 the previous one.
We advise the following recommendation as for now, for both trading and longer-time investment purpose. 𝐀𝐀𝐋𝐈, 𝐋𝐒𝐈𝐏 (𝐬𝐞𝐜𝐭𝐨𝐫 𝐨𝐟 𝘈𝘨𝘳𝘪, 𝐚𝐥𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧 𝐬𝐮𝐠𝐠𝐞𝐬𝐭𝐢𝐨𝐧 𝘜𝘯𝘥𝘦𝘳𝘸𝘦𝘪𝘨𝘩𝘵 ), 𝐔𝐍𝐓𝐑, 𝐈𝐓𝐌𝐆, 𝐀𝐃𝐑𝐎, 𝐏𝐓𝐁𝐀 (𝐬𝐞𝐜𝐭𝐨𝐫 𝐨𝐟 𝘊𝘰𝘢𝘭 𝘔𝘪𝘯𝘪𝘯𝘨, 𝐚𝐥𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧 𝐬𝐮𝐠𝐠𝐞𝐬𝐭𝐢𝐨𝐧 𝘔𝘢𝘳𝘬𝘦𝘵-𝘸𝘦𝘪𝘨𝘩𝘵), 𝐆𝐆𝐑𝐌, 𝐔𝐍𝐕𝐑, 𝐈𝐂𝐁𝐏 (𝐬𝐞𝐜𝐭𝐨𝐫 𝐨𝐟 𝘊𝘰𝘯𝘴𝘶𝘮𝘦𝘳, 𝐚𝐥𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧 𝐬𝐮𝐠𝐠𝐞𝐬𝐭𝐢𝐨𝐧 𝘖𝘷𝘦𝘳𝘸𝘦𝘪𝘨𝘩𝘵 ), 𝐀𝐒𝐈𝐈 (𝐬𝐞𝐜𝐭𝐨𝐫 𝐨𝐟 𝘈𝘶𝘵𝘰𝘮𝘢𝘵𝘪𝘷𝘦, 𝐚𝐥𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧 𝐬𝐮𝐠𝐠𝐞𝐬𝐭𝐢𝐨𝐧 𝘔𝘢𝘳𝘬𝘦𝘵-𝘸𝘦𝘪𝘨𝘩𝘵), 𝐚𝐧𝐝 𝐀𝐂𝐄𝐒, 𝐒𝐂𝐌𝐀, 𝐌𝐀𝐏𝐈 (𝐬𝐞𝐜𝐭𝐨𝐫 𝐨𝐟 𝘛𝘳𝘢𝘥𝘦, 𝐚𝐥𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧 𝐬𝐮𝐠𝐠𝐞𝐬𝐭𝐢𝐨𝐧 𝘖𝘷𝘦𝘳𝘸𝘦𝘪𝘨𝘩𝘵),𝐚𝐧𝐝 𝐓𝐊𝐈𝐌 (𝐬𝐞𝐜𝐭𝐨𝐫 𝐨𝐟 𝘉𝘢𝘴𝘪𝘤 𝘐𝘯𝘥𝘶𝘴𝘵𝘳𝘺, 𝐚𝐥𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧 𝐬𝐮𝐠𝐠𝐞𝐬𝐭𝐢𝐨𝐧 𝘔𝘢𝘳𝘬𝘦𝘵-𝘸𝘦𝘪𝘨𝘩𝘵).
Cheers,