The JCI August 28, 2020

𝐀𝐮𝐠𝐮𝐬𝐭 𝟐𝟖, 𝟐𝟎𝟐𝟎

* 𝐓𝐡𝐞 𝐉𝐂𝐈 𝐭𝐫𝐚𝐝𝐢𝐧𝐠 𝐫𝐚𝐧𝐠𝐞: 𝟓,𝟑𝟎𝟎𝐩𝐭 – 𝟓,𝟒𝟐𝟓𝐩𝐭  (𝐘𝐞𝐬𝐭𝐞𝐫𝐝𝐚𝐲 𝐜𝐥𝐨𝐬𝐞: 𝟓,𝟑𝟕𝟏𝐩𝐭)

* 𝐖𝐚𝐥𝐥 𝐒𝐭𝐫𝐞𝐞𝐭 𝐜𝐥𝐨𝐬𝐞𝐝 𝐡𝐢𝐠𝐡𝐞𝐫 𝐚𝐬 𝐭𝐡𝐞 𝐜𝐞𝐧𝐭𝐫𝐚𝐥 𝐛𝐚𝐧𝐤 𝐮𝐧𝐯𝐞𝐢𝐥𝐞𝐝 𝐬𝐡𝐢𝐟𝐭 𝐦𝐨𝐧𝐞𝐭𝐚𝐫𝐲 𝐩𝐨𝐥𝐢𝐜𝐲 𝐭𝐨 𝐬𝐮𝐩𝐩𝐨𝐫𝐭 𝐭𝐡𝐞 𝐔𝐒 𝐞𝐜𝐨𝐧𝐨𝐦𝐲

* 𝐓𝐡𝐞 𝐉𝐂𝐈 𝐢𝐬 𝐞𝐱𝐩𝐞𝐜𝐭𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐢𝐧 𝐭𝐡𝐞 𝐡𝐢𝐠𝐡𝐞𝐫 𝐭𝐫𝐞𝐧𝐝 𝐛𝐮𝐭 𝐫𝐞𝐬𝐭𝐫𝐚𝐢𝐧𝐞𝐝 𝐛𝐲 𝐩𝐫𝐨𝐟𝐢𝐭-𝐭𝐚𝐤𝐢𝐧𝐠𝐬

Morning,

The Jakarta Composite Index (JCI) today (28/8) is expected to be within the range of 5,300pt – 5,425pt by support of stable USDIDR and oil close.  Meanwhile, yesterday (27/8) in Wall Street  the  DJIA  ended higher by  160points or 0.6%  at 28,492pt , while the S&P500 and the Nasdaq both closed higher and lower  by  0.2% and 0.3%, respectively.  Wall Street was generally upbeat on the statement from the central bank Chairman that reference rate to be kept near zero while allowing the unemployment and inflation rates to run higher, to support the economy. This is perceived as major policy shift, t as during normal time the Federal Reserve tied rates change with those main economic data.

𝑰𝒏𝒅𝒐𝒏𝒆𝒔𝒊𝒂 𝒄𝒐𝒏𝒔𝒖𝒎𝒆𝒓 𝒔𝒆𝒄𝒕𝒐𝒓

𝐈𝐂𝐁𝐏 𝟏𝐇𝟐𝟎 𝐑𝐞𝐯𝐢𝐞𝐰:  𝐌𝐚𝐢𝐧𝐭𝐚𝐢𝐧 𝐨𝐮𝐫 𝐁𝐔𝐘 𝐫𝐚𝐭𝐞 𝐨𝐧 𝐢𝐧-𝐭𝐚𝐜𝐭 𝐬𝐞𝐜𝐨𝐧𝐝 𝐪𝐮𝐚𝐫𝐭𝐞𝐫 𝐫𝐞𝐬𝐮𝐥𝐭𝐬 (𝟏𝟐𝐌-𝐓𝐏 𝐈𝐃𝐑𝟏𝟑,𝟕𝟎𝟎/𝐬𝐡𝐚𝐫𝐞)

Indofood CBP Sukses Makmur (ICBP) reported financial performance for the period of six months ended June this year (1H20) with total net revenue of IDR23.1tr, an increase of 4.1% YoY, while cost of goods sold (COGS) increased by 0.7% YoY. The minimal hike in COGS has propelled gross margin to 36.1% during 1H20 vs. 33.9% during the same period last year (1H19).  Stable volume growth and improved product mix were the main reasons, we suspect.  Meanwhile, stable operational costs has produced expanded operating margins at 20.3% in 1H20 vs. 17.4% in 1H19.  Bottom line during the 1H20 was recorded at IDR3.4tr, an increase of 31.2% YoY.

ICBP published 1H20 results are generally in-line with our estimates for this year both for revenue and operating profits which represented 47% and 55% of total revenue and operating profit , respectively.

Given the latest progress, we maintain our estimates and valuations that call for an equity fair value of DIR13,700 /share by DCF method (WACC:9%, LTG:3%).  At our 12M-TP, ICBP is trading at 28.4 times our FY20 estimated earnings, which is a discount to its historical averages.

The share price increased by 10% since early July (please see Market Review on July 8), reflecting investors’ higher confidence on the latest corporate action.  Last May this year, ICBP finalized the purchase of 100%-stake on Pinehill Company Limited with purchase price of USD2.99bn or an equivalent of IDR43tr.  Last week, ICBP obtained an IDR30tr of loan from an international syndications to finance most of the deal.

𝟐𝐐𝟐𝟎 𝐩𝐢𝐜𝐭𝐮𝐫𝐞

ICBP registered outstanding sales growth during 2Q20 on most of its divisions.  In the 1H20, Noodles division recorded  sales growth of  6.3% YoY (1Q20:6.5% YoY), while Dairy at 6.5% YoY (1Q20:4.9% YoY), and Food Seasoning at 27% YoY (1Q10: 27.2% YoY).

Food Seasoning has gained tractions recently, with the most visible among others of Racik line for instant fried chicken, and Rendang for instant beef in coconut sauce.  We suspect both products are among the main drivers for growth, as they seemed to be very popular and accessible by the traditional and modern channels, with favorable price mark in the traditional ones.

At the other end, yesterday  the WTI price closed lower by 0.8% at USD40.4/barrel as Hurricane Laura caused damages in the within  US Gulf Coasts area. Meanwhile the USDIDR  closed  at IDR14.714  vs. IDR14.636 the previous one.

We advise the following recommendations, 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,