The JCI July 30, 2020
Jᴜʟʏ 30, 2020
* Tʜᴇ JCI ᴛʀᴀᴅɪɴɢ ʀᴀɴɢᴇ: 5,075ᴘᴛ – 5,175ᴘᴛ ( Yᴇsᴛᴇʀᴅᴀʏ ᴄʟᴏsᴇ: 5,111ᴘᴛ )
* Wᴀʟʟ Sᴛʀᴇᴇᴛ ᴄʟᴏsᴇᴅ ʙʏ ᴏᴠᴇʀ 1% ʜɪɢʜᴇʀ ʏᴇsᴛᴇʀᴅᴀʏ ᴀs ᴛʜᴇ Fᴇᴅ ᴋᴇᴘᴛ ʀᴇꜰᴇʀᴇɴᴄᴇ ʀᴀᴛᴇs ᴜɴᴄʜᴀɴɢᴇᴅ
* Tʜᴇ JCI ɪs ᴇxᴘᴇᴄᴛᴇᴅ ᴛᴏ ɢᴀɪɴ ᴇᴅɢᴇ ᴡʜɪʟᴇ ʀᴇsᴛʀᴀɪɴᴇᴅ ʙʏ ᴘʀᴏꜰɪᴛ-ᴛᴀᴋɪɴɢs ᴅᴜᴇ ᴛᴏ ᴛʜᴇ ʟᴏɴɢ-ᴡᴇᴇᴋᴇɴᴅ ɪɴ Iɴᴅᴏɴᴇsɪᴀ
Morning,
The Jakarta Composite Index (JCI) today (30/7) is expected to be in the range of 5,075pt – 5,175pt to gain edge while restrained by profit-takings as traders reduce risks for the coming long-weekend in Indonesia. Meanwhile, yesterday (29/7) in Wall Street the DJIA ended higher by 160 points or 0.6% at 26,540pt , while the S&P500 and the Nasdaq both gained by 1.3% and 1.4%, respectively. The central bank the Fed kept the target federal funds rate at 0%-0.25% unchanged during the completion of the July’s FOMC meeting.
𝐈𝐧𝐝𝐨𝐧𝐞𝐬𝐢𝐚 𝐂𝐨𝐧𝐬𝐮𝐦𝐞𝐫 𝐒𝐞𝐜𝐭𝐨𝐫
𝐖𝐞 𝐯𝐢𝐞𝐰 𝐜𝐮𝐫𝐫𝐞𝐧𝐭 𝐝𝐞𝐯𝐞𝐥𝐨𝐩𝐦𝐞𝐧𝐭𝐬 𝐚𝐫𝐞 𝐰𝐢𝐭𝐡𝐢𝐧 𝐬𝐭𝐚𝐤𝐞𝐡𝐨𝐥𝐝𝐞𝐫𝐬’ 𝐞𝐬𝐭𝐢𝐦𝐚𝐭𝐞, 𝐚𝐧𝐝 𝐬𝐡𝐨𝐮𝐥𝐝 𝐭𝐡𝐞𝐬𝐞 𝐛𝐞 𝐦𝐚𝐢𝐧𝐭𝐚𝐢𝐧𝐞𝐝, 𝐛𝐨𝐭𝐡 𝐭𝐡𝐞 𝐜𝐨𝐮𝐧𝐭𝐫𝐲’𝐬 𝐬𝐭𝐨𝐜𝐤 𝐦𝐚𝐫𝐤𝐞𝐭 𝐚𝐧𝐝 𝐜𝐨𝐧𝐬𝐮𝐦𝐞𝐫𝐬 𝐛𝐞𝐧𝐞𝐟𝐢𝐭.
𝐌𝐚𝐣𝐨𝐫 𝟐𝐐𝟐𝟎 𝐞𝐚𝐫𝐧𝐢𝐧𝐠𝐬 𝐫𝐞𝐥𝐞𝐚𝐬𝐞
Gudang Garam (GGRM), one of important references of the country’s corporate performance, reported a stable first semester-20 sales at IDR 53.6tr vs. IDR52.7tr (+2% YoY), while bottom line hit IDR3.8tr in the 1H20 vs. IDR4.3tr in 1H19. We saw higher excise duty ribbons, cigarette tax and VAT item in the cost of goods sold to IDR35.7tr vs. IDR33.5tr in 1H19, an increase of 7% YoY that lowered total gross margin in the 1H20 to 16% vs. 19% in 1H19.
Total volume of cigarettes sold was down by 9.5% in Indonesia during 1H20 to 131.4bn sticks, and by 17% in the 2Q20. It has been reported that smokers have been down-trading to the lower-priced cigarette product segments. We suspect GGRM to have gained market share in the 2Q20 as major competitor incurred a decline.
We assume cigarette producers to catch up selling price for the rest of the year, adjusting price in-line with the new preference of consumers. Both the Covid-19 pandemic impact, and the higher duties as well as higher minimum selling price regulations from the government require changes in pricing strategies for GGRM as well.
GGRM gearing improved in June, while sales has been stable and forming close to 50% of our full year estimates. Yet earnings multiple wise, at yesterday closing, the counter is trading at an undemanding one at 12 x. We maintain our BUY call on the counter with 12 M –TP of IDR62,100 per share.
At the other end, yesterday the WTI price closed higher by 30 cents to USD41.3/barrel on highest weekly inventory drawdown since December,of 10.6mn barrels. Meanwhile the USDIDR closed at IDR14.570 vs. IDR14.543 the previous one.
We advise the following recommendation , 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,