The JCI July 9, 2020
Jᴜʟʏ 9, 2020
* Tʜᴇ JCI ᴛʀᴀᴅɪɴɢ ʀᴀɴɢᴇ: 5,050ᴘᴛ – 5,150ᴘᴛ (Yᴇsᴛᴇʀᴅᴀʏ ᴄʟᴏsᴇ: 5,076ᴘᴛ)
* Wᴀʟʟ Sᴛʀᴇᴇᴛ ᴄʟᴏsᴇᴅ ʜɪɢʜᴇʀ ᴡɪᴛʜ Nᴀsᴅᴀǫ ᴀᴛ ʀᴇᴄᴏʀᴅ-ʜɪɢʜ ᴅʀɪᴠᴇɴ ʙʏ ᴍᴀᴊᴏʀ ᴛᴇᴄʜɴᴏʟᴏɢɪᴄᴀʟ ᴄᴏᴜɴᴛᴇʀs
* Tʜᴇ JCI, ᴡʜɪʟᴇ ᴄᴀᴜᴛɪᴏᴜs, ɪs ᴇxᴘᴇᴄᴛᴇᴅ ᴛᴏ ᴇxᴛᴇɴᴅ ɢᴀɪɴ ᴏɴ sᴛᴀʙʟᴇ USDIDR ᴀɴᴅ ᴏɪʟ ᴄʟᴏsᴇ
Morning,
The Jakarta Composite Index (JCI) today (9/7) is expected to be in the range of 5,050pt – 5,150pt with investors remain cautious in stance for 2Q20 earnings release. Meanwhile, yesterday (8/7) in Wall Street the DJIA ended higher by 177 points or 0.7% at 26,067pt, while the S&P500 and the Nasdaq both closed with an increase of 0.8% and 1.4%, respectively. Nasdaq ended at record high yesterday, mainly driven by share price of technological counters of such as Apple Inc., Amazon, and Nvidia.
𝐈𝐧𝐝𝐨𝐧𝐞𝐬𝐢𝐚 𝐂𝐨𝐧𝐬𝐮𝐦𝐞𝐫 𝐒𝐞𝐜𝐭𝐨𝐫
𝐑𝐞-𝐢𝐭𝐞𝐫𝐚𝐭𝐞 𝐁𝐔𝐘 𝐜𝐚𝐥𝐥, 𝐈𝐂𝐁𝐏 (𝐬𝐞𝐞 𝐨𝐮𝐫 𝐩𝐮𝐛𝐥𝐢𝐬𝐡𝐞𝐝 𝐑𝐞𝐩𝐨𝐫𝐭 𝐨𝐧 𝟏𝟏/𝟏𝟏/𝟏𝟗)
We maintain our BUY recommendation on the counter with a 12-M target price of IDR13,700 (calculated based on DFC method with LTG of 3% and WACC 0f 9%), representing an annual estimated capital gain of 45% from yesterday close of IDR9,450.
Indofood CBP Sukses Makmur (ICBP) has published its 1Q20 financial results, putting aside an IDR584.3bn from Other Income, that represented 25%, 27%, and 27% of our full year forecasts of Sales, Operating Profits, and Net Profits, respectively, for this year.
We rate the overall financial position of ICBP as fine. The company recorded revenue of IDR12.0tr, representing a more-than-decent 6.7% growth from the same period last year. We estimate revenue 1Q20 sales growth mostly came in from an average of 0-1% of volume growth and from an average of 0-5% of price increase for its main contributor Noodle division. Gross, operating, and net profit margins in 1Q20 came in at, respectively, 34.8%(1Q19: 33.7%), 23.3% (1Q19:16.9%), and 17.5% (1Q19: 11.5%). Factoring-out Income from foreign exchange in 1Q20, both operating and net profit margins recorded at a roughly stable rates at, respectively, 18.5% and 12.7%.
𝐀𝐜𝐪𝐮𝐢𝐬𝐢𝐭𝐢𝐨𝐧 𝐨𝐟 𝟏𝟎𝟎%-𝐬𝐭𝐚𝐤𝐞 𝐨𝐧 𝐏𝐢𝐧𝐞𝐡𝐢𝐥𝐥 𝐂𝐨𝐦𝐩𝐚𝐧𝐲 𝐋𝐢𝐦𝐢𝐭𝐞𝐝 (𝐏𝐂𝐋) 𝐢𝐬 𝐞𝐱𝐩𝐞𝐜𝐭𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐬𝐭𝐫𝐚𝐭𝐞𝐠𝐢𝐜
The purchase of PCL is expected to leverage the company’s domestic prowess, in our view. In 1Q20 export market accounted for 9.8% of total sales (2019:10.8%, 2018:10.0%). Five major destinations of ICBP export sales have been Saudi Arabia whereby sales growth in 1Q20 was recorded at 20.7% YoY (2019: 49.5% YoY), Sudan at 1,263% YoY (2019: 114.8%), and Turkey at 112.3% YoY sales growth in 1Q20 (2019: 41.2% YoY). Most of sales growth of these export markets recorded from a very low base and thus provide room for ICBP to expand sales in the future.
The cost of purchase as officially stated is based on an arm-length value of total USD2.99bn or an equivalent of IDR43.4tr. Purchase payment is planned to be financed by internal cash (USD300mn), while the rest on bank loans.
As at end of March this year, ICBP was in a net-cash balance sheet with cash stood at IDR8.9tr, while bank loans at IDR2.2tr and total equity at IDR28.8tr. Factoring in this transaction, ICBP balance sheet is expected to expand with gearing ratio to reach slightly above 1. With growth prospect from exports sales at hands, the risk seems worth-assumed, in our view.
At the other end, yesterday the WTI price closed higher at USD40.9/barrel, or by 0.7%, and the USDIDR closed at IDR14.460 vs. IDR14.556 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,