The JCI August 31, 2020

𝐀𝐮𝐠𝐮𝐬𝐭 𝟑𝟏, 𝟐𝟎𝟐𝟎

* 𝐓𝐡𝐞 𝐉𝐂𝐈 𝐭𝐫𝐚𝐝𝐢𝐧𝐠 𝐫𝐚𝐧𝐠𝐞:  𝟓,𝟑𝟎𝟎𝐩𝐭 – 𝟓,𝟒𝟐𝟓𝐩𝐭  (𝐅𝐫𝐢𝐝𝐚𝐲 𝐜𝐥𝐨𝐬𝐞:  𝟓,𝟑𝟒𝟕𝐩𝐭)

* 𝐖𝐚𝐥𝐥 𝐒𝐭𝐫𝐞𝐞𝐭 𝐜𝐥𝐨𝐬𝐞𝐝 𝐡𝐢𝐠𝐡𝐞𝐫 𝐛𝐲 𝐜𝐥𝐨𝐬𝐞 𝐭𝐨 𝟏% 𝐨𝐧 𝐝𝐚𝐭𝐚 𝐫𝐞𝐥𝐞𝐚𝐬𝐞 𝐚𝐧𝐝 𝐦𝐨𝐧𝐞𝐭𝐚𝐫𝐲 𝐩𝐨𝐥𝐢𝐜𝐲 𝐦𝐨𝐦𝐞𝐧𝐭𝐮𝐦

* 𝐓𝐡𝐞 𝐉𝐂𝐈 𝐢𝐬 𝐞𝐱𝐩𝐞𝐜𝐭𝐞𝐝 𝐭𝐨 𝐭𝐫𝐞𝐧𝐝 𝐡𝐢𝐠𝐡𝐞𝐫 𝐚𝐦𝐢𝐝 𝐜𝐚𝐮𝐭𝐢𝐨𝐮𝐬 𝐟𝐨𝐫 𝐂𝐨𝐯𝐢𝐝-𝟏𝟗 𝐬𝐩𝐫𝐞𝐚𝐝 𝐡𝐚𝐧𝐝𝐥𝐢𝐧𝐠

Morning,

The Jakarta Composite Index (JCI) today (31/8) is expected to be within the range of 5,300pt – 5,425pt by support of stable USDIDR and oil close.  Meanwhile, last Friday (28/8) in Wall Street  the  DJIA  ended higher by  162 points or 0.6%  at 28,654pt , while the S&P500 and the Nasdaq both closed higher by  0.7% and 0.6%, respectively.  With the last close, the DJIA was up by 0.4% for 2020 mainly driven by consumers’ Walmart and Coca-Cola, For the S&P500, Tech and energy were the best-performing sectors. On the data front, The United States (US)  spending rose 1.9% in July, topping a Reuters forecast of a 1.5% gain. Meanwhile, Personal income was also stronger than expected, rising 0.4% while economists had forecast a drop of 0.2%.

𝑰𝒏𝒅𝒐𝒏𝒆𝒔𝒊𝒂 𝒄𝒐𝒏𝒔𝒖𝒎𝒆𝒓 𝒔𝒆𝒄𝒕𝒐𝒓

𝐔𝐋𝐓𝐉 𝟏𝐇𝟐𝟎 𝐑𝐞𝐯𝐢𝐞𝐰: 𝐦𝐨𝐝𝐞𝐫𝐚𝐭𝐞𝐥𝐲 𝐡𝐢𝐭 𝐛𝐲 𝐚 𝐪𝐮𝐚𝐫𝐭𝐞𝐫 𝐨𝐟 𝐥𝐢𝐦𝐢𝐭𝐞𝐝 𝐥𝐨𝐜𝐤-𝐝𝐨𝐰𝐧 𝐢𝐧 𝐭𝐡𝐞 𝟐𝐐𝟐𝟎

Ultrajaya Milk Industry & Trading Company (ULTJ) reported  financial performances for the first six month ended June this year (1H20) with net profit of IDR555.0bn as compared to IDR508.6bn in the same period last year (1H19), or representing an annual increase of 9.1%.  Bottom line during the 1H20  was backed by an increase of net sales value by 1.6% YoY to IDR3.0tr, and by tamed cost of goods sold the led to higher gross margins to 37.4% as compared to 36.8% in the 1H19 (1Q20: 38.9%, 2Q20: 35.7%).

Operating margins during the 1H20 was recorded at 23.8% vs. 20.9% in the 1H19 (2Q20: 10.9%, 1Q20: 35%). During the 1Q20, ULTJ recorded gain on of sale of foreign exchange of IDR176bn (1H20: IDR45.5bn, 1H19: loss of IDR24.2bn) which propelled operating margin  to 35%. Excluding this account in the 1Q20, operating margins would have been recorded at 24.1%. Overall, net profit margin during the 1H20 was recorded at 18.4% vs. 17.1% in the 1H19.  ULTJ  financials was overall being supported by its net-cash position both in the 1H and 1Q this year.

𝟐𝐐𝟐𝟎 𝐩𝐢𝐜𝐭𝐮𝐫𝐞

During the 2Q20, net sales value was recorded at IDR1.4 tr, or representing 9.1%  YoY decline as compared to the same quarter last year  (2Q19). At the other end, compared to the preceding quarter of 1Q20, net sales value declined by 13.0%.  Limited lock-down has hurt the company’s sales through lower volume, especially along the closing of all schools, we reckon.

𝐕𝐚𝐥𝐮𝐚𝐭𝐢𝐨𝐧𝐬

At yesterday closing price of IDR1,805, ULTJ is trading at 18.9 times this year’s annualized earnings, which is a substantial discount both to that of consumer sector and the general market of 33 times trailing earnings.

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, WTI price closed at USD42.9 or lower by 0.2% in Friday.   Meanwhile the  USDIDR  closed  at IDR14.702  vs. IDR14.714 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,