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Morning Dew 15 September 2020

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OPEC CUT ITS OIL DEMAND GROWTH FORECAST

The Organization of the Petroleum Exporting Countries (OPEC) decided to cut its oil demand growth forecast this year, as India and other Asian countries are estimated to have weaker-than-expected recovery. At the same time, OPEC sees that risks remain high in Asia for the first half next year as a result of lingering pandemic. OPEC released on Monday a monthly report that states global oil demand this year will reach 90.2 million barrels per day (bpd), on average, which is down by 400,000 bpd from the forecast announced last month. The report also cites that the possible weaker demand was dragged down by tepid economic recovery amid the pandemic; thus, fuel demand is impacted as well.  

 

In detail, the Organisation for Economic Co-operation and Development (OECD) countries’ oil demand was revised upward by 100,000 bpd, as the declines are not as big as expected in the second quarter this year. On the other hand, oil demand in non-OECD countries, including Asia and India, was revised downward by 500,000 bpd in the wake of weaker demand. Going forward, OPEC estimates that oil demand will grow by 6.6 million bpd next year to an average of 96.9 million bpd; the estimate is already down by 400,000 bpd from the previous estimate.

 

OPEC+, which consists of OPEC and non-OPEC allies, is reportedly planning to hold a meeting on September 17 to discuss production policy. As it stands, the members have agreed to cut oil production by 7.7 million bpd until December to combat weaker demand stemming from the economic slowdown. As additional information, according to the CNBC, the U.S. Energy Information Administration cut its estimated global demand growth next year by 500,000 bpd, supported by weaker consumption growth in China.

 

JCI

On Monday trading (9/14), JCI continued last week’s rebound and closed strongly higher by +145 points (+2.9%) to 5,161.8. Total transaction volume reached 13 billion shares with a transaction value of Rp9.7 trillion. However, foreign investors still posted a net sell of Rp478 billion, compounding the year-to-date foreign net sell to Rp36.3 trillion.

 

All sectors advanced, which were led by property (+6.47%), basic industry (+4.28%), and finance (+3.25%). Stocks supporting the JCI were BBRI (+5.8%), BBCA (+2.5%), and BMRI (+5.0%). By contrast, stocks weighing down the JCI were UNVR (-1.2%), DSSA (-6.9%), and RMBA (-5.0%).

 

U.S. NEWS  

U.S. stocks closed sharply higher, amid fresh hope for a coronavirus vaccine after the pharmaceutical company said that if the experimental COVID-19 vaccine works by the end of October - and if approved, it could be distributed in the U.S. by the end of the year. Moreover, investors' appetite is also boosted by reports that Oracle may be forging a partnership with TikTok, the popular China-owned social-media platform.  Citing from marketwatch, an agreement to link up TikTok with a U.S. company comes amid rising tensions between America and China, after Donald Trump threatened repeatedly to shut down TikTok in the U.S. if it isn’t sold to an American company by Sept. 15. The DJIA rose 1.16%, to 27,987.18, the S&P 500 gained 1.27%, to 3,383.26 and the Nasdaq Composite added 1.87%, to 11,056.65.

 

U.S. Treasury yields barely unchanged as investor’s waited for the result from the FOMC meeting this week. The benchmark 10-year notes were down 2/32 to yield 0.673% and the 30-year bonds were 2/32 down to yield 1.418%. The 2-year notes were down 1/32 to yield 0.137%

 

Crude oil prices fell as OPEC further reduced its outlook for demand growth, as well as the potential for more oil from Libya after Libya poised to resume production. WTI crude down by -0.08% to US$37.30/barrel, while Brent crude down by -0.48% to US39.64/barrel.

 

COMPANY UPDATE

FITCH DOWNGRADE WIKA RATING

Fitch Ratings has downgraded PT Wijaya Karya (Persero) Tbk (WIKA) Long-Term Rating of Foreign Currency and Local-Currency Issuer Default Rating (IDR) from BB to BB-. Fitch also downgraded WIKA's National Long-Term Rating to 'A (idn)', from 'AA- (idn)' previously. The rating downgrade follows Fitch's revision of WIKA's Standalone Credit Profile (SCP) to 'b-' and 'bbb- (idn)', from 'b' and 'bbb + (idn)', respectively. All ratings are placed in the Negative Rating Watch (RWN) due to the absence of certainty about government support for providing stimulus to the construction sector. This is also coupled with the decline in the company's financial profile which will have an impact in the medium term due to the economic slowdown as a result of the coronavirus pandemic, which is also reflected by the revision of WIKA's SCP. The rating downgrade was caused by the company's less than optimal performance in 2Q2020, as seen from the net debt and EBITDA ratio which increased to above 5X. In addition, the coronavirus pandemic also resulted in a decrease in the value of new contracts. Fitch projects that the company's new contract value will drop by 60% in the range of Rp17 trillion.

 

PTPP BEGINS CONSTRUCTION OF BOGOR HERITAGE AND ECOPARK APARTMENTS

PT Pembangunan Perumahan (Persero) Tbk. (PTPP) began to carry out the construction of the Bogor Heritage and Ecopark Apartment projects owned by PT Sejahtera Eka Graha worth Rp1.29 T and is targeted to be completed in March 2022. PTPP will build as many as seven apartment towers, with 18 floors and one roof and two floors basement in each tower.

 

ADHI RECORDED A NEW CONTRACT OF Rp4.7 T

PT Adhi Karya Tbk (ADHI) until the end of August 2020 recorded the realization of the acquisition of new contracts worth Rp4.7 trillion or only 17.4% of the FY2020 target. With this processing, the company's order book value increased to Rp35.2 T. Realization of the company's new contracts came from government projects by 68%, SOEs by 22%, then 10% from private parties or others.

 

MITI PLANS TO CONDUCT REVERSE STOCK

Mining contractor company PT Mitra Investindo, Tbk. (MITI) plans to conduct a reverse stock from two shares to five shares for both class A and class B shares. The nominal value of class A shares will change from Rp200/share to Rp500/share, while class B’s from Rp20/share to Rp50/share. This reverse stock is aimed at MITI’s being allowed to conduct rights issue in order to increase capital as, by regulation, issuance of new shares can be conducted with a minimal execution price that is equal to outstanding shares’ nominal value, while on the other hand, minimal stock price for trading is Rp50/share. The funds raised from the rights issue will be used for inorganic expansion by acquiring PT Wasesa Line.

 

PANDEMIC HINDERS IFSH’S OPERATIONAL AND SMELTER PROJECTS

The Covid-19 pandemic that is still rampaging in Indonesia hinders the operational and smelter projects of PT Ifishdeco, Tbk. (IFSH). Despite the development of one blast furnace smelter in Sulawesi is already done, its operational is currently on halt due to unavailability of foreign experts from China. In addition, IFSH also plans to develop another smelter with rotary kiln electric furnace (RKEF) technology and is still in quest for financing.

 

MAIN AIMS AT NEW EXPORT MARKETS

PT Malindo Feedmill, Tbk. (MAIN) plans to penetrate new export markets for its processed food products following the first export of chicken-based SunnyGold to Japan this early September. The variants shipped to Japan include chicken nugget, chicken tempura, and karaage. MAIN is soon to export products to East Timor and Papua New Guinea as well. As of 1H20, the company booked revenue of Rp3.2 trillion with the processed food segment contributing to Rp97.5 billion.

 

TECHNICAL OUTLOOK

JCI IS POSITIVE, WITH EXPECTED RANGE OF 5,060 to 5,245

JCI closed sharply higher to 5,161. The Support lay at 4,747 while the Resistance hanging still at 5,220/380. EMA 5&20 still in death cross pattern while PSAR green dot just appeared. MACD and Stochastic start signaling positive along with RSI was curled higher.

 

ADHI

Support            500

Resistance        1015

Target Price     995

 

ADRO

Support            1030

Resistance        1350

Target Price     1280

 

BBTN

Support            900

Resistance        1930

Target Price     1800

 

EXCL

Support            1,920

Resistance        2,600

Target Price     2,500

 

FAST

Support            880

Resistance        950

Target Price     950

 

HMSP

Support            1455

Resistance        1650

Target Price     1650

 

MAPI

Support            600

Resistance        710

Target Price     700

 

PTBA

Support            1930

Resistance        2500

Target Price     2280

 

PWON

Support            332

Resistance        434

Target Price     420

           

WEGE

Support            107

Resistance        290

Target Price     240

 

For a detailed explanation, please see the Morning Dew PDF full version

 

DISCLAIMER

This research report is prepared by PT MINNA PADI INVESTAMA SEKURITAS Tbk. for information purposes only and is not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. The report has been prepared without regard to individual financial circumstance, need or objective of person to receive it. The securities discussed in this report may not be suitable for all investors. The appropriateness of any particular investment or strategy whether opined on or referred to in this report or otherwise will depend on an investor’s individual circumstance and objective and should be independently evaluated and confirmed by such investor, and, if appropriate, with his professional advisers independently before adoption or implementation (either as is or varied).

Mon September 14Th, 2020

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