<< Back To Daily Report
Morning Dew - 19 March 2020
THE GOVERNMENT POLICY TO OVERCOME THE IMPACT OF COVID-19
The government issued a number of fiscal and non-fiscal stimuli to support the national manufacturing and trade industry and to further provide an impetus to export-import activities from the effects of the COVID-19 outbreak. Previously, the Bank Indonesia (BI) Board of Governors' Meeting (RDG) on 19-20 February 2020 decided to slash the BI 7-Day Reverse Repo Rate (BI7DRR) by 25 bps to 4.75%, the Deposit Facility interest rate by 25 bps to 4.00%, and the Lending Facility interest rate of 25 bps to 5.50%. In addition, BI refined the provisions on the Statutory Reserves for Foreign Exchange through the PADG No.22 / 2 / PADG / 2020 concerning the Fourth Amendment to PADG Number 20/10 / PADG / 2018 concerning the Statutory Reserves in Rupiah and Currency Foreigners for Conventional Commercial Banks (BUK), Sharia Commercial Banks (BUS), and Sharia Business Units (UUS). This PADG came into force on March 16, 2020.
Furthermore, the Ministry of State-Owned Enterprises (BUMN) has instructed several SOE companies to conduct a buyback with a budget of Rp7-8 Trillion. This was also followed by several non-state-owned companies to buy back, such as:
In this stimulus, the value of tax incentives provided by the government reaches Rp22.9 Trillion, which is derived from the relaxation of four types of taxes, namely 21 PPh, 22 PPh Import, Corporate Income Tax, and VAT refunds,
• PPh 21 for workers in all manufacturing sectors with incomes below Rp200 Million will be borne by the government from April to September 2020,
• Import 22 PPh for 19 manufacturing sectors and including WP KITE and WP KITE IKM, Postponement of Import Tax 22 import is carried out for 6 months,
• Corporate Income Tax of 30% for 6 months from April to September for 19 affected industrial sectors as well as WP KITE and WP KITE IKM,
• Relaxation in VAT refunds for 19 manufacturing sectors, WP KITE, and WP KITE IKM for 6 months,
Specifically, 19 manufacturing industry sectors receiving 22 PPh Import facilities, Corporate PPh, and VAT refunds include: Chemical and chemical goods industry, Other transportation equipment industry, Food industry, Basic metal industry, Paper, and paper products industry, Industry Beverage, Pharmaceutical industry, chemical, and traditional medicine products, Manufacture of motor vehicles, trailers and semi-trailers, Rubber industry, rubber and plastic goods, Non-metal mining products industry, Apparel industry, Electrical equipment industry, Textile industry, Industry YTDL machinery and equipment, Metal goods industry, non-machinery and its equipment, Printing and reproduction industry of recording media, Leather industry, leather goods, and footwear, Furniture industry, Computer industry, electronic goods, and optics
The four non-fiscal stimulus policy packages will start on April 1, 2020, with details:
• Simplifying and reducing the number of prohibitions and restrictions (lartas) for export activities and increasing the competitiveness of Indonesian products,
• Simplification and reduction of the number of lartas for import activities, especially raw materials, this stimulus is given to companies with status as producers,
• The acceleration of the export and import process for companies with export-import activities that have a high level of compliance,
• Improvement and acceleration of export-import process services, and supervision through the development of the national logistics ecosystem (NLE),
At the same time, the OJK also issued several countercyclical policies through the OJK Regulation on the National Economic Stimulus, the impact of the spread of the COVID-19. With this policy, banks can restructure loans whose debtors are affected by COVID-19 outbreak, including in this case debtors of Small and Medium Enterprises (SMEs). This stimulus policy consists of assessing the quality of credit or financing, or the provision of other funds, based solely on the accuracy of principal and/or interest payments for loans of up to Rp10 Billion.
On Wednesday trading session (3/18), JCI dropped by -2.8% to 4,331. Transaction volume was recorded at 8.3 billion shares with Rp8.1T of trading value. Foreign investors posted a net buy of Rp258B, resulting in the year-to-date accumulation of foreign net sell of Rp8.8T.
All sectors retreated, led by infrastructure (-3.85%), consumer goods (-3.77%), and agriculture (-3.45%). Stocks supporting JCI were DNET (+9.4%), TPIA (+3.3%), and POLL (+3.8%). On the other hand, stocks weighing down JCI were BMRI (-6.8%), UNVR (-6.9%), and BBRI (-3.7%).
Again, U.S. stocks plummeted amid fears of a global pandemic outbreak, which has erased the gains since the U.S. President Donald Trump’s inauguration in 2017. During today’s trading session, the S&P 500 was down by -5%, which triggered a 15-minute trading halt, as the index was weighed down by dropping the S&P 1500 airlines index. DJIA lost -6.28% to 19,904, the S&P 500 plunged -5.18% to 2,398 and the Nasdaq declined -4.7% to 6,990.
U.S. Treasury yields rose and lower trade volumes have resulted in unclear market signals. The benchmark 10-year notes fell 2-5/32, yielding 1.22%. Short-dated two-year notes fell 6/32 with a yield of 0.55% and 30-year bonds fell 6-3/32, yielding 1.83%..
As a result of global lockdowns, demand for oil remained sluggish. According to Goldman Sachs, as cited from Thomson Reuters’s The Day Ahead, if lockdowns remain in place by the end of March, global oil demand may fall by as much as 8 million to 9 million bpd. Brent crude fell -9.5%, to US$26/barrel and WTI crude plunged -17.55%, to US$22.22/barrel.
R&I UPGRADED INDONESIA'S RATING TO BBB+
In the middle of Covid-19 global pandemic and its potential impacts on the economy, the Japanese rating agency, Rating and Investment Information, Inc. (R&I), upgraded Indonesia's sovereign credit rating to BBB+/outlook stable from previously BBB/outlook stable (April 2019). Some key factors underpinning the upgrade are relatively stable economic growth of 5%, manageable fiscal deficit of 1.76% GDP (2020 State Budget), sufficient foreign exchange reserves to finance 7.4 months of import plus payment of government foreign loans, and current account deficit of 2%-3% of GDP in 2020.
CORONA-EFFECT, TINS TO REDUCE PRODUCTION AND EXPORT
PT Timah (Persero), Tbk. (TINS) is said to decrease its monthly production target by 20%-30% and to halt the export of tin ores whose price is currently under pressure (year-to-date, tin price has been eroded by -31.2% to 12.4 US$/troy ounce). As widely known, the outbreak of Covid-19, which originated from China, has caused companies to temporarily halt production and therefore hurts the demand for tin which is essential as raw material in the electronic and semiconductor industry.
UCID TO RELEASE MASK PRODUCT IN APRIL
Amidst the outbreak of Covid-19 in Indonesia and therefore increasing the needs to protect the respiratory system, PT Uni-Charm Indonesia, Tbk. (UCID) is to begin releasing its new product named protect pollution mask in April 2020. The product, which is previously only available for Japanese market, will be gradually marketed to Indonesia with a price of Rp9,500 per two pieces. The mask consists of three layers, with the second one acts as the filter to micro particles of 2.5 PM-sized.
INTP’S FEBRUARY SALES DROPPED 4% (Y/Y)
Year-to-date, PT Indocement Tunggal Prakarsa, Tbk. (INTP)’s sales reached 2.8 million tons, which were lower by -4% (Y/Y) if compared with that of 2019. Initially, the Company aims to reach a sales growth of +3-4% (Y/Y), however, amid global pandemic issues, INTP is now revising its sales target.
ISAT PAID ITS BONDS AND SUKUK WORTH Rp1.19T
PT Indosat, Tbk. (ISAT) paid Shelf Registration Bonds III Indosat Phase I 2019 series A’s interest and principal and Sukuk Ijarah III Indosat Phase I 2019 Series A totaling Rp1.19T. For additional information, the Shelf Registration Bonds III Phase I are divided into 5 series, all of which amounting to Rp7T. While Sukuk Ijarah III Phase I 2019 is divided into 5 series totaling Rp500B.
THE CONSTRUCTION OF TPIA PLANT (CAP 2) WILL BE LATE DUE TO COVID-19
The selection of two strategic investors to build CAP 2 factory owned by PT Chandra Asri Petrochemical Tbk (TPIA) will not be in accordance with the Company’s target due to COVID-19 pandemic. The investment of the CAP 2 plant is amounting to US$5B. It will be built on an area of 200 hectare in Cilegon, Banten. TPIA allocated CAPEX amounting to US$430M for this CAP2 plant expansion. The remaining CAPEX funds will be used for methyl tert-butyl ether (MTBE) & Butene-1 plant expansion which are targeted to operate in 3Q202. Besides, It also will be allocated to finance Enclosed Ground Flare (EGF) project which is targeted to complete in 4Q20. Source of the CAPEX will be from internal cash. TPIA has amounting to US$660M in cash. However, the decline in crude oil price will benefit from the side of a decline of naphtha price (main raw material cost - COGS). TPIA will focus on its business sustainability, operational excellence, liquidity, and rights issue (7,16B new shares). The Company Perseroan has a deadline up to next 12 months to execute the right issue.
MEDC WILL OFFER SENIOR NOTES AMOUNTING TO US$ 400M
PT Medco Energi Internasional Tbk (MEDC), through Medco Strait Services Pte Ltd, will offer for senior notes amounting to US$400M (8.5%) which will mature in 2022. It will offer from March 16 to March 20, 2020 in the United States. Morgan Stanley Asia (Singapore) & Standard Chartered Bank Ltd were appointed as joint dealer manajer in the tender. While Morrow Sodali Ltd is a tender agent. The price to buy is US$1.000 for every US$1.000 of principal notes when tendered and paid by the Company on March 25, 2020. The repurchase of debt securities funds will be from the issuance of senior notes (US$650M) in last january. MEDC will allocate CAPEX amounting to US$340M to meet its target (production:110 thousand boepd) in 2020 with composition: oil production (43 mboepd) and gas production (67 mboepd).
JCI IS NEGATIVE, WITH EXPECTED RANGE OF 4,200 to 4,500.
JCI closed lower at 4,330, touching our support line at 4,330. If, by any chance, the JCI breached our support line, our next support will be at 4,034/3,944. MACD remained at the negative side, although stochastic touched the oversold thresholds. In our view, today’s JCI may be negative.
Target Price 1800
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).
Wed March 18Th, 2020