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Morning Dew 22 April 2020

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SOE CONTRACTORS TO CUT CAPEX BUDGET THIS YEAR

Due to the coronavirus pandemic outbreak, SOE contractors decided to cut its capital expenditure budget this year. PT Adhi Karya (Persero), Tbk. (ADHI), for example, aims to cut its budget to Rp1.4T from Rp5.5T. The capex, ADHI said, will be used for fixed asset purchase, assuming that the investment in projects may have to be deferred to next year. In addition, PT Pembangunan Perumahan (Persero), Tbk. (PTPP) will also cut its capex budget to Rp3.6T from Rp5.4T, 90% of which will be used for carry over contracts and the remaining 10% will be used for new contracts this year.

 

Same, PT Wijaya Karya (Persero), Tbk. (WIKA) and PT Waskita Karya (Persero), Tbk. (WSKT) also plan to cut its budget but the exact amount remains to be disclosed, as the two companies are now reviewing it. As additional information, WIKA and WSKT allocated a capex budget of Rp11.5T and Rp19T, respectively. WSKT indicated that it will review its toll-road capex amounting to Rp16T, but the Company still plans to divest its toll road portfolio, which, to date, consists of 16 concession toll roads through its subsidiary PT Waskita Toll Road (WTR). To complement, we also provide SOE contractors’ new contract target this year (see Figure 2).

 

JCI

On Tuesday trading session (4/21), JCI continued its bearish trend and ended lower by -74 points (-1.6%) to 4,502. Total trading volume reached 7.2 billion shares with transaction value amounted to Rp6.5 trillion. Foreign investors, again, posted a net sell amounting to Rp427 billion, compounding the year-to-date foreign net sell to Rp15.9 trillion in 2020.

 

All sectors retreated, mainly the commodity-related sectors, with the biggest losses suffered by agriculture (-2.46%), mining (-2.30%), and finance (-2.20%). Stocks supporting the JCI were BRPT (+5.2%), TBIG (+5.3%), and SMSM (+16.7%). On the contrary, stocks weighing the JCI down were BBCA (-3.6%), BBRI (-2.2%), and TLKM (-1.6%).

 

U.S. NEWS  

U.S. stocks slumped for a second day as the Brent crude oil slide continued outweighed a new fiscal deal in Congress to overcome the COVID-19 pandemic effect. Moreover, investors worried that plunging demand for the commodity would dent a key sector for U.S. employment and investment and signal a deeply depressed global economy, while investors get prepared to embrace the worst earnings since the 2008 financial crisis. The DJIA dropped 2.67% at 23,019.71, while the S&P 500 lost 3.07% to 2,736.49. The Nasdaq Composite dropped 3.48% to 8,263.23.

 

U.S. Treasury yields continue to fall as crude oil futures extend its plunge. The benchmark 10-year notes rose 19/32 to yield 0.5675%. The 5-year notes were up 3/32 to yield 0.3340%. The 30-year bonds rose 2-3/32, yielding 1.1599%. On the short end, the 2-year notes were flat, yielding 0.2034%.

 

BRENT crude prices continued to plunge, for June delivery fell 22.45% to US$19.83/barrel amid mounting concerns over oil demand in a market overrun by supply while the world is rapidly running out of space to store crude oil with no end in sight to a swelling global crude glut as the COVID-19 pandemic has destroyed demand for fuel.  At the same time, WTI crude for June delivery fell 33.48% to US$13.59/barrel, WTI for May delivery rebounded from negative territory and was last at US$10.01/barrel, jumped 124.08%. 

 

MACRO UPDATE

JOKOWI IMPOSES NATIONALLY BAN ON MUDIK

To prevent the spread of COVID-19, President Joko Widodo (Jokowi) on Tuesday, April 21, 2020, officially banned 'mudik' in 2020 nationally after the government had previously banned 'mudik' for the State Civil Service (ASN), TNI, Polri, and BUMN employees. This policy is effective to start from Friday 24 April 2020, accompanied by supervision of access to and out of the region, especially for regions that have implemented Large-Scale Social Restrictions (PSBB). Furthermore, this regulation will be tightened starting Thursday, May 7, 2020, with sanctions for violators.

 

COMPANY UPDATE

INAF TO RESTRUCTURE ITS BUSINESS AND DEBTS

PT Indofarma, Tbk. (INAF) is set to restructure its business portfolio by focusing on the medical equipment business. So far, this segment contributes to only 15% of revenue, while drugs or pharmacy dominates the 85% share. Going forward, as part of the SOE holding in pharmacy, Kimia Farma is to take over the drugs business, while INAF to produce various medical equipment, i.e. syringe, surgical suture, infusion set, electromedical device for hemodialysis, ventilator, test kit for pregnancy, dengue fever, HIV, coronavirus, and personal protective equipment (APD) for medical officials. It is expected that by 2024 this segment could contribute to 50% of revenue. Financial-wise, INAF is to restructure its financial expenses at three banks, i.e. Mandiri, BNI, and Exim Bank, which is expected to save up to Rp30 billion. Hence, INAF expects to book net profit in FY19-20, instead of net losses as in FY16-18.

 

KAEF TO CUT CAPEX AND FINANCIAL COSTS

In order to improve the FY19 results, PT Kimia Farma, Tbk. (KAEF) is set to take some frugal strategy. Capital expenditure, for instance, is cut by Rp547 billion to Rp1.44 trillion. In line with it, KAEF is set to gradually reduce its interest-bearing debts by Rp837 billion to Rp7.4 trillion. This is as a result of last year's aggressive expansion (capex Rp2.5 trillion), most of which is debt-funded, causing financial costs to swell by +165.9% to Rp498 billion. Additionally, KAEF is also to slash its operating expenses by Rp208 billion to Rp3.5 trillion. On the other hand, the distribution of drugs, medical equipment and services to handle the Covid-19 pandemic is expected to be a bounty worth enough to reach this year's Rp11.7 trillion revenue target.

 

ADRO RETAINS FY20 TARGETS, MEDC THE OPPOSITE

Amidst the sentiment of Covid-19 pandemic, PT Adaro Energy, Tbk. (ADRO) is to retain the full year 2020 targets, i.e. capital expenditure of US$300 million-US$400 million, operational EBITDA of US$900 million-US$1.2 billion, and coal production of 54-58 million metric tons. ADRO's optimism is backed by the still high demand for electricity, the majority of which is coal-powered. On the contrary, as a result of the collapse in global crude oil prices, PT Medco Energi Internasional, Tbk. (MEDC) reluctantly revises this year's targets. Capital expenditure is slashed to US$240 million (vs. US$340 million previously), 75% (US$180 million) of which is to be allocated for the oil and gas segment, while the remaining 25% (US$60 million) is for electricity business. Likewise, MEDC also cuts production targets from 110 thousands barrel oil equivalent per day (boepd) to 100-105 thousands boepd, with 33-38 thousands boepd is set for oil and 67 thousands boepd for gas.

 

MOODY'S DOWNGRADED PBRX’S CORPORATE FAMILY RATING

Moody's downgraded the corporate family rating of PT Pan Brothers Tbk's (PBRX) from B1 to B2 and also gave a negative outlook for PBRX caused by the risk of the Company's working capital credit facility (US$138.5M) - payment due in February 2021. Moody's assessed that the Company’s refinancing is very high risk. In addition, PBRX also has another working capital credit facility (US$138M) - payment due in 2021.  It has been analysing new financing for this facility with a maturity of up to 2023. The new facility is estimated to come from six banks. PBRX is expected to experience liquidity constraints due to a decline in financial performance and unexpected stretch of working capital due to several things such as the COVID-19 spread, worsening global economic outlook, and falling oil & asset prices. These issues will cause PBRX revenues in 2020 to remain relatively flat. The Company must find other income sources to face the decline in fashion products demand. However, the Company CAPEX is estimated to decrease, debt/ EBITDA will become 5.1x and EBITDA/ interest expense will be 1.9x, in 2020.

 

TELKOMSEL WILL IMPROVE TRAFFIC DATA TARGET IN 2020

A subsidiary of PT Telekomunikasi Indonesia Tbk (TLKM), PT Telekomunikasi Selular (Telkomsel) targeted a 20% increase in broadband data traffic services this year. It is higher than the achievement of the same period in 2019 which was only 12%. “The Work and Study from home policies (SFH & WFH)”, and large-scale social restrictions have triggered an increase in broadband traffic (18%). The highest increases came from: online-based learning applications (e-learning), followed by online conference work/meeting services (CloudX), WhatsApp, Line & Telegram (30%), YouTube & MaxStream Videos (25%), and video games (60%).  To face the Ramadan and Eid in 2020, Telkomsel determined 436 points of interest: residential areas (309 points), hospitals (58 points), major transportation such as airports, ports & toll roads along 16,000Km (38 points), meanwhile it also created 436 strategic points for logistics lines which affected by Covid-19 pandemic. In addition, Telkomsel will add 11 ,000 new BTS in 2020

 

BIRD WILL REDUCE SALARY OF BOARD OF DIRECTORS AND COMMISSIONERS

The Directors (4 persons) and Commissioners (7 persons) of PT Blue Bird Tbk (BIRD) expresses their willingness if the Company will reduce their salaries to facilitate the Company’s cost and other more pressing needs. The salary reductions will be considered by the level of employees in the organization: directors [100%) & non-management levels (different calculations). BIRD also stated that it would carry out various efficiencies on direct cost & operational expenditure in the midst of the spread of the COVID-19 pandemic. It has also been reviewing its CAPEX allocation (Rp1,5T) in 2020 which will be used to purchase new units. For 2019 performance, BIRD experienced a decrease in net profit attributable to the owners of the parent entity (Rp314.56B). While the basic earnings per shares attributable to the owners of the parent entity declined (+31.1%,Y/Y), and a decrease in net profit also occurred (-4.03%,Y/Y). OPEX increased by 16.45% (Y/Y). While total liabilities amounted to Rp2.01T (+19.64%,Y/Y). Long-term bank debt with a maturity of one-year increased by 51.4% (Y/Y) & Long-term debt was amounting to Rp1,07T. Net cash for CAPEX also increased (+33.6%, Y/Y).

 

PGAS REVENUE POTENTIALLY DOWN BY 21%

PT Perusahaan Gas Negara Tbk. (PGAS) through its finance director, Arie Nobelta Kaban, said that the application of Minister of Energy and Mineral Resources Regulation No. 8 of 2020 concerning How to Determine Users and Prices of Certain Natural Gas in the Industrial Sector. The regulation is intended for seven industry groups namely fertilizer, petrochemical, oleochemical, steel, ceramics, glass, and rubber gloves which are set to be US$6/MMBTU from previously US$8.4/MMBTU. Meanwhile, PGAS bought upstream gas at an average price of US$ 5.4/MMBTU. Thus, the PGAS sales margin only reached US$ 0.6/MMBTU, down 80% from the previous US$3/MMBTU and could reduce the company's revenue by 21%. At the same time, PGAS has long-term debt up to 2024 in the form of bonds of up to US$1.9 billion. If income decreases, there is a possibility that the debt repayment could be disrupted. Therefore, PGAS expects compensation from the government to address this matter.

 

BNGA DECLARES THAT GIAA SHARIA DEBT HAS BEEN REPAID

PT Bank CIMB Niaga Tbk (BNGA) states that the Sharia financing facility with a mature period on September 25, 2020, to PT Garuda Indonesia (Persero) Tbk. (GIAA) was settled in early 2020. The facility was provided to GIAA's subsidiary, PT Garuda Maintenance Facility Aero Asia Tbk (GMFI) in the form of a financing facility valued at US$12.28 million in the form of working capital financing under musyarakah or profit sharing schemes. Profit-sharing is equivalent to a 3-month LIBOR + 2.21% which will expire on 25 September 2020.

 

TECHNICAL OUTLOOK

JCI IS NEGATIVE, WITH EXPECTED RANGE OF 4,400 to 4,600.

JCI closed lower at 4,501. The Support lay at 4,460/400/3,920 while the Resistance hanging still at 4,750/975. PSAR green hit the candlestick, waiitng today confirmation to turn red or stay green. Stochastic turn to negative along with RSI curled lower. EMA 5, & 20 waiting today confirmation to stay in golden cross pattern or turning into death cross pattern, while MACD continue to negative. For this week, JCI still in a negative within 4,300 - 4,800. Hence, today JCI still negative following the abridge Monday and Tuesday trading session.

 

BBNI

Support            2700

Resistance        4650

Target Price     4600

 

BBTN

Support            660

Resistance        1930

Target Price     1800

 

WEGE

Support            107

Resistance        290

Target Price     240

 

DMAS

Support            102

Resistance        296

Target Price     246

 

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).

Tue April 21Th, 2020

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