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Danareksa Equity Snapshot - 20 Mei 2020
May 20, 2020 08:58

FROM EQUITY RESEARCH

 

Bank Negara Indonesia: Managing expectations (BBNI IJ. IDR 3,520 BUY TP. IDR 5,000)

Following BBNI’s 1Q20 set of results and new guidance from the management, we cut some of our key assumptions. We assume earnings will fall by 86.5% to IDR2.1tn in FY20F driven by a lower NIM and significantly higher credit costs. We assume the NIM will decline to 3.9% due to lower asset yields. Meanwhile, credit costs are expected to rise to 352bps given the deterioration in assets quality coming from this year’s soft GDP growth outlook also the impact from COVID-19. BUY maintained with a new GGM-derived TP of IDR5,000 (implying 0.86x 2020F PBV).

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Retail: Hope For the Best, Well Prepared For The Worst (NEUTRAL)

More than our normal lives, Covid-19 pandemic has put world economy to a standstill. In the context of Indonesian consumer, economic activities is noticeably much less than before, and struck at the seasonally high period, Ramadan and Lebaran quarter. Low economic activity has driven many businesses to stop production and shops to close leading to a wave of furloughing and even lay-off. Kudos to the government for swiftly rolling out efforts to cushion the purchasing power destruction totaling IDR111.7tn, but our calculation suggest IDR59.7tn in spending power will be within the next 3-4 months from salary and THR will be lost despite the government best effort. Maintain Neutral as nominal share price is cheap and 2021 to offer string growth off a relatively low base of 2020.

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MARKET NEWS

MACROECONOMY

Bank Indonesia maintained its policy rate at 4.5%

At BI’s Board of Governors Meeting yesterday, it was decided to maintain the policy rate (7 days reverse repo rate) at 4.5% in order to stabilize the IDR. However, it was also mentioned that there is still room for lower rates this year considering the low inflation rate. The former Senior Deputy Governor of Bank Indonesia stated that there is room for another 50-bps rate cut this year, noting that the real interest rate in Indonesia is still positive and the economy would likely contract in 2Q20. Bank Indonesia believes that it currently has ample forex reserves to meet import requirements, and projects that the CAD in 2020 will be below 2% of GDP (vs 2.5-3% of GDP previously).

Meanwhile, Bank Indonesia also mentioned that it would inject IDR1,147tn of liquidity into the financial market and banking system to stabilize the IDR and mitigate the impact of covid-19. It has injected IDR583.5tn of liquidity since Jan-20 via:

•          Purchasing govt bonds of IDR166.2tn sold by foreign investors in the secondary market

•          IDR137.1tn of govt bond term repo from banks and corporations

•          IDR53tn from minimum reserve requirement reduction by 100bps to 5.5%

•          IDR29.7tn from forex swaps

•          Another reduction in the minimum reserve requirement from 1-6 May 2020 by 200 bps has pumped up liquidity by IDR102tn

•          Additional IDR15.8tn from the Macroprudential Intermediary Ratio (MIR) adjustment for 1 year. 

•          Quantitative easing of IDR79.7tn from 7-19 May 2020.

Bank Indonesia also encouraged more banks to use the term repo facility for the govt bonds they hold. BI mentioned that currently banks have IDR886tn of govt bonds. From this amount, the banks can repo IDR563.6tn of bonds with Bank Indonesia. To date, IDR43.9tn of govt bonds have been repoed to be used in the credit restructurization for micro, small and medium enterprises. (Bank Indonesia, Investor Daily)

 

CORPORATE

Cigarette: GGRM, HMSP applied for excise payment delay

In 11 May 2020, the excise and custom body – ministry of Finance reported that 82 companies have obtained the ease of payment for cigarette excise tax (for 90 days) worth IDR12.79tn. By criteria, the companies in tier 1 obtained IDR10.3tn, followed by tier 2 (IDR 2.45tn) and tier 3 (IDR 15bn), respectively. Amongst these companies, three major players also apply for payment delay to preserve cash flow; GGRM (IDR4.07tn), HMSP (IDR3.37tn) and Djarum (IDR1.7tn).  The custom and tax body stated that the Covid-19 pandemic has negatively impact the cigarette sales volume. The government reported that cigarette production down more than 2.1% in April 2020. (Bisnis Indonesia)