Equity SNAPSHOT Monday, August 31, 2020 FROM EQUITY RESEARCH KEY INDEX KEY INDEX Chg Ytd Vol Chg Ytd Vol Danareksa Research Institute: Inflation Outlook Aug 2020 Close Close : Slow Pace of Growth (%) (%) (US$ m) (%) (%) (US$ m) Improvements in economic activity remain weak after the relaxation Asean - 5 Asean - 5 of large-scale social distancing restrictions and the realization of Indonesia 5.347 (0,5) (15,1) 489 Indonesia 6,134 0.1 (1.0) 318 government stimulus to encourage household consumption. As such, Thailand 1.323 (0,3) (16,2) 1.765 Thailand 1,568 (0.1) 0.2 1,454 the increase in household expenditure has not been significant. Philippines 5.884 (0,6) (24,7) 170 Philippines 7,855 (0.3) 5.2 87 Weak household expenditure was behind the decline in basic food Malaysia 1.525 (1,9) (4,0) 1.335 Malaysia 1,562 (0.5) (7.6) 338 prices. Given this backdrop, we extimate that inflation will reach Singapore 2.540 0,8 (21,2) 877 Singapore 3,173 (0.5) 3.4 908 0.02% mom or 1.49% yoy in August 2020. Regional Regional To see the full version of this report, please click here China 3.404 1,6 11,6 76.051 China 2,885 0.3 15.7 28,889 Hong Kong 25.422 0,6 (9,8) 21.345 Hong Kong 26,391 (0.2) 2.1 9,093 Adaro Energy: Fine tuning our estimates Japan 22.883 (1,4) (3,3) 15.015 Japan 23,380 (0.6) 16.8 10,278 (ADRO.IJ IDR. 1,145 BUY TP. IDR. 1,300) Korea 2.354 0,4 7,1 12.821 Korea 2,068 (0.8) 1.3 3,790 Post the release of the 1H20 results, we fine tune our earnings Taiwan 12.729 (0,5) 6,1 6.957 Taiwan 11,532 0.2 18.5 3,534 estimates for Adaro Energy (ADRO) as we lower our coal production India 39.467 0,9 (4,3) 585 India 40,675 (0.3) 12.8 495 and price assumptions. Nonetheless, we maintain our TP at Nasdaq 11.696 0,6 30,3 212.060 Nasdaq 8,521 (0.6) 28.4 116,797 IDR1,300 (DCF valuation with WACC of 10.9% and LT growth of Dow Jones 28.654 0,6 0,4 18.560 Dow Jones 27,503 (1.0) 17.9 11,490 3%) as we roll over our valuation to 2021. In 1H20, ADRO reported CURRENCY AND INTEREST RATE CURRENCY AND INTEREST RATE soft results with net profits of USD155mn (-47.8% yoy) driven by w-w m-m ytd w-w m-m ytd weak coal prices and lower production due to the Covid-19 Rate Rate (%) (%) (%) (%) (%) (%) pandemic. Maintain BUY. Rupiah Rp/1US$ 14.632 1,0 (0,7) (5,5) Rupiah Rp/1US$ 14,115 (0.2) (0.7) 1.9 To see the full version of this report, please click here BI7DRRR % 4,00 - - (1,0) BI7DRRR % 5.00 - (0.3) (1.0) 10y Gov Indo bond 6,90 0,2 0,1 (0,2) 10y Gov Indo bond 7.16 0.1 0.2 (0.9) Japfa Comfeed Indonesia: All Indonesian`s chicken united (JPFA.IJ IDR. 1,125 HOLD TP. IDR. 1,150) HARD COMMODITY HARD COMMODITY JPFA Tbk is going to acquire its CBP business from its parent d-d m-m ytd d-d m-m ytd Unit Price Unit Price company JPFA Ltd. For c. IDR1.2tn (c. US$83mn) on Nov, 30 2020. (%) (%) (%) (%) (%) (%) Our insights on the transaction are: 1) the buying price is relatively Coal US$/ton 51 0,3 (2,3) (25,3) Coal US$/ton 67 (0.3) 0.2 (34.0) cheap compared to the reverse transaction of US$100mn back in Gold US$/toz 1.965 1,8 0,3 29,5 Gold US$/toz 1,478 (0.0) (2.1) 15.2 2011, 2) the acquisition value is in the range of JPFA`s TTM Nickel US$/mt.ton 15.337 1,2 12,7 9,9 Nickel US$/mt.ton 13,315 (2.5) (20.7) 25.6 EV/EBITDA and P/E valuation of IDR1.0-1.3tn, and 3) earnings Tin US$/mt.ton 17.867 0,2 (1,0) 4,0 Tin US$/mt.ton 16,771 1.5 1.7 (14.1) accretive in view of higher consumption of processed poultry SOFT COMMODITY SOFT COMMODITY products caused by COVID-19 pandemic. d-d m-m ytd d-d m-m ytd To see the full version of this report, please click here Unit Price Unit Price (%) (%) (%) (%) (%) (%) Cocoa US$/mt.ton 131 0,6 7,1 (8,7) Cocoa US$/mt.ton 2,476 (1.0) 1.3 4.7 MARKET NEWS Corn US$/mt.ton 43 (0,2) 4,7 (29,6) Corn US$/mt.ton 141 1.7 (2.5) 5.6 SECTOR Oil (WTI) US$/barrel 46 0,5 6,0 (30,6) Oil (WTI) US$/barrel 56 0.6 (0.2) 24.3 ▪ 1H20 booked IDR62.6tn net profit: OJK predict banking Oil (Brent) US$/barrel 2.784 2,0 (1,8) (8,0) Oil (Brent) US$/barrel 61 (0.2) (1.4) 13.0 sector’s net profit down by 20-50% for FY20F Palm oil MYR/mt.ton 134 (0,2) 12,7 (7,9) Palm oil MYR/mt.ton 2,632 (1.3) 11.4 34.8 ▪ Govt. processing the school subsidy at the parity of Rp35,000 Rubber USd/kg 1.205 N/A 2,8 20,5 Rubber USd/kg 142 0.9 6.9 13.6 for 35GB Pulp US$/tonne 360 (0,6) (0,9) 0,1 Pulp US$/tonne 1,205 N/A 2.8 20.5 CORPORATE Coffee US$/60kgbag 149 (0,4) 3,5 (5,0) Coffee US$/60kgbag 72 0.3 7.9 3.5 ▪ TPIA issued IDR 1tn of bonds Sugar US$/MT 33 0,2 13,5 (3,2) Sugar US$/MT 345 0.7 1.3 3.6 ▪ Sarana Menara Nusantara issues local bonds Wheat US$/ton 951 1,4 6,0 0,8 Wheat US$/ton 143 (1.9) 0.7 (5.1) Soy Oil US$/lb 131 0,6 7,1 (8,7) Soy Oil US$/lb 30 0.1 (3.4) 8.9 PREVIOUS REPORT SoyBean US$/by 43 (0,2) 4,7 (29,6) Soy Bean US$/by 871 0.1 (5.8) (1.3) ▪ Alam Sutra Realty: Better earnings albeit still in negative territory ▪ Media Nusantara Citra: Active Deleveraging on The Card ▪ Pembangunan Perumahan: Looking forward ▪ XL Axiata: Admirable performance ▪ Coal Mining: Scaling down coal production targets ▪ United Tractors: Slight recovery in Komatsu volume Source: Bloomberg Source: Bloomberg Danareksa Sekuritas – Equity SNAPSHOT CPI Outlook • • • • • • o o o Equity Research Company Update Monday,31 August 2020 BUY Adaro Energy(ADRO IJ) Maintain Fine tuning our estimates Last price (IDR) 1,145 Post the release of the 1H20 results, we fine tune our earnings estimates for Target Price (IDR) 1,300 Adaro Energy (ADRO) as we lower our coal production and price assumptions. Nonetheless, we maintain our TP at IDR1,300 (DCF valuation with WACC of Upside/Downside +13.5% 10.9% and LT growth of 3%) as we roll over our valuation to 2021. In 1H20, Previous Target Price (IDR) 1,300 ADRO reported soft results with net profits of USD155mn (-47.8% yoy) driven by weak coal prices and lower production due to the Covid-19 pandemic. Stock Statistics Maintain BUY. Sector Coal Mining 1H20 soft earnings on lower production and weak prices. After solid earnings Bloomberg Ticker ADRO IJ in 1Q20, ADRO reported net profits of USD57mn (-42.0% mom, -68.0% yoy) in No of Shrs (mn) 31,986 2Q20 due to: a) lower coal production (-10.6% qoq) from unfavorable weather Mkt. Cap (IDRbn/USDmn) 36,624/2,503 conditions and b) soft coal prices in 2Q20 owing to the Covid-19 pandemic. As such, net profits declined 47.8% yoy to USD155mn in 1H20 with lower ASP (- Avg. daily T/O (IDRbn/USDmn) 68.7/4.7 18.1% yoy) and lower production (-4.2% yoy). A lower SR and fuel prices (-22% Major shareholders (%) yoy) helped to lower cash costs by 13.8% yoy. The result is below our previous estimate (41% of our FY20F). With ADRO targeting a SR of 4.3x, we expect a Adaro Strat. Inv. 43.9 higher SR in 2H20. Nonetheless, we believe that anemic crude oil prices will Estimated Free Float 42.9 help to maintain cash costs at a low level. 2020 guidance: Revised production target on weak coal prices. Given the weak EPS Consensus (USDcents) coal prices amid the Covid-19 pandemic, the company decided to scale down its coal production target to 52 – 54mn tons for 2020 from initially 54 – 58mn 2020F 2021F 2022F tons. While maintaining a SR target of 4.3x, the revised coal production target Danareksa 0.8 0.9 1.1 in addition to lower coal price estimates lead to lower operational EBITDA in Consensus 1.0 1.0 1.1 the range of USD600 – 800mn (vs. a previous guidance of USD0.9 – 1.2bn) for 2020. This year, the company will spend lower capex at USD200 – 250mn (2019: Danareksa/Cons (23.2) (10.0) (4.0) USD489mn). ADRO relative to JCI Index The near-term coal price outlook remains muted. We foresee a muted coal price outlook in the near term from the Covid-19 pandemic.