Please consider the rating criteria & important disclaimer
income as since the 3Q16 its interest income underperformed.
The interest
income was flat at the range of IDR19
-
20 trillion per quarter
. The flat
growth since the last two years occurred along with the sluggish growth in
credit and the downtrend in loan yield.
On the other side, the net profit edged up 17.6%, but
the hike was more
attributable to the temporary hike of 22.9% y
-
y
from IDR5.8 trillion to
IDR7.1 trillion
in non
-
interest income
.
Credit Rebound
BMRI posted
the growth of 11.8% y
-
y
from IDR682 trillion in the 2Q17 to
IDR762.5 trillion
in the 2Q18’s credit
. The growth was
in stark contrast to
the growth of 7.1% in the 1Q18’s credit
. Thanks to the corporate segment
posting the buoyant growth of 23.1% to IDR300.1 trillion that BMRI
enjoyed the rosier growth in credit.
However, the buoyant credit growth
was coupled with a steep decline into
9.5% in the 2Q18’s loan yield
a way lower than the 1Q18’s loan yield of
10.1%. We lower the estimate of the 2018’s interest income from IDR86.8
trillion to IDR82.9 trillion after the downturn in loan yield.
Target Price of IDR7,500
We use an assumption of forward P/B of 1.9x (0.5 SD higher than the last 4
ASEAN Banks
BMRI at A Glance
BMRI is the second biggest bank in Indonesia after BBRI.
It is the leading bank in
Indonesia in term of the corporate segment
. In 2Q18, it distributed the credit of IDR300
trillion to the corporate segment of equal to 39% from the total credit.
It persistently endeavors to not only strengthen its relationship with the corporate clients
but also
bolster the contribution of the consumer and micro segment
. The contribution
of the consumer segment is targeted to hit 19% in 2020 with the focus on mortgage loan,
automotive credit, and payroll
-
based credit, particularly for employees of companies
which are the corporate clients of BMRI
Indonesian’s Bank Competitiveness in ASEAN
Banking industry in Indonesia is the investment priority in ASEAN as it offers
higher credit
rate
than do its peers in ASEAN. It is the takeaway factor to the excellent characteristic
the banking industry in Indonesia has.
The Indonesia’s banks
are still capable of maintaining NIM higher than 5%
albeit the
headwind of decline in reference rate. The higher NIM is capable of being translated into
a higher ROE.
A number of banks in Malaysia and Singapore such as OCBC, CIMB, and Malayan Banking
can outpace
the growth of 10%
-
20% in net profit
posted by the Indonesia’s banks.
However, those three banks have bigger assets than does the Indonesia’s bank have.
Company
Market Cap
Bangkok Bank
11,898
94,446
6.7%
2.4%
8.9%
11.3x
1.0x
3.2%
Siam Commercial
14,897 92,841
-
13.0%
3.2%
11.7%
11.8x
1.3x
3.8%
Bank of Ayudhya
8,903
64,128
7.5%
3.7%
10.7%
12.2x
1.3x
2.1%
Philippine
BDO Unibank
10,366
53,371
6.4%
4.1%
9.5%
20.2x
1.9x
0.9%
Metropolitan Bank
5,490
41,612
6.5%
3.8%
8.3%
12.5x
1.1x
1.3%
Interest Income (IDR bn)
|
3Q15
-
2Q18
Source: Company, NHKS research
Performance Highlights
Net Profit (IDR bn)
|
3Q15
-
2Q18
Source: Company, NHKS research
Loan Yield, Cost of Deposit, NIM
|
3Q15
-
2Q18
Source: Company, NHKS research
Loan Composition
Source: Company, NHKS research
Deposit (IDR bn)
| 3Q15
-
2Q18
Source: Company, NHKS research
Gross Loan (IDR bn)
|
3Q15
-
2Q18
Multiple Valuation
Forward P/B band
| Last 4 years
Source: NHKS research
Dynamic Forward P/B band
| Last 4 years
Source: NHKS research
Rating and target price update
Target Price Revision
Date
Rating
Target Price
Last Price
Consensus
vs Last Price
vs Consensus
02/22/2018
Buy
10,300 (Dec 2018)
8,800
8,407
+17.0%
+22.5%
08/20/2018
Hold
7,500 (Dec 2018)
6,700
8,171
+11.9%
-
8.2%
Source: NHKS research, Bloomberg
Closing and Target Price
Source: NHKS research
Analyst Coverage Rating
Source: Bloomberg
NH Korindo Sekuritas Indonesia (NHKS) stock ratings
1.
Period: End of year target price
2.
Rating system based on a stock’s absolute return from the date of publication
Buy
: Greater than +15%
Summary of Financials
DISCLAIMER
This report and any electronic access hereto are restricted and intended only for the clients and related entity of PT NH Korindo Sekuritas Indonesia. This report is only for information and recipient use. It is not reproduced, copied, or made available for others. Under no circumstances is it considered as a selling offer or solicitation of securities buying. Any recommendation contained herein may not suitable for all investors. Although the information here is obtained from reliable sources, it accuracy and completeness cannot be guaranteed. PT NH Korindo Sekuritas Indonesia, its affiliated companies, respective employees, and agents disclaim any responsibility and liability for claims, proceedings, action, losses, expenses, damages, or costs filed against or suffered by any person as a result of acting pursuant to the contents hereof. Neither is PT NH Korindo Sekuritas Indonesia, its affiliated companies, employees, nor agents liable for errors, omissions, misstatements, negligence, inaccuracy arising herefrom.
in IDR bn 2016/12A 2017/12A 2018/12E 2019/12E Pre-Provi s i on ROA 4.5% 4.0% 3.8% 3.7%
Interest Income 76,710 79,502 82,886 91,344 Non-Interes t Income/Op. Rev 28.5% 31.1% 31.5% 28.7%
Growth (% y/y) 7.2% 3.6% 4.3% 10.2% Cos t/Income 40.2% 43.4% 43.5% 42.1%
Interes t Expens es (24,885) (27,174) (28,866) (32,254) Ca s h Di vi dend (IDR bn) 6,213 9,288 10,318 11,499
in IDR bn 2016/12A 2017/12A 2018/12E 2019/12E 2016/12A 2017/12A 2018/12E 2019/12E
Ca s h 22,907 24,269 23,051 23,258 Pri ce /Ea rni ngs 19.6x 18.1x 13.6x 12.2x
in IDR bn 2016/12A 2017/12A 2018/12E 2019/12E 2016/12A 2017/12A 2018/12E 2019/12E