RHB Indonesia Morning Cuppa - 3 August 2016- (BFI Finance, KMI Wires)

Good morning,

Key Takeaways from KMI Wires and Cable and BFI Finance Visits

BFI Finance

¨ BFI Finance (BFIN IJ, NR) is the multifinance companies with strong focus on high yield financing segment (non-dealer cars and motorcycles financing) (c.49% of managed receivables). Please noted this non-dealer auto business is financing by using auto (cars or motorcycles) as the collateral. Managed receivables grew relatively flat YoY basis (include off balance sheet) of 0.8% due to contracted YoY new bookings. While gross NPL ratio flat at 1.5% with stable write-offs at 1.6% (annualized).

¨ Net interest margin (NIM) expanded by c.30bps on YoY basis in 1H16 to 8.5% due to lower funding cost as well as refocusing more on high yield products segment. This year BFIN plan to issue another round of bonds issuance of IDR5trn in 4Q16 following its IDR1trn bonds issuance in February 2016. BFIN currently rated at A+ from fitch rating for its bonds.

¨ BFIN is one of the dividend yield player (c.8%) given that its payout ratio of nearly 50% for the past three years to maintain its modest level of ROAE (annualized 1H16: 16.7%). BFIN has a cheap valuation of 0.9x 2016F P/BV multiple, with relatively low liquidity shares. (Eka Savitri)

KMI Wires and Cables

♦ KMI Wire and Cable (KBLI IJ, NR) has second biggest market share in cable industry with 42k tones/year capacity (16k tones aluminum and 26k cooper). This year KMI plans to add additional 3k tones/year capacity for high voltage cable.

♦ Starting this year, KMI will produce high voltage cable which previously they can only produce low and medium voltage cable. Higher voltage cable has higher margin than lower voltage cable

♦ Raw material cost contributes 80% - 90% to its COGS which mainly are aluminum and cooper which only 20% of it is import products. Its production is also based on order.

♦ Company expects to have higher revenue contribution from PLN of 35% (previously only 5%) this year. Private sector is expected to contribute around 60% of revenue.

♦ This year KMI expects its net profit to reach IDR250bn, surged +117%YoY from last year with gross margin minimum of 16%. Its higher margin will come from its new product (high voltage cable) and PLN order which has higher margin. Currently, the stock is trading at 3.9x FY16F PE. (Dony Gunawan)

Link to Daily report: Indonesia Morning Cuppa - 030816