Results Review:
Bank Tabungan Negara (BBTN IJ, BUY, TP: IDR2,420)
Better Days Ahead
We expect BBTN to generate sustainable earnings growth going forward, driven by its focus on the mortgage segment, manageable credit cost and improvements in asset quality. Subsidised mortgage should continue to support its loan book expansion as the Government is allocating a total of IDR15.2trn from its 2017 state budget. With substantial mortgage exposure, BBTN’s credit cost and loan loss coverage (LLC) ratio should continue to be manageable as the loans are already secured by the properties. Maintain BUY and GGM-based IDR2,420 TP (25% upside).
Bank Tabungan Negara (BBTN IJ, BUY, TP: IDR2,420)
Better Days Ahead
We expect BBTN to generate sustainable earnings growth going forward, driven by its focus on the mortgage segment, manageable credit cost and improvements in asset quality. Subsidised mortgage should continue to support its loan book expansion as the Government is allocating a total of IDR15.2trn from its 2017 state budget. With substantial mortgage exposure, BBTN’s credit cost and loan loss coverage (LLC) ratio should continue to be manageable as the loans are already secured by the properties. Maintain BUY and GGM-based IDR2,420 TP (25% upside).
♦ Earnings growth outlook. We expect Bank Tabungan Negara’s (BBTN) earnings growth to be sustainable, backed by higher loans volume, mostly coming from subsidised mortgage. In addition, non-subsidised mortgage would be the second contributor to its loans book as it would be able to tap into the low income segment (with maximum mortgage size of IDR200m) that does not match the requirements for subsidised mortgage. BBTN should also benefit from lower corporate tax rate of c.20% (previously 25%) this year as the company has secured 40% free float for its shares. All in, we expect its earnings to generate a 23% 3-year CAGR for 2016F-18F.
♦ Manageable asset quality. BBTN’s September NPLs stood at 3.6%, still relatively manageable in our view. We anticipate gross NPLs to improve to 3% by end-2017F. Given the company’s strategy to maintain mortgage as its core business, credit cost should remain manageable at 63.5bps and 65.1bps in FY17F-18F as it build up its LLC ratio to 47.9%/48.8% by end-2017F/2018F respectively.
3QFY16 earnings – below expectations
|
(IDRbn)
|
3Q16
|
2Q16
|
QoQ
|
3Q15
|
YoY
|
Comments - QoQ
|
|
NII
|
1,954
|
1,892
|
3.3%
|
1,759
|
11.1%
|
Up from strong subsidised mortgage
growth
|
|
Non-II
|
308
|
303
|
1.7%
|
255
|
20.6%
|
|
|
PPOP
|
984
|
869
|
13.2%
|
960
|
2.5%
|
|
|
Provisions charges
|
(173)
|
(170)
|
1.5%
|
(389)
|
-55.5%
|
Relatively stable due to a more
manageable NPLs and building up of LLC ratio
|
|
Net
profit
|
579
|
555
|
4.3%
|
394
|
47.0%
|
|
♦ Maintain BUY. We maintain our BUY call on BBTN due to:
i. Its strong focus in the subsidised mortgage segment;
ii. Manageable credit cost; and
iii. Improvements in asset quality with manageable credit cost.
Our GGM-based IDR2,420 TP is based on FY17F P/BV of 1.2x (0.25SD to its historical mean) and 8.8x P/E.
Kindly click the following link for the full report: Bank Tabungan Negara : Better Days Ahead
i. Its strong focus in the subsidised mortgage segment;
ii. Manageable credit cost; and
iii. Improvements in asset quality with manageable credit cost.
Our GGM-based IDR2,420 TP is based on FY17F P/BV of 1.2x (0.25SD to its historical mean) and 8.8x P/E.
Kindly click the following link for the full report: Bank Tabungan Negara : Better Days Ahead
Best regards,
Eka Savitri
Eka Savitri
RHB Securities
Indonesia
