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Good morning,
Bank
Rakyat Indonesia: Reaching a New Balance
We
continue to like BBRI due to its resilient business model in micro lending,
which is not easily duplicated by peers. Although we anticipate asset yield
to fall due to higher contribution of the KUR program to total micro lending,
NPLs are likely to improve to 2.2% by end-2017 (FY16: 2.3%).We reiterate our
BUY call with a new TP IDR14,500 (from IDR12,900, 19% upside), as we rollover
our valuation to 2017.
¨ 3Q16
preview: Likely to be inline. 3Q16 results should be announced next
week. We expect net interest margins (NIM) to be fairly stable on a QoQ
basis, due to higher utilisation of its funding. That should be reflected in
a higher loan-to-deposit ratio (LDR). Meanwhile provisions are expected to
remain high in order to maintain its loan loss coverage (LLC) ratio at a
minimum level of 150%, as we have assumed an uptick in gross NPL ratio to
2.4% by September.
¨ Continued
focus on micro lending. We view the Government’s micro lending program, called
Kredit Usaha Rakyat (KUR), as a drag on Bank Rakyat Indonesia’s (BBRI) loan
yield. This is as KUR attracts lower yield as compared to commercial micro
lending of Kupedes (19% vs c.21%). Under this year’s scheme, the Government
is providing a 10% subsidy on KUR micro for banks while the borrower pays
only 9% interest on the loan. All in, we project a higher contribution from
micro lending to its total loan book of 32.5% and 33.1% by end-2016/2017,
respectively (end-2015: 31.7%).
¨ Expect
slight uptick in NPL, before inching down by end-2017. BBRI’s lower asset
quality is mainly attributed to its corporate non-state owned enterprise
(SOE) lending, with non-performing loans (NPLs) of 4.7% as at June.
Management emphasised that it would remain cautious due to its exposure to
specific borrowers– including a private biodiesel producer and a sugar
manufacturer. Having said that, gross NPL is likely to reach 2.3% by year-end
before inching down to 2.2% by end-2017.
¨ Gaining
market share in deposits. BBRI has aggressively gained market share
in customer deposits, particularly in savings accounts (June: 18.6% vs Jun
2011: 16.6%), thanks to its huge customer deposit base of c.50m accounts. In
addition, it has a strong presence with 10,628 outlets throughout Indonesia.
As such, BBRI is expected to continue to tap more customers for deposit-based
accounts, which should underpin a stable market share. We expect it would
focus more on increasing its CASA portion on deposits to 59.1% and 59.7% by
end-2016/2017 (end-2015: 58.7%).
¨ Maintain
BUY, new IDR14,500 TP. We maintain our BUY call on BBRI with a new IDR14,500
TP as we rollover our valuation to 2017. We derive our GGM-based TP
(implies2017 P/BV of 2.15x) by assuming a 17% sustainable ROE, 9.5% cost of
equity and 3% long-term growth. Risks to our call include
higher-than-expected gross NPLs, lower Government subsidy on the KUR program
which would result in further yield decline, and Government intervention risk
due to its status as an SOE bank. (Eka
Savitri)
Link
to report: Bank Rakyat Indonesia : Reaching a New Balance
Link
to Daily report: Indonesia Morning Cuppa - 201016
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Media
Highlights:
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Corporates
Telkom to expand to Myanmar
Waskita received IDR4.59trn loan for LRT
project
Bukit Asam sales volume increased by 6.6%
YoY in 9M16
Bumi Minerals to repay USD350m loan
CIMB Niaga aims IDR800bn of fee based income in FY16
Modernalnd to repay USD57m senior notes
PP Properti aims IDR1.5trn from right issue
Total secured IDR2.5trn of new contracts
until mid October 2016
Government inaugurates 17 new bonded
logistic centers
Jakarta MRT replaces top officials due to
delays
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Our
Recent Publication:
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Sector update:
Building Materials: Sales To Pick Up Despite Intensified Competition
Link
to report: Sales To Pick Up Despite Intensified Competition
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Company Results:
Arwana Citra Mulia : Strong Earnings Recovery To Sustain
Link to report: Arwana
Citra Mulia : Strong Earnings Recovery To Sustain
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Economic Highlight:
Exports Continues to Recover while Imports Fall Deeper in September
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Not Rated Note:
Wismilak Inti Makmur : Only Listed Company To Enjoy New Excise Tax Threshold
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Sector update:
Regional Oil & Gas: Glimmer of Hope
Link
to report: Glimmer Of Hope
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Company Update:
Hexindo Adiperkasa: Refurbishment Cycle To Boost Spare Parts Revenue
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Corporate news
flash: Semen Indonesia: Working To Sort Out Rembang Plant Quagmire
Link to report: Semen
Indonesia : Working To Sort Out Rembang Plant Quagmire
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Sector news flash:
Property: Revision To Foreign Property Ownership Regulation
Link
to report: Revision To Foreign Property Ownership Regulation
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Sector update:
Construction: Positive Outlook Ahead
Link
to report: Positive Outlook Ahead
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Sector update:
Regional Plantation: Inventory To Rise Further As Peak Season Approaches
Link
to report: Inventory To Rise Further As Peak Season Approaches
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Best regards,
Helmy Kristanto
Director
Head of Indonesia
Research
PT. RHB Securities Indonesia
