RHB Indonesia - Bank Tabungan Negara: Not Slowing Down Yet - 18 January 2017 - (Bank Tabungan Negara, Puradelta Lestari) Unknown Rabu, 18 Januari 2017




Good morning,

Bank Tabungan Negara: Not Slowing Down Yet

Maintain BUY on BTN with an unchanged GGM-derived TP of IDR2,420 (27% upside). BTN is one of our Top Picks due to its undefeated position in the lower-income mortgage market, with a projected higher market share of 32.6% by end-2017F (end-2016: 31.5%). Provisions should remain manageable due to its substantial mortgage exposure, where loans are secured by the relevant properties. We believe a lower payout ratio would be crucial in maintaining its CAR at sufficient levels, as BTN is expected to grow its loan book by at least 18% over the next three years.

¨ Main beneficiary of housing backlog of c.11.3m units in Indonesia, given Bank Tabungan Negara’s (BTN) niche in the lower-income mortgage segment (ticket size averages c.IDR250m). Its strong positioning in this segment should also limit downside risks, given the borrowers’ primary housing status. Aside from subsidised mortgages provided under strict government requirements (having a maximum monthly salary of IDR4m and a tax number, not owninga house, and with a cap on house price), it is also able to offer non-subsidised mortgage loans to borrowers who do not meet the requirements. As such, we project subsidised and non-subsidised mortgages to grow by 21% and 19.5% YoY respectively this year, with mortgages making up71.7% of total loans.
¨ Provisions are manageable due to BTN’s substantial exposure to mortgages, as lending would be secured by the relevant properties. Also, management has implemented stricter underwriting processes – for both mortgages and property construction lending – to improve asset quality. As such, we expect credit cost to stabilise at 63bps, with a decent LLC ratio of 47.9% this year.
¨ More room to push CASA deposits. BTN’s management is expected to continue focusing on pushing higher CASA deposits, in order to lower its blended cost of funds (CoF). It remains optimistic, given that nearly half of its c.2m mortgage accounts are already utilising its deposit accounts as daily accounts, ie to pay electricity and prepaid mobile phone bills. Therefore, CASA deposits should reach 50.5% by end-2017 (Sep 2016: 47.2%, end-2016: 50%).
¨ Lower payout ratio is a must in our view, despite a CAR of 20.6%as of Sep2016. This is due to BTN’s loan growth targetof at least 18% for the next three years. We believe the Government (and majority shareholder)would be reasonable on this matter as BTN is already supporting the Government’s housing programme through its subsidised mortgage programme (FLPP). All in, we assume lower payout ratio of17.5% (2015-2016: 20%), which translates to IDR47 dividend per share for 2017F (2016 estimate: IDR45).
¨ Maintain BUY, with TP of IDR2,420. We like BTN, which remains one of our Top Picks given its niche business model in subsidised mortgages, and on-track asset quality improvements. We retain our BUY call with an unchanged GGM-based IDR2,420TP, assuming cost of equity (CoE) of 12.1%, sustainable ROE of 14% and long-term growth of 3%. Key risks include changes in government policies, higher-than-expected CoF, higher-than-expected credit costs, and rising building costs which may limit housing supply. (Eka Savitri)

Link to Daily report: Indonesia Morning Cuppa - 180117
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Visit Notes:

Puradelta Lestari (DMAS IJ, NR), Company Visit Notes
¨ During 2016 the company targets 50 Ha marketing sales and they achieved 53 Ha marketing sales of which; 52.1 Ha comprised of industrial land sales (around 38 Ha was contributed by Astra Honda Motor), 0.6 Ha residential, and 0.6 Ha commerical land sales.
¨ The company expect FY16 revenue to reach IDR1.5trn (91% from consensus) and net profit to reach IDR750-800bn (85%-91% from consensus).
¨ This year, DMAS has received several inquires for industrial land sale where a pharmaceutical company is interested for 30 – 40 Ha, an auto related company for 5 – 10 Ha. Management expects to close these sales by end of 1Q17 with ASP at approximately IDR1.7 mn/sqm.
¨ DMAS also plans to launch 300 - 400 new residential homes during the period of March – April and September – October. The selling price for the home will range from IDR 0.9bn – 1.1 bn/ unit (approximately IDR 5 mn/sqm).
¨ This year, management will allocate IDR900bn of capex for building supporting infrastructure as well as land acquisition. 2 of their tenants are expected to operate this year; Mitsubishi Motors in 2Q17 and GM-Wuling in 3Q17.
¨ Currently DMAS has the largest industrial net saleable land bank amongst its peers at 1,024 Ha. It is currently trading at 11.9x FY16 PE with consensus NAV per share of IDR335.84 and 3M average daily traded value of IDR 6.3bn. (Yualdo Tirtakencana Yudoprawiro)
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Best regards,

Helmy Kristanto
Director
Head of Indonesia Research
PT. RHB Securities Indonesia


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