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Good morning,
Bank Rakyat
Indonesia – More Room For Improvement
We
maintain our BUY call and GGM-derived IDR16,500 TP (11% upside) on the back
of BRI’s strategy to focus on micro lending. The KUR programme would not
cause an overhang, in our view, since BRI can still disburse loans through
its regular micro lending product KUPEDES. Additionally, BRI Link, its
branchless banking agent that also facilitates micro borrowers, utilises
BRI’s e-banking network through the fee sharing scheme. That said, we expect
its fee income to contribute a greater portion (12.9%) to operating income in
FY18 (1H17: 10.7%).
¨ Still focused on
micro lending.
Despite increasing competition in this segment, we believe Bank Rakyat
Indonesia (BRI) is still in a leading position due to its extensive know-how
in this field, which cannot easily be duplicated by rivals. Gross NPL ratio
for this segment was at a manageable 1.5% as of June. As such, we expect its
exposure to micro lending to increase to 34.1% of its loan book by end-2018.
¨ Funding mixture has
room to improve.
Given the substantial portion of micro lending in its loan book, it should be
able to manage its NIMs, which are well above the industry average. Yet, we
believe that, going forward, BRI would need to improve its funding structure in
order to minimise further NIM compression. With over 36m micro savings
accounts, BRI has already a decent customer base of CASA deposits. Meanwhile,
for current accounts, BRI aims to grow its institutional clients. All in, we
expect CASA deposits to reach 61.2% of total customer deposits by the end of
2018.
¨ Expect higher
contributions from fee income. With a strong retail-based business model,
we expect BRI to book higher fee income contributions to its numbers, moving
forward. Payment services and e-banking related fees would also be two key
fee income contributors, due to the utilisation of BRI Link Agent as part of
its branchless banking infrastucture. BRI applies equal fee sharing income
with BRI Link Agent when providing several banking services, ranging from
money transfers to utilities payments. As such, we expect its fee income to
grow 20% YoY next year, resulting in a 12.9% contribution to total operating
income.
¨ BUY, with a
IDR16,500 TP.
We maintain our BUY recommendation and GGM-derived TP of IDR16,500, which
also implies 2.2x 2018F P/BV. Our TP also reflects the following assumptions:
9.9% CoE, 18.1% sustainable ROAE and 3% long-term growth. BRI is our Top Pick
for Indonesia’s big-cap banking stocks.
¨ Risks. Downside risks to
our call are are higher-than-expected exposure to the KUR programme and
higher-than-expected credit costs in providing an ample LLC ratio. (Eka Savitri)
Link
to report: Bank Rakyat Indonesia : More Room For Improvement
Link
to daily report: Indonesia Morning Cuppa 040817
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Company Update:
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Arwana Citramulia
(ARNA IJ, BUY, TP: IDR550), Robust July sales
On phone call with
Arwana, the company indicated its July sales jumped to 4.4m sqm (+49% MoM, +83%
YoY), partly driven by sales seasonality. Despite the five-day holiday during
the month, July sales were almost same level with average monthly sales in
1Q17 when Arwana’s monthly sales reached its previous peak. This indicated
that average daily sales in July were higher than that in 1Q17.
Arwana said that
UNO, Regular, and Best Buy accounted for 40%, 16%, and 44% of total sales,
the same as 2Q17 sales contribution.
We
maintain BUY with a DCF-derived TP of IDR550 (24% upside), which implies
25x/17x FY17F/18F P/Es respectively. (Andrey
Wijaya)
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Media Highlights:
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Corporate
Hotel business under
pressure in 2Q17
RI export financing
rises in 1H17
Gudang Garam
acquires IDR845bn of land
Ciputra Development
prepares 7 new projects
Chandra Asri
upgraded to Ba3 by Moody’s
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Our
Recent Publication:
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Company Update: Nippon Indosari Corpindo – Expecting
Sunshine After The Storm
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Company Update: Aneka Gas Industri – Muted Volume
Growth Due To Lebaran Break
Link to report: Aneka
Gas Industri : Muted Volume Growth Due To Lebaran Break
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Company Update: Wijaya Karya Persero – Stronger Year
Ahead
Link to report: Wijaya
Karya Persero : A Stronger Year Ahead
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Company Update: Harum Energy – Strong Earnings To
Continue
Link to report: Harum
Energy : Strong Earnings To Continue
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Results Review: Bumi Serpong Damai – Expect Its
Performance To Stay Level In 2H17
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Results Review: XL Axiata – Upbeat On Better Data
Monetisation
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Results Review: Unilever Indonesia – Solid Earnings
Growth Likely To Continue
Link to report: Unilever
Indonesia : Solid Earnings Growth Likely To Continue
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Results Review: Alam Sutera – Positive Surprise
Following a Weak 1Q17
Link to report: Alam
Sutera : Positive Surprise Following a Weak 1Q17
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Results Review: Intiland Development – All Priced In
Link to report: Intiland
Development : All Priced In
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Results Review: Pembangunan Perumahan Persero –
Positive Outlook Ahead
Link to report: Pembangunan
Perumahan Persero : Positive Outlook Ahead
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Best regards,
Helmy Kristanto
Director
Head of Indonesia Research
PT RHB Sekuritas Indonesia
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