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May 04, 2016 09:26:31
BANK TABUNGAN NEGARA | BUY


STANDING TALL


- Elevated multiples are supported by growth momentum
- Asset quality and cost-income improvements intact  
- A BUY rating well deserves  

We initiate coverage Bank Tabungan Negara (BTN) with a BUY rating. The core strength of the bank is the ability to grow its EPS above system, which has been the key driver of the stock performance. We think that the elevated multiples are supported by the growth momentum and sustainable improvement on asset quality. The medium-term trend for cost-income improvement remains intact as well to support solid EPS growth. BTN is also well-placed to benefit from an economic recovery, given its fortress balance sheet. We introduce our TP of IDR2,370, which still offers 32% upside from the current price level. BTN currently trades a little below +1sd on 3-year mean P/B. Multiples should continue to push up towards +2sd on P/B. Robust earnings momentum and fortress balance sheet should drive this. We prefer to follow P/B multiples on the stock given its significant return profile. Our TP is implying 1.4x 2017E PB.


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