Bank BJB ($BJBR): Building up growth buffers
Maintain BUY on higher CAR to support expansion
Reiterate BUY on BJBR with TP at IDR1,175 (1.2x FY16 P/BV) for its 19%
YoY net profit growth and 5.2% dividend yield estimates. Land
revaluation in 2H16 is projected to add 1.3ppt CAR to 16.7%, with upside
risk to the growth buffer coming from a potential capital raising in 2017,
which could put BJBR’s CAR at par with the big banks. As demand from
its high-yield consumer segment remains strong, BJBR should face no
issues in maintaining loan growth at 12% in FY16-18F.
Building up capital…
Having proposed a lower dividend payout ratio (DPR) of 40% for 2016F
profit (vs. 60% in 2015), BJBR is building up more CAR through a total
IDR762b land revaluation, which is expected to be completed in 2H16.
The estimated impact is 1.3ppt addition in capital buffer to 16.7%. The
bank is also in talks with the West Java Provincial Government on a
potential rights issue in 2017. At least four municipal governments in
West Java and Banten Provinces outside BJBR’s existing shareholders
have expressed an interest to participate in the corporate action, which
based on our forecast could boost BJBR’s CAR to as high as 20% in 2017-
18F, at par with the big players.
… to support robust growth
We adjust our DPR assumption to 40% from previously 35% for 2016-18F
and add the upcoming asset revaluation, which in total should allow CAR
to stay above 15% until YE18. At this level, BJBR will have enough capital
to support 12% YoY loan expansion as demand from the consumer
segment remains strong. Combined with sufficient funding, with an
estimated LDR of 90% by YE16, we estimate 19% YoY EPS growth in 2016F,
higher than for most of the big banks under our coverage. Maintain BUY,
TP at IDR1,175 (1.2x FY16P/BV).