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Apr 12,2017 12:39:32

Bank Jatim ($BJTM): Unjustified Valuation, Downgrade to REDUCE

- Second-largest regional development bank, but valuation looks stretched: Bank Pembangunan Jawa Timur ($BJTM) is the second largest regional development bank in terms of market cap (after $BJBR), owned by East Java Provincial and Municipal Governments (80% of outstanding shares); its main purpose is to provide financial services for East Java civil servants. BJTM’s share price has rallied by 21.2% in the past one month, now reaching 1.4x FY17F PBV (at 15% ROE), notably higher than its small cap bank peers’ of 0.6-1.1x PBV, and also more expensive than BBNI at 1.3x PBV. BJTM’s PBV is currently more than +2SD above its 5yr mean, which we find too expensive. As such, we downgrade our recommendation to REDUCE (from HOLD) with a new target price of IDR600.

- Low-risk payroll a majority of loan book: More than half of BJTM’s loan book was dominated by consumer loans (2016: 67%), which consist of payroll and mortgage loans. Due to its nature as a low-risk loan segment, payrolls deliver excellent asset quality with an NPL ratio of 0.44% in 2016. Helped by its status as a regional development bank, BJTM gained exposure in providing payroll services to regional civil servants of the East Java government, which accounted for >50% of its total outstanding consumer loans in 2016. Going forward, we believe civil servants’ payroll loans will remain as a core asset driver, accounting for 68.2% of total loans in 2017F. Given the growth in the consumer segment, we expect loan growth to reach c.7% y-y in 2017F and 2018F, slightly higher than 4.4% y-y in 2016.

- High NPL ratio in SME & Commercial (10-13%) remains key concern: Despite its asset growth being supported by strong payroll loans, BJTM is dragged down by the non-consumer division on poor asset quality. The SME and commercial segments have worsened the overall NPL ratio to 4.77% (2015: 4.29%). The SME segment’s NPL ratio stood at 9.6% (2015: 22.7%) while that of the commercial segment stood at 12.77% (2015: 9.97%). We believe that BJTM’s current valuation (at more than +2SD above mean) looks unjustified with the current elevated NPL level.

- Earnings likely to grow slower on the back of higher provisioning expenses: Given that the high NPL ratio will remain an issue in 2017F, we expect earnings growth to slow to 7% y-y in 2017F (2016: 16% y-y) on higher provisioning expenses of IDR553bn in 2017 (vs. 2016: IDR510bn). In addition, we expect the NII to grow slower at 5.3% y-y in 2017F vs. 9% y-y in 2016, and the NIM to come down to 6.7% in 2017F (2016: 6.9%) before further declining to 6.5% in 2018F.

Downgrade to REDUCE; prefer $BNGA and $PNBN for Small Cap Banks
BJTM is currently trading at 1.4x 2017F PBV, at more than +2SD of its 5yr mean. We downgrade BJTM to REDUCE with a revised TP of IDR600 (from IDR475), now based on a PBV multiple of 1.16x, at 1SD above its 5yr mean, on the new 2017F BVPS of IDR513 (previous TP based on 1x PBV on previous 2017F BVPS of IDR475 – see exhibit 10). We prefer BNGA (IDR1,215, BUY) and PNBN (IDR935, BUY) within the Indo Small Cap banks universe. Risks to our call include: 1) Stronger-than-expected economic growth, 2) NPL improvement, and 3) Lower-than-expected provisioning.

Dec 01,2016 11:42:02

Bank Jabar: 10M16 Results- Above Expectations ($BJBR)

Bjb reported 10M16 unconsolidated net income of Rp1.5tn, +49% yoy, accounting for 91% of FY16 consensus and 97% of Mansek’s expectations. Strong net income growth was driven by decline in provision expenses of -62%yoy and operating income growth of +25%yoy. Assuming its syariah unit’s net loss was similar to 9M16, we estimate consolidated net income to total to Rp1.2tn, accounting for 76% of consensus and 81% of Mansek’s expectations. Net income in the month of Oct totaled to Rp77bn, -41%mom/-14%yoy.

Loan growth +15%yoy (flat mom), deposit growth -6%yoy (-1%mom). We believe infrastructure loans, classifiedunder commercial loans, continues to be the main loan growth driver. Decline in deposit growth was driven by demand deposit of -7%yoy and time deposit of -9%yoy while savings deposit grew by +10%yoy bringing CASA to 45% in Oct16 vs. 43% in Oct15. LDR increased to 87% in Oct16 from 71% in Oct15.

NIM increased to 7.3% in 10M16 from 6.0% in 10M15 as cost of funds declined by 88bps while asset yield increased by 42bps, mainly due to strong loan growth and decline in deposit growth. On a monthly basis, NIM increased to 9.2% in Oct from 5.6% in Sept.

Cost to income ratio improved to 64% in 10M16 vs 67% in 10M15. However in the month of Oct, cost to income ratio deteriorated to 92% from 48% in Sept due to significant increase in other expenses totaling to Rp582bn.

Provisioning expenses declined by 62%yoy in 10M16 to Rp78bn as the bank continues to receive insurance claims and recoveries of bad debts. We estimate Bjb to have written off about Rp639bn in 10M16 and Rp70bn in the month of Oct alone. Provisioning level declined to 1.0% in Oct16 from 1.1% in Sept16 while cumulative cost of credit remains stable at 2.3% in Oct16.

Maintain Neutral with TP of Rp1,600. The counter is trading at 1.3x P/BV 2017F. We remain cautious on the bank’s syariah unit which has been dragging down consolidated net income. As of 9M16, BJBR’s syariah unit recorded a net loss of Rp231bn and a NPF ratio of 12.4%.

Nov 18,2016 15:16:45

Recovery on track ?

Loans growth has rebounded
Bank Indonesia states that banking industry loans growth in October 2016 grew by 7.5% YoY. The growth was better than September’s growth of 6.5% YoY, and October is the first month where loans growth accelerates after a string of deceleration that had happened since the start of the year. Furthermore, Bank Indonesia expects that significant loans growth recovery could start in 2Q17 as appetite for capacity expansion is expected to rebound. In line with authorities’ projection, we expect that loans to grow by 11% in 2017, helped by : 1) Higher GDP growth as we expect GDP to grow by 5.3% in 2017 versus 5.1% in 2017 2) Bank Indonesia’s stance to keep liquidity afloat by keeping lenient monetary policy 3) High level consumer confidence that we expect to continue throughout 2017 where in October 2016 the reading was at 116.8, much higher than in September of 110.0.
NPL is stabilizing
Banking industry NPL was lower to 3.1% in September 2016 from 3.2% a month earlier after accelerating consistently since January 2016. This is an encouraging sign that asset quality has begun to stabilize. With accelerating loans growth in October 2016, we expect that the NPL reading in October could be better. The improvement of asset quality is the main theme of our call for better bottom line growth for banking industry in 2017. As of September 2016, banks grew its net income by only 9.7% YoY to Rp84.8 tn. Slower growth of provision expense in 2017 due to gradual decrease of NPL would be the main factor for net income acceleration in 2017. We expect banking industry’s to book 15-17% net income growth in 2017 thanks to higher loans growth and declining NPL.
Cost of fund is starting to creep up
OJK confirms that several banks from Book I to Book IV have started to slightly increase special TD rates since October 2016. The increase of TD rate is inevitable as LDR is stubbornly above 90% and banks have begun to push loans book growth after long period of asset quality consolidation. Nevertheless, we will only see gradual increase of cost of fund and stabilization of NIM instead of significant drop of NIM as we believe Bank Indonesia will keep its commitment to lenient monetary policy to keep the acceleration of GDP growth,
What will the central bank do ?
Bank Indonesia decided to keep reverse repo rate benchmark at 4.75% (in part to guard the exchange rate stability) in response to global uncertainty after Trump won US presidential election. However, we do not believe that BI would change its course to a more hawkish stance as inflation is still contained and the need of monetary policy to complement the already limited fiscal room. Instead, we expect BI to lower reserve requirement in 1H17 to push liquidity to the market.
BBNI and BJBR are still our top pick

We maintain BBNI as our top pick for Book IV bank on the back of our conviction that the bank could significantly lower improve its asset quality in 2017. We expect BBNI’s NPL to decline to 2.5% at the end of 2017 from 3Q16 level of 3.1% on. For Book III bank, BJBR is our choice as the bank’s transformation has proven to significantly improve asset quality in 2016 that can continue throughout 2017.


Nov 08,2016 18:32:53

Banking: 9M16 Results - On the Road to Recovery?

- Banks' average profit growth improved to 4% y-y in 9M16 from +1% y-y in 6M16, but loan and deposit growth remained weak at +9% y-y and +6% y-y respectively. NIM improved to 6.7% while NPL reached 3.0% with signs of peak. Trading at 1.6x P/BV 2017, we keep our Neutral sector call with $BBRI, $BBTN and $BNGA as top picks.

- Average net profit growth of 4% y-y in 9M16. The 12 banks under our result universe show improving profit growth from the previous quarter given the high losses incurred by $BNLI in 1Q and 2Q16. The results were in line with expectations, accounting 73% of the consensus’ full year targets. $BMRI, $BBTN, and $BJBR posted below expectations, while $PNBN, $BJTM and $BNGA above. $BNLI continued to record losses in 9M16 on its rising NPL level. At the PPOP level, average growth was a decent 18% y-y as banks had a better management on operating costs.

- Loan growth slowed down to 9% y-y. The industry indicates +6.4% y-y loan growth in September while some of the banks in our universe managed to record much higher loan growth; BBNI (+21% y-y) is on corporate/infrastructure loans, BBRI (+16% y-y) on corporate and micro loans, while $BBTN (+17% y-y) on housing loans. Over the past one year, more loans have been channeled into corporate (especially state companies) and micro segments, at the expense of SME commercial and consumer loan segments. Of the 12 banks, three ($BDMN, $BNGA and $BNLI) still posted negative y-y growth.

- Deposit growth also weakened to 6% y-y. Total deposit still grew at +8% y-y in June, while the 5% economic growth is not enough to generate better deposit growth. Five banks ($BDMN, $BJBR, $BJTM, $BNGA and $BNLI) still recorded negative y-y deposit growth with two of them ($BDMN and $BNLI) continued to see negative ytd growth. CASA deposits continued to gain more than time deposits, which see declining rates.

- NIM still improved to 6.7% in 9M16. In contrast to our earlier expectation, banks recorded better margin in 3Q16 as they had not lower the lending rates as much as deposits rates. While this is true in the declining rate environment, banks are also pending further reduction in view of rising need for provisioning. Average NIM reached 6.9% in 3Q16 from 6.7% in 2Q16, but this level is expected to decline in the coming quarter on pressure to reach single digit lending rates.

- NPL reaching the new peak of 3.0%. Additional problem loans are growing at a slower pace, with some banks claiming to have seen peak NPL in August. Banks like $BMRI and $BBCA still expect peak NPL in 4Q16 and continued charging high provisioning.

- Classified loans at 11.3%. Average classified loans (NPL, SML, and performing restructured loans) were at 11.2% in June and 10.9% in March 2016. This shows less pressure on asset quality while coverage/classified loans ratio improved to average 32% from 28% a year ago.

- Operating costs were well managed. The average cost/income ratio went down to 45% in 3Q16 from 48% in 2016 and 47% in 3Q15. Of the banks, $PNBN, $BNGA, and $BDMN showed the best cost/income ratio improvement.

- Maintain Neutral. We will wait for stronger support for improving NPL and hence keep our Neutral call for the stock, which trades at 1.6x P/BV 2017. Our top picks are $BBRI, $BBTN and $BNGA.

Jul 27,2016 08:50:23
EARNINGS CALENDAR (Half Year 2016 - Estimated)

JULY 2016

Jul 25, 2016 :
$BBTN (Bank Tabungan Negara (Persero) Tbk PT)

Jul 26, 2016
$BDMN (Bank Danamon Indonesia Tbk PT)
$BMRI (Persero) Tbk PT Earnings Release - 4:00PM GMT+7

Jul 27, 2016
$AALI (Astra Agro Lestari Tbk PT)
$HMSP (Hanjaya Mandala Sampoerna Tbk PT)
$LPPF (Matahari Department Store Tbk PT)
$MPPA (Matahari Putra Prima Tbk PT)
$PTBA (Bukit Asam (Persero) Tbk PT)

Jul 28, 2016
$ASII (Astra International Tbk PT)
$BEST (Bekasi Fajar Industrial Estate Tbk PT)
$BJBR (PT Bank Pembangunan Daerah Jawa Barat dan Banten Tbk)
$DOID (Bloomberg)
$NCO (Vale Indonesia Tbk PT)
$JPFA (Bloomberg)
$PSAB (Bloomberg)
$SSMS (Bloomberg)
$SMGR (Semen Indonesia (Persero) Tbk PT)
$UNTR (United Tractors Tbk PT)
$UNVR (Unilever Indonesia Tbk PT)

Jul 29, 2016
$ASRI (Alam Sutera Realty Tbk PT)
$ADHI (Bloomberg)
$BSDE (Bumi Serpong Damai Tbk PT)
$BNGA (Bloomberg)
$BNLI (Bloomberg)
$BNII (Bloomberg)
$BKSL (Bloomberg)
$BHIT (Bloomberg)
$BISI (Bloomberg)
$CPIN (Bloomberg)
$CTRA (Ciputra Development Tbk PT)
$CTRP (Bloomberg)
$ELSA (Bloomberg)
$GIAA (Bloomberg)
$GJTL (Bloomberg)
$GGRM (Gudang Garam Tbk PT)
$NKP (Bloomberg)
$INTP (Indocement Tunggal Prakarsa Tbk PT)
$INDF (Indofood Sukses Makmur Tbk PT)
$ICBP (Indofood CBP Sukses Makmur Tbk PT)
$INDY (Bloomberg)
$KARW (Bloomberg)
$KAEF (Bloomberg)
$KIJA (Bloomberg)
$KLBF (Kalbe Farma Tbk PT)
$KRAS (Bloomberg)
$LPKR (Lippo Karawaci Tbk PT)
$LSIP (Perusahaan Perkebunan London Sumatra Indonesia Tbk PT)
$MAPI (Bloomberg)
$PWON (Bloomberg)
$PNBN, $PNLF, $PNIN (Bloomberg)
$PTPP (Bloomberg)
$RALS (Bloomberg)
$SMRA (Bloomberg)
$TBLA (Bloomberg)
$TLKM (Telekomunikasi Indonesia (Persero) Tbk PT)
$TOTL (Bloomberg)
$WSKT (Bloomberg)

Aug 1, 2016
$HRUM (Harum Energy Tbk PT)
$SSIA (Surya Semesta Internusa Tbk PT)

Aug 10, 2016
$ITMG (Indo Tambangraya Megah Tbk PT)

Aug 12, 2016
$EXCL (XL Axiata Tbk PT)

Aug 29, 2016
$ADRO (Adaro Energy Tbk PT)
$ANTM (Aneka Tambang (Persero) Tbk PT)
$BBRI (Bank Rakyat Indonesia (Persero) Tbk PT)
$ISAT (Indosat Tbk PT)
$PGAS (Perusahaan Gas Negara (Persero) Tbk PT)


Sep 13, 2016
$SMCB (Holcim Indonesia)

Jun 15,2016 08:55:19
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).
Quotes delayed, except where indicated otherwise.
1,515.00 25.00 (2.69%)
Bank Pembangunan Daerah Jawa Ba
Last Update 21:48:33