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P H
Feb 21,2017 09:45:22

Bank Permata’s FY16 losses are likely to slow group earnings growth. However, higher earnings from Astra’s automotive, agribusiness and heavy equipment units should partially offset the lower income from its financial units. We reduce our FY16F earnings but keep our FY17F forecast, as we expect its financial services arm to recover this year. In 2017, Astra should also benefit from improved consumer spending, as well as higher CPO and coal prices. Our SOP-based TP drops to IDR9,100 (from IDR9,250, 15% upside) implies 19x/16x FY17/18F P/Es. BUY.

  • Unexpected FY16 losses from Bank Permata. PT Bank Permata Tbk (Bank Permata) ($BNLI) – which is 44.6%-owned by Astra – surprisingly recorded a net loss of IDR6.5trn for FY16. This was driven by substantial new provision allocations for non-performing loans (NPL), which significantly increased in 4Q16. In 4Q16, the bank allocated IDR4.3trn in new provisions for allowances for impairment losses, which pressured FY16 earnings.
     
  • The increase in NPL was driven by loans to the manufacturing, agribusiness, wholesale & retail trading, as well as mining sectors. This year, we expect Bank Permata’s NPL to improve – especially for loans given to the agribusiness and mining sectors. These sectors are benefiting from the current increase in commodity prices, such as CPO, rubber and coal prices.
     
  • Lower FY16F earnings. Astra’s financial services unit – comprising PT Federal International Finance, PT Toyota Astra Financial Services, PT Astra Sedaya Finance, PT Surya Artha Nusantara Finance and Bank Permata – accounted for 18% of Astra’s 9M16 consolidated earnings. In our calculation, Astra’s financial unit is likely to book a net loss of IDR1.3trn in 4Q16 (from earnings of IDR750bn in 3Q16). Hence, we cut Astra’s FY16F consolidated earnings estimates by 19% to IDR14trn.
     
  • Tailwinds ahead. We see strong tailwinds for Astra’s mining, agribusiness and auto arms ahead, driven by:
    i. Higher coal prices and slower growth of labour costs for its plantation unit, which may lift earnings;
    ii. Its auto business is likely to maintain strong sales growth, boosted by lower financing costs;
    iii. Hidden value in its property arm (just launched in Oct 2016) which may be unlocked once its assets start to be monetised.

    In addition, in 2017, Bank Permata is likely to book lower new provisions for NPL. The bank’s allowances for its impairment losses coverage ratio increased to 75% at end-Dec 2016 (from 51% at end-Mar 2016).
     
  • Maintain BUY with a lower SOP-based TP of IDR9,100 (from IDR9,250, 15% upside) that also implies 19x/16x FY17F/FY18F P/Es respectively. While rising NPLs at Bank Permata are a key risk to our call, our sensitivity analysis indicates its impact on Astra’s value should not be significant. (Andrey Wijaya)

$ASII $AALI $UNTR

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P H
Jan 04,2017 15:21:44

Bank Permata: 11M16 Results- Below Expectations ($BNLI)

Bank Permata reported 11M16 unconsolidated net loss of Rp1.9tn, -468%yoy, exceeding consensus and Mansek’s expected loss of Rp1.7tn for FY16. Significant net loss was due to increase in provision expense of +115%yoy and reduction in assets size. PPOP was flat as operating income and operating expenses declined by -1%yoy.The bank booked a net loss of Rp556bn in Nov alone vs. Rp141 net loss in Oct16.

Loan growth -17%yoy (-1% mom), deposit growth -6%yoy (+2%mom). YTD this translates to loan growth of -16% and deposit growth of -7%. Decline in deposits was mainly driven by decline in time deposits of -14%yoy. Meanwhile, demand deposits and savings deposits grew by +9%yoy and +17%yoy bringing CASA to 37% in Nov16 from 31% in Nov15. LDR stood at 79% in Nov16 vs 90% Nov15.

NIM remained stable at 3.8% in 11M16, as decline in asset yield was offset by decline in cost of funds. On a monthly basis, NIM declined to 3.7% in Nov16 from 4.0% in Oct16.

Provisioning expense increased by +115%yoy to Rp5.9tn, while in the month of Oct alone provisioning expenses increased by +95%mom/+51%yoy to Rp979bn. Mansek estimates total write-offs of Rp2.4tn in 11M16 and Rp17bn in Nov alone. Provisioning to total loans increased to 6.2% in Nov from 5.2% in Oct while cost of credit (gross) increased to 6.2% in Nov from 5.7% in Oct. With such a high level of provisioning, we expect substantial write offs in December.

Cost to income ratio remains stable at 57% in Nov16. On a monthly basis, cost to income ratio increased to 65% in Nov from 55% in Oct.

Maintain BUY with TP of Rp700. The stock is trading at 0.5x 2017 P/BV. Concentration on asset quality improvement resulted in net loss and negative loan growth to date. However, in line with management expectations, we expect loan growth and asset quality to see a turnaround in 2017.

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P H
Dec 14,2016 07:56:10

Bank Permata: More Provision Expenses Anticipated ($BNLI; Rp545; Buy; TP:Rp690)

  • Contradictory to prior expectations, NPL will likely peak in 4Q16 as the bank is still in the process of de-risking its loan portfolio to ensure a cleaner balance sheet in 2017. We lower our TP to Rp690 and maintain our BUY recommendation as we expect improvement in asset quality to take place in 1H17.
     
  • Closer to the peak. In contrast to earlier expectations, NPL will likely peak in 4Q16 as the bank is still in the process of de-risking its loan portfolio. Management wants to ensure that the bank has a cleaner balance sheet, stronger risk appetite, and tighter risk management standards prior to entering the new fiscal year. Hence, taking these factors into account along with the slow economic environment, we increase expected NPL to 5.0% in 2016F from previously 4.8%, mainly due to reduction in the bank’s asset size. Furthermore, we expect loan growth to decline by -17%yoy in 2016F (previously at -12%yoy). We downgrade 2016F earnings by 49%, which translates to an expected net loss of Rp1.7tn in 2016F from previously Rp1.1tn.
      
  • Weak results likely to persist until FY16. BNLI reported unconsolidated net loss of Rp1.4tn in 10M16, -266%yoy, mainly due to increase in provision expenses. However, the bank managed to book flat PPOP growth as decline in operating income was offset by operating expense efficiencies. Meanwhile, loans declined -18%yoy (-3% mom) and deposits by -8%yoy (+1%mom) in the month of Oct. We expect BNLI to report similar results in the month of Nov and Dec as the bank continues to de-risk its loan portfolio.
      
  • Expect some changes in management. We anticipate seeing a major change in BNLI’s BoD next week post the bank’s General Shareholder’s Meeting, however details have yet to be disclosed. As announced last month, BNLI will hold its Extraordinary General Shareholder’s Meeting on Dec 13, 2016, at 2.00pm.
      
  • 2017, a brighter year. Even though 2016 has been rather gloomy, we anticipate a more optimistic year ahead with expected loan growth of 10.5% in 2017 (previously 9%), stable NIMs at approximately 4.1-4.2%, and improvement in CASA ratio. Furthermore, we expect significant decline in provision expenses to be the main driver behind 2017’s net income growth. Despite earnings downgrade, we believe BNLI will start 2017 with a much cleaner balance sheet. We maintain our BUY call with revised TP of Rp690, the counter is trading at 0.5x 2017F P/BV.
      
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P H
Nov 28,2016 12:25:46

Bank Permata’s  ($BNLI) public expose (23Nov2016) by Marisa Wijayanto
 
·       BNLI plans to lower its wholesale loans proportion in the future due to high NPL risk.

o   Wholesale loans to total loans declined to 49% in 9M16 vs. 53% in 9M15

o   BNLI expects its wholesale loans to grow by 5-7% YoY, while its retail loans to grow by 9-12% YoY in 2017

o   BNLI will also rebalance the wholesale loan portfolio to smaller loan size and more SOE loans in order to reduce its NPL risk.

o   9M16 retail loans breakdown:

§  Credit card: 2% of total loans

§  Personal loan: 1% of total loans

§  Joint financing (auto loans with Astra): 10% of total loans vs. 7% of total loans in 9M15

§  Mortgage: 13% of total loans vs. 12% of total loans in 9M15

§  SME: 25% of total loans

o   To support its mortgage growth, BNLI accelerates its mortgage approval process to 5 days.

·       Mining loans (including mining supported sectors) contributed 7-8% of total loans in 9M16

o   Related to recently increasing coal price, BNLI stated that it is still too early to indicate the potential recovery in the mining sector’s NPL. If the coal price keep rising for the next 3-6 months, then it may give good indication for the NPL recovery.

·       Most of the loan restructuring is through giving grace period

·       BNLI plans to spin-off its sharia business by 2023 (Sharia loans contributed 9% of BNLI’s total loans).

o   BNLI’s sharia business will implement branchless banking in 2017

·       Fee based income grew significantly by 21% YoY in 9M16, supported by bancassurance business (Astra Aviva Life) and wealth management business

$ASII $BNLI

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P H
Nov 08,2016 18:55:03

Bank Permata: Meeting Takeaways($BNLI)

- We met with Bank Permata’s ($BNLI) Investor Relations team last week. We discussed about the bank’s asset quality and outlook for 2017. Below are the key takeaways from our meeting:

- NPL still a key issue. $BNLI guides for NPL to peak in 4Q16 at 5% max and expects NPL to trend down in 2Q17. In general, the soft economic condition tends to adversely impact the commercial and mid-SME segment more than the corporate and consumer segment. The bank discovered that most debtors with problematic loans faced at least one of the following issues: cash flow problems, lack of experience in running the business (this is particularly true for businesses that have been passed down to the second and third generation), and/or over-expansion issues. In addition, the bank partly attributes high NPL ratios to loose loan underwriting standards. As of Sept-16, BNLI’s top four NPL contributors come from the retail, wholesale, and mining economic sectors.

- No upgrades to mining and coal related loans in the meantime. Despite the recent increase in coal prices which reached USD 109/ton (from USD 49/ton in Jan-16), management is still hesitant to upgrade coal and mining related loans from NPL (cat 3-5) to a higher category, i.e.: special mention (cat 2) or performing (cat 1). The bank indicates that they would like to see coal prices sustain over a six month period before upgrading loans to the performing category, despite its ability to service the loans.

- Approaches to lower NPL. In an attempt to reduce NPL, $BNLI has created a Special Asset Management team, which includes an advisor from Standard Chartered Bank, fully dedicated to improve collection activities and reduce problematic loans. Furthermore, the bank has been refining its risk appetite, risk management criteria, and internal policies to ensure tighter underwriting standards are applied to future loan disbursements. Over the next three to six months, management plans to focus on increasing the proportion of consumer loans, particularly from the auto, mortgage, and joint financing segment, which have relatively lower NPL and higher yields. Meanwhile, over the medium term, management plans to concentrate on expanding the SME segment, hence increasing contribution of the retail banking segment (consumer and SME loans) to >50%.

- The calm after the storm. In line with our expectations, management guides for a more optimistic year ahead with loan growth of approximately 10% in 2017 and 10-15% thereafter, along with reduction in NPL beginning 2Q17. Furthermore, the bank expects NIMs of 4% over the next three years and expects CASA to gradually increase to 45%, mainly supported by the increasing number of payroll accounts from Astra Group’s companies. The bank indicates that it does not plan on distributing micro loans even though this segment tends to offer higher yields.

- Maintain BUY with TP of Rp700. The stock is trading at 0.5x 2017 P/BV.

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P H
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.

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P H
Sep 13,2016 08:15:22

Bank Permata ($BNLI) targets middle class clients BNLI targets increase in the number of middle class clients through its program Permata Preferred. Clients can only participate in the program if they have a balance of Rp100mn in BNLI. BNLI does not provide a specific target, however they are optimistic that 2016’s growth in middle class clients will be better than last year. (Bisnis Indonesia)

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P H
Jul 27,2016 08:50:24
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)

AUGUST 2016
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)

SEPTEMBER

Sep 13, 2016
$SMCB (Holcim Indonesia)

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P H
May 07,2016 13:15:28
Astra International: Negative News Likely Priced In
 
Upgrade Astra to BUY (from Neutral) with higher SOP-based IDR7,400 TP (from IDR6,800, 12% upside) driven by a higher valuation of its agribusiness. Clearer details of its rights issue have been released, which should eliminate its overhang. The accelerated vehicle monthly sales, expected to recover in 2H16, is also a catalyst for its auto earnings. Negative news, such as lower mining contractors’ fee and higher NPLs, have likely been priced in since its share price fell 15% in the last two weeks. It is trading at an attractive -1SD of its 5-year mean forward P/E.
 
¨ Clearer details of Agri’s rights issue should eliminate its overhang. Since Astra Agro Lestari (Agri) (AALI, BUY, TP: IDR19,500) has disclosed more details of its rights issue – including June 2016 as targeted completion month – we see the overhang on its value to be eliminated. The exercise price of its rights issue should be announced late May, which would be a catalyst for Agri’s share price increase. In addition, we expect Agri to book strong earnings for the current quarter, due to a spike in the domestic CPO price since end-March (average 1Q16 CPO price: IDR6,593/kg vs average price in April: IDR8,630/kg).

¨ Expect better vehicle sales in 2H16. Lower financing costs, as well higher consumer spending should boost both four-wheel (4W) and two-wheel (2W) vehicles sales. New Toyota models – such as the All New Sienta, All New Kijang Innova and All New Fortuner – should increase 4W monthly sales. In addition, finance companies have started lowering their lending rates at end March 2016 – which should provide an additional engine for sales growth. 2W sales growth would be driven by the higher low-end consumer income – which has been boosted by higher CPO price. Notably, last year’s lower YoY 2W sales were attributed to a decline in sales in Kalimantan and Sumatra – where their main income sources are derived from commodities.

¨ Fine tune earnings estimates. Following Astra International’s (Astra) dissapointing 1Q16 earnings, we adjust its FY16-17 earnings estimates to IDR18trn/19trn (-6%/-6%) on the back of lower auto earnings following the implementation of the restructuring of a two-tiered distribution model, effective 1Q16. Our adjustment also includes the lower mining contractors’ earnings impacted by the lower contractors’ fees. We also raise uncollectible receivables (bad-debts) expenses for its financing companies.

¨ Upgrade to BUY, higher TP. We raise our SOP-based TP to IDR7,400 (from IDR6,800), driven by a higher valuation of Agri. We believe that the overhang caused by its rights issue would be eliminated soon. In addition, the accelerated vehicles monthly sales volume would be a catalyst for its auto earnings. Negative news – such as lower mining contractors’ fee and non-performing loans (NPLs) – has likely been priced in since the share price has fallen by c.15% in last two weeks. Astra is now trading at an attractive valuation -1SD of its 5-year average rolling forward P/E. Key risks to our call include weak consumer spending and the depreciating IDR vs USD.

$ASII $AALI $UNTR $BNLI

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P H
Apr 08,2016 09:17:10
CIMB Niaga ($BNGA), Bank Permata ($BNLI), and OCBC NISP ($NISP) targets to be included in BUKU IV
The three commercial banks plan to increase capital by increasing retained earnings in order to be included in BUKU IV. BNGA states that their current capital totals to Rp27tn and targets to increase capital to Rp30tn this year. Meanwhile, BNLI  will increase its capital by relying on retained earnings and by conducting a rights issue. BNLI’s planned rights issue, worth Rp5.5tn, will boost BNLI’s capital to Rp24tn. Meanwhile, NISP’s current capital totals to Rp16.5tn and will rely on retained earnings to increase its capital.
Bull