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P H
Apr 12,2017 12:39:33

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.

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P H
Nov 16,2016 12:21:45

Indonesian banking: Sept-16 data - improvement in asset quality

- Here is some details on the banking data:

- Loan growth:
1) +6.5% y-y (+3.8% ytd; +1.6% m-m) in September compared to +6.8% y-y (+2.2% ytd; +0.4% m-m) in August.
2) Adjusted for rupiah appreciation, total loan growth was +8.4% y-y, compared to +7.7% y-y in August. Rupiah loans were +10.5% y-y (+10.7% y-y in August) while FX loans in USD term is at -1.7% y-y vs. -6.9% y-y in August.
3) Based on bank classification, strongest loan growth came from BUKU IV banks at +13.5% y-y, followed by BUKU II banks at +3.9% y-y and BUKU III banks at +2.9%y-y. Meanwhile, BUKU I banks recorded a decline in loan growth at -45.1% y-y as a number of banks have been upgraded from BUKU I to BUKU II.
4) In terms of usage, investment loans still has the highest growth rate of 9.1% y-y, down from 9.4% y-y in August, followed by consumption at 8.0% y-y from 8.2%y-y in August and working capital loans at 4.2% y-y vs. 4.7% y-y in August.
5) Of the large sectors with >5% loan exposure: agriculture (6.5% exposure) +14.7% y-y vs. +15.7% y-y in August, manufacturing (17.7% exposure) at -0.1% y-y vs. +2.9% y-y, wholesale and trade (19.7%) at +7.1% y-y vs. +6.1% y-y, and home ownership (8.1% exposure) at +7.2% y-y, up from 6.8% in August.
6) Regionally, all areas showed declining y-y loan growth except Sumatera at +6.1% y-y in September from +5.5%y-y in August.

- Deposit growth:
1) +3.1% y-y (+4.3% ytd; -0.1% m-m).
2) Adjusted for the currency movement, deposit grew +5.2% y-y in September vs. +6.4%y-y in August. Rupiah deposits grew +7.1% y-y vs. +9.9% in August and foreign currency deposits contracted by 14.5% y-y. In USD terms, FX deposits contracted by 3.6% y-y.
3) Based on bank classification deposits in BUKU IV banks +8.0% y-y, BUKU III +3.8% y-y while in BUKU II -5.6%y-y and BUKU I -48.4%y-y.
4) Based on type, CASA deposits was +5.0% y-y vs. +8.8% y-y in August (CA at -2.7% y-y and savings at +11.5% y-y) while time deposits growth remains weak at +1.1% y-y. - Liquidity: the weak deposit growth increased the industry LDR to 91.5% in September from 89.9% in August. Increase in LDR was seen across all bank classifications, with the highest increase coming from BUKU II banks to 92.5% in September (from 89.0% in August) and BUKU III banks to 97.6% in September (from 94.3% in August).

- Asset quality:
1) NPL declined to 3.10% in September from 3.22% in August while special mention loans (category 2) also declined to
5.44% in September from 5.52% in August. In terms of absolute amount, total NPL increased 21.9% y-y (+29.5% ytd; -2.1% m-m).
2) Improvement in NPL was seen across all banks, with exception of BUKU I banks in which NPL increased to 2.02% in September from 1.98% in August.
3) In terms of segment, NPL in investment loans improved to 3.46% from 3.53% in August, in consumer loans to 1.71% from 1.79% and in working capital to 3.73% from 3.91%.
4) Industry with >4% NPL level: mining at 6.38% (7.22% in August), construction at 4.26% (4.92% in August), wholesale & retail at 4.42%( 4.33%), and transportation at 4.77% (5.61%). Meanwhile, NPL in manufacturing sector declined to 3.88% from 3.92% in August, in household to 1.80% from 1.88%, in apartment 2.32% from 2.44% and in shop houses to 4.16% from 4.18%.
5) Location wise, all areas saw improvement in loan quality with the highest improvement was seen in Sumatera to 3.18% from 3.38% in August and Kalimantan to 4.92% from 5.07%.

- Profitability:
1) Industry NIM improved to 5.65% from 5.59% in August thanks to continuing reduction in time deposits rates.
2) NIM in state banks increased to 6.40% from 6.24% while NIM of forex commercial banks remains stable at 5.31%.
3) NIM in BUKU IV banks increased to 6.59% (from 6.46% in August) while BUKU III NIM remained relatively stable.

- Capital: average CAR declined to 22.6% in September from 23.3% in August. Decline in CAR was seen across all bank classifications with the highest decline coming from BUKU IV banks to 20.7% (from 21.8% in August).

$BBCA $BBRI $BMRI $BBNI $PNBN

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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
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
Jun 04,2016 18:47:46
Bank Negara Indonesia : Key Takeaways From Bojonegoro Site Visit
 
Last weekend, BBNI took us with several foreign and local investors on a site visit to Bojonegoro, which had the highest GDP growth of 13.3% in the country last year. By leveraging its close connection with the local government, BBNI is able to tap into the medium-size enterprise and corporate loan segments in the region. We maintain our BUY call and GGM-derived TP of IDR6,200 (34% upside). The stock is currently trading at 1.0x 2016F P/BV (-1SD of its historical mean).

¨ Support from local government. Bojonegoro recorded 13.3% GDP growth in 2015, thanks to its abundant oil & gas reserves. Amid lower commodity prices, the local government has set the minimum wages for villages at only IDR1m (below the minimum wages of IDR1.3m for its city) to stimulate growth in surrounding villages and to attract more local and foreign investors in the non-commodity sector. The local government has also simplified the permit application process for investors under one roof in an effort to achieve more sustainable GDP growth going forward.

¨ More players in local banking landscape. Given its high GDP growth, more banks have opened branches in Bojonegoro. Apart from state-owned enterprise (SoE) banks and regional bank (Bank Jatim), these include private banks eg Bank Tabungan Pensiunan Nasional (BTPN), Panin (PNBN) and Bank Central Asia (BBCA)). This has led to increased competition in the area. Specifically, we think that Bank Negara Indonesia (BBNI) is well-positioned due to its strong relationship with the local Government and business owners.

¨ Leveraging its relationship. During our site visit, we met up with one of BBNI’s corporate borrowers – the biggest Wallet bird nest producer in the area. The company started out managing bird nests but has now expanded to the downstream business by producing bird nest bottled beverage using recycled water and by-products of its upstream bird nests. However, we think its downstream business is still at an early stage and would only be profitable in three years’ time at the earliest due to the small market for specialised (bird nest) bottled beverage. Moreover, with the estimated ASP of IDR35,000, its product is relatively expensive in the bottled beverage market given that most Indonesians prefer tea bottled beverage. The second BBNI borrower we visited was a local batik producer, who emphasised that her business is a side job to supplement her full-time employment as a junior high school teacher. This falls under BBNI’s small business segment due its <IDR5bn loan size. On the other hand, Bank Rakyat Indonesia (BBRI) caters more towards loan sizes of <IDR100m, while Bank Mandiri (BMRI) taps more into the national-scale corporate segment.

¨ Maintain BUY and GGM-derived TP of IDR6,200, which implies 1.3x 2016F P/BV. The stock is currently trading at 1x 2016F P/BV (-1SD of its historical mean). Key risks to our call are:
i. Government intervention risk;
ii. Lower-than-expected GDP growth that may worsen its assets quality. (Eka Savitri)

$BBNI $BJTM $PNBN $BTPN $BBCA $BMRI $BBRI

Bull
P H
Apr 20,2016 09:38:58
Banks - Bumpy But Still Promising
 
We re-initiate coverage on Indonesia banks with an OVERWEIGHT. Higher government spending should translate into a 5.1% GDP growth pick-up and stronger loan growth of 14.3%. We forecast for earnings to grow a stronger 8.7% as credit costs stabilise at 161bps. Our Top Picks are BBCA (strong asset quality and least vulnerable to regulatory risks) and BBTN, as it would benefit most from the Government’s subsidised mortgage scheme.

¨ Reasonable valuations on higher GDP growth. According to our economists, 2016 would be a better year, supported by higher government spending in 2M16 to IDR5.4trn (+306% YoY) and a GDP growth pick-up to 5.1%. Yet with such potential, Indonesian banks under our coverage are trading at current P/BV multiple of 2.2x 2016F P/BV vs a historical mean of 2.9x and -2SD of 2.1x. We believe the multiple de-rating reflects the slide in ROAE to 17.6% for 2016F from c.25% in 2010 as loan growth slowed and credit costs spiked.

¨ Two sides of the knife. The Financial Services Authority (OJK) has introduced changes/revised guidelines to spur banks to lend more, but its renewed lower lending rates push has unnerved investors. We believe an immediate lending rate cuts to single digits directive is unlikely, as this has a detrimental impact on earnings. We expect it to take indirect measures that provide banks room to lower lending rates. March’s 125bps cut in maximum time deposit rates was the first move in this direction. We believe state-owned enterprise (SOE) banks would be most impacted, as the OJK would expect them to take the lead.

¨ Lower margins outlook. Lower caps for time deposit (TD) rates would mitigate the policy rate cuts (75bps YTD and another 25bps expected by end-2016), resulting in a moderate 7-12bps decline in net interest margins (NIMs). We expect Bank Negara Indonesia (BBNI) and Bank Tabungan Pensiunan Nasional (BTPN) to be most affected, while Bank Rakyat Indonesia (BBRI) and Bank Tabungan Negara (BBTN) are expected to see some uptick in NIMs.

¨ Smoother assets quality ride. Stronger economic growth and lower interest rates, we believe, would ease pressure on asset quality in 2016. We expect non-performing loans (NPLs) to trend higher in 1H16 and peak in 2Q16. Among banks under our coverage, we believe Bank Mandiri (given its loan portfolio size) would need a longer time to improve asset quality. We expect sector gross NPL ratio to edge down to 2% by Dec 2016 (Dec 2015: 2.1%) with stable 161bps credit costs and improvements in loan loss coverage to 155.2% by end-2016.

¨ Wholesale funding as additional liquidity source. As the system loan-to-deposit ratio (LDR) touched 90.9% in January, banks are likely to tap the wholesale market for funding, given more affordable benchmark rates and longer maturity profiles. Negotiable certificates of deposits, bonds and medium-term notes are the preferred wholesale instruments of the three big SOE banks.

¨ Bank Central Asia (BBCA) and BBTN are our Top Picks. Given regulatory risks and asset quality concerns, BBCA is our Top Pick for big-cap banks. Its premium valuation (3.0x 2016F P/BV vs peers’ 1.8x average) is justified as its NIMs are least vulnerable to government intervention risks while assets quality is superior vis-à-vis peers. BBTN is our small-cap Top Pick as we anticipate ROAE expansion and asset quality improvements in the next two years.

$BBCA $BMRI $BBRI $BBNI $BBTN $BTPN $PNBN $BDMN $BNGA
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P H
Apr 05,2016 15:30:37
Banking: 2M16 Results Wrap – Continuing Provisioning

- Banks have not shown significant earnings improvement in 2M16, with average net profit growth of 6% y-y, accounting for 14% of consensus expectations. Meanwhile, average NIM remained stable at 6.6% with loan growth of 11% y-y (vs. industry loans of 8%) and provisioning increased 60% y-y. Maintain Neutral.

- 6% y-y average earnings growth - banks have not shown any significant earnings improvement in the first two months of the year with average net earnings growth of 6% y-y. The results were still within expectations, accounting for 14% of average consensus’ full year forecast. Despite 16% y-y growth in operating income (net interest income plus non-interest income), banks have been increasing provisioning charges, which rose 60% y-y, as an anticipation for higher problem loans ahead. This, in addition to growing operating expenses, limited earnings growth. Among the larger banks, BBCA posted the highest earnings growth of 18% y-y, while among the smaller banks, BBTN, BJBR, and BJTM excelled with 19% y-y growth rate. Meanwhile BTPN and BDMN suffered 20% and 17% y-y earnings decline respectively due to competition in the micro lending.

- Loan and deposit growth. Due to cyclicality, most banks recorded negative or slow loan m-m growth in February, with average growth rate of 11% y-y, higher than the indicated industry loan growth of 8% y-y. Some banks reported high loan growth, such as BBNI due to government projects and BBTN on subsidized housing loans. Deposit growth was also weak, averaging 7% y-y, similar to the industry level, with CASA deposit growth overtaking time deposit growth at 12% vs. 1% yy. This is partly due to increasing government funds transferred as well as the crowding out effect on the government’s bond issuance and the regulation that requires pension funds to place some portion of their funds in government papers.

- Stable net interest margin for now – average NIM remained high at 6.6% in 2M16, up from 6.2% in 2M15 thanks to steeper reduction in cost of funds than in asset yield (60bps vs. 10bps). Banks have been cutting their time deposit rates on the back of weaker loan demand and are still taking the advantage before they start lowering the lending rates.

- Rising provisioning charges – the industry data shows the NPL level increased to 2.7% in January from 2.5% in December 2015 and we believe banks are experiencing the same pattern in February. This prompted banks to increase their provisioning charges, which rose 60% y-y. NPL is still expected to rise in the coming months, in particular from the retail commercial segment, and in terms of industry NPL comes mainly from mining related businesses. BBCA recorded the highest increase in provisioning charges at 429% y-y amid from the low base. PNBN came second with +262% y-y, while BJBR and BJTM bucked the trend with -62% and -39% y-y, as they have seen asset improvement. Provisioning level is now at 3.3% of total loans.

- Industry outlook and recommendation - We are still expecting rising problem loans in the coming months as a delayed effect from weak economic growth last year. Hence banks are still forecast to beef up their provisioning. We still rate Neutral on the sector, which is trading at 1.9x P/BV for 2016, with top picks on BBNI (TP Rp6,000) and BBTN (TP Rp2,100).

$BBRI $BBCA $BMRI $BBNI $BBTN $BBNI $PNBN
Bull
P H
Mar 14,2016 12:38:15
ada buy signal... Target terdekat di 800

Bull