BPD Jatim (BJTM IJ) Equity Research Result Note BUY. Retaining its niche appeal. Friday,25 January 2019

Transcription

1 Equity Research Result Note Friday,25 January 2019 BUY Maintain Last price (IDR) 730 Target Price (IDR) 850 Upside/Downside +16.4% Previous Target Price (IDR) 850 Stock Statistics Sector Bloomberg Ticker Banking BJTM IJ No of Shrs (mn) 14,975 Mkt. Cap (IDRbn/USDmn) 10,931/771 Avg. daily T/O (IDRbn/USDmn) 4.1/0.3 Major shareholders (%) East Java provincial government 51.4 East Java regencies government 28.5 Estimated free float 20.1 EPS Consensus (IDR) 2018F 2019F 2020F Danareksa Consensus Danareksa/Cons (9.4) (11.1) (13.6) BJTM relative to JCI Index BPD Jatim (BJTM IJ) Retaining its niche appeal We maintain our BUY call on BJTM with a GGM-derived TP of IDR850, liking the bank for its strong foothold in East Java s civil servants multipurpose lending segment. Nonetheless, we only expect 9.3% yoy loans growth this year. Meanwhile, the bank s commercial lending will be driven mainly by the syndicated loans scheme to match the risk appetite of the bank s management. All in all, we expect 7.2% yoy net profits growth this year. FY18 highlights. FY18 s net profits of IDR1.26tn were inline with our forecast with a lower NIM of 6.4% on the back of lower asset yields and a higher blended CoF of 2.8% in FY18. The gross NPLs ratio declined significantly to 3.7% due to IDR128bn of write-offs in commercial segments. Meanwhile, credit costs declined to 54bps (from 71bps in FY17) as BJTM s management is already comfortable with the present level of the bank s coverage ratio, believing it does not need to allocate more provisions due to the bank s substantial exposure to multipurpose loans. To retain its focus on consumer lending. Going forward, multipurpose loans will continue to account for most of BJTM s loans. For these loans, competition is not likely to be fierce as BBRI is not expected to aggressively expand its payroll loans for East Java s civil servants. In addition, BJTM has partnered with Taspen and Asabri to tap the pensioners of military and police personnel. Commercial lending, meanwhile, may only be driven by the syndicated loans scheme (along with other big SOE banks) for certain infrastructure projects in areas of Java. Thus, we estimate 10.4% yoy consumer loans growth, exceeding the total expected loans growth pace of 9.3% by year-end. High CASA deposits provide a buffer for its CoF. BJTM continues to have a high level of CASA deposits thanks to its regional bank status. For current accounts, the local and provincial governments remain its captive market. And for savings accounts, the payroll payments of East Java s civil servants support its CASA deposits. All in all, we expect CASA deposits to account for 70.4% of total customer deposits by the end of the year with a 3.7% blended CoF. BUY with a TP of IDR850. We maintain our BUY call on BJTM with a GGMderived TP of IDR850 (implying 1.4x 2019F PBV) assuming 11.3% CoE, 14.7% sustainable ROAE and 3.0% long-term growth. The short-term risks include political risk due to the bank s shareholders structure, slower-than-expected asset quality improvement and possible changes in the management team. Source : Bloomberg Eka Savitri (62-21) ext 3506 eka.savitri@danareksa.co.id Key Financials Year to 31 Dec 2016A 2017A 2018F 2019F 2020F PPOP (IDRbn) 1,961 1,860 1,983 2,121 2,290 Net profit (IDRbn) 1,028 1,159 1,259 1,350 1,469 EPS (IDR) EPS growth (%) BVPS (IDR) PER (x) PBV (x) Dividend yield (%) ROAE (%) Source : BJTM, Danareksa Estimates See important disclosure at the back of this report 1

2 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Exhibit 1. Loans and Growth Exhibit 2. Net Interest Income and Growth Exhibit 3. NIM and LDR Exhibit 4. NPLs Exhibit 5. PBV ROAE Band Chart Exhibit 6. PE Band Chart x % x Fwd P/BV Mean +1SD -1SD ROAE (RHS) Fwd P/E Mean +1SD -1SD See important disclosure at the back of this report 2

3 Exhibit 7. BJTM s result FYE Dec (IDRbn) 4Q17 3Q18 4Q18 QoQ (%) YoY (%) FY17 FY18 YoY (%) Net interest income , ,485 3, Net interest margin (%) Non-interest income Non-II/Total income (%) Operating income 957 1,054 1, ,856 4, Overhead expenses (618) (615) (848) (1,996) (2,360) 18.2 Cost-Income Ratio (%) Pre-Provisions profit (21.2) 1.7 1,860 1,853 (0.4) Provisions allowance (74) (31) (60) 92.8 (18.5) (217) (134) (38.4) Credit cost - annualized (bps) Pretax profit (32.7) ,637 1, Tax (103) (131) (90) (31.0) (12.5) (478) (493) 3.3 Effective tax rate (%) (41.5) (30.3) (31.1) (29.2) (28.1) Profit after tax (33.5) ,159 1, Other Key Data and Ratios Gross loans 31,754 33,073 33, ,754 33, Customer deposits 39,845 52,843 50,916 (3.6) ,845 50, Gross NPLs 1,458 1,406 1,271 (9.6) (12.8) 1,458 1,271 (12.8) Total assets 51,519 63,428 62,689 (1.2) ,519 62, Shareholders' funds 7,816 8,217 8, ,816 8, ROAA (%) ROAE (%) LDR (%) Gross NPLs ratio (%) LLC ratio (%) CAR (%) Source : Company, Danareksa Sekuritas estimates See important disclosure at the back of this report 3

4 Exhibit 8. Income Statement Interest Income 4,904 4,890 5,385 5,697 6,277 Interest Expense (1,446) (1,405) (1,721) (1,814) (2,011) Net Interest Income 3,458 3,485 3,664 3,884 4,266 Non-Interest Income (NII) Oper. Income 3,808 3,856 4,078 4,345 4,787 Oper. Expenses (1,846) (1,996) (2,095) (2,224) (2,497) Pre-provisions profit 1,961 1,860 1,983 2,121 2,290 Provisions & Allowances (510) (217) (254) (266) (271) Operating Profits 1,452 1,643 1,728 1,855 2,019 Non-Operating Income 1 (6) Exceptionals Pre-tax Profit 1,452 1,637 1,748 1,862 2,026 Income Tax (424) (478) (489) (512) (557) Minorities Net Profit 1,028 1,159 1,259 1,350 1,469 Exhibit 9. Balance Sheet Gross Loans 29,675 31,754 34,141 37,316 41,247 Provisions (1,322) (1,394) (1,460) (1,532) (1,566) Net Loans 28,353 30,360 32,681 35,784 39,681 Govt. Bonds Securities 3,528 4,742 4,505 5,167 4,909 Other Earnings Assets Total Earnings Assets 38,301 45,550 48,602 53,434 58,203 Fixed Assets 1,281 1,425 1,460 1,495 1,532 Non-Earnings Assets Total Assets 43,033 51,519 54,806 60,118 66,292 Customer Deposits 32,799 39,845 43,373 47,455 52,300 Banks Deposits 1,218 1, Int. Bearing Liab. - Others Total Liabilities 35,823 43,703 46,424 51,128 56,641 Share capital & Reserves 4,766 4,839 4,839 4,839 4,839 Retained Earnings 2,443 2,978 3,544 4,151 4,812 Shareholders' Funds 7,210 7,816 8,382 8,990 9,651 Minority interests Total Equity & Liabilities 43,033 51,519 54,806 60,118 66,292 See important disclosure at the back of this report 4

5 Exhibit 10. Selected ratios Yield on Earning Assets Cost of funds Interest Spread Net Interest Margin Cost/Income Ratio Oper. Exp./Oper. Gross Inc Gross NPL Ratio LLP/Gross NPL Cost of Credit Loan to Deposit Ratio Loan to Funding Ratio CASA Mix ROAE ROAA CAR Exhibit 11. Dupont and growth Year to 31 Dec 2016A 2017A 2018F 2019F 2020F Dupont Pre-Tax ROAA Tax Retention rate Post-Tax ROAA Goodwil, Assoc& Min Leverage ROAE Growth (%) Interest income 4.3 (0.3) Net Interest Income Other Oper. Expenses Fee Based Income Pre-Provision Oper. Profit 9.2 (5.2) Net Profit Shareholders Equity Loan Earnings Asset Deposit (3.1) Int. Bearing Liab. (2.1) CASA (2.3) Total Asset Source : BJTM, Danareksa Estimates