MNCS COMPANY UPDATE MNC Sekuritas Research Division November,

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1 MNCS COMPANY UPDATE MNC Sekuritas Research Division November, PT Bank Tabungan Negara (Persero) Tbk Banking Small House is Booming Stock Data BUY Target Price : IDR 3,000 Curent Price : 52wk Range H-L : Share Outstanding : Free Float (%) : Mkt Capitalization (IDR bn) Major Shareholders : IDR 2,350 IDR 3,890-2, bn 40% 23, Goverment : 60.00% Public : 40.00% IFRS 9 Anticipation During 9M18, BBTN booked net profit of IDR2,24 trillion or grew by 11.51% YoY, which was driven by 15.29% YoY growth of net interest income to IDR7.55 trillion. Strong loan disbursement that grew by 19.28% YoY helped to boost interest income. NIM was decreased to 4.35% (vs 4.49% in 3Q17), but it was stronger if it was compared to NIM in 2Q18 at 4.17%. BBTN s bottom line growth was hampered by IFRS 9 application in 2020 which BBTN will thicken its coverage ratio gradually, as the coverage ratio was increased up to 46.19% in 3Q18 (vs 40.01% in 3Q17). Hence, provision expense grew by 44.84% YoY up to IDR867 billion in 3Q18. The management is still discussing with BBTN s consultant about the coverage ratio level that is suitable for BBTN s risk management and to comply with IFRS 9. Therefore, we recalculate our forecast in the upcoming years and lower our net profit estimation of FY18E/FY19F by -2.08%/-5.99% from our previous estimate to IDR3.33 trillion/idr3.69 trillion, respectively. High Demand of Subsidized Mortgage Loan Loan disbursement still went strong, along with high demand from middle class segment, especially from subsidized mortgage loan scheme which grew by 30.11% YoY to IDR88.92 trillion with its composition reached up to 54% of total mortgage loan (vs 51% in 3Q17). Meanwhile, non-subsidized mortgage loan was also remain strong with 13.22% YoY growth. In the middle of hawkish trend environment of interest rate, BBTN s management maintains its asset quality by adjusting loan interest gradually in accordance with debtor profile. Therefore, NPL gross was improved to 2.65% in 3Q18 (vs 3.07% in 3Q17). We see that there is still room for BBTN to grow in terms of low-middle class house demand along with subsidized program and economy growth. Recommendation: BUY at Target Price IDR3,000 We recommend BUY for BBTN with target price at IDR3,000 with implied PBV FY18E/FY19F at 1.31x/1.18x with its current PBV at 1.00x (2 November 2018). We see that BBTN is traded below average 3 years PBV band at STDEV 1 is attractive, along with the demand of middle class house demand. BBTN downside risk is higher than expected about IFRS 9 application and slower macroeconomy growth. Key Financial Highlight Research Analyst Rr. Nurulita Harwaningrum roro.harwaningrum@mncgroup.com (021) ext YE Dec (IDR bn) 2015A 2016A 2017A 2018E 2019F Net Interest Income 6,811 8,163 9,341 11,069 13,031 Net Profit 1,851 2,620 3,028 3,333 3,695 EPS (IDR) PER (x) BVS (IDR) 1,167 1,822 2,063 2,293 2,548 PBV (x) ROAE (%) ROAA (%) Dividend Yield (%) Source: Bloomberg, MNCS as of November 2, 2018 Page 1

2 BBTN s 3Q18 Results Exhibit 01. BBTN s Loan, Third party Fund, and LDR 250, , , ,000 50,000 - Loan (RHS) Third Party Fund (RHS) LDR (LHS) 114% 112% 110% 108% 106% 104% 102% 100% 98% 96% 94% Exhibit 02. BBTN s Loan Segmentation Housing loans Non-housing loans 9% 10% 10% 10% 9% 10% 9% 9% 9% 91% 90% 90% 90% 91% 90% 91% 91% 91% Exhibit 03. BBTN s NPL Gross and Coverage Ratio 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% NPL Gross (LHS) Coverage Ratio (RHS) 39.2% 45.3% 45.3% 46.2% 42.3% 38.3% 38.8% 40.0% 41.7% 3.6% 2.8% 3.3% 3.2% 3.1% 2.7% 2.8% 2.8% 2.7% 50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Page 2

3 Exhibit 04. BBTN s 3Q18 Results IDR Bn 3Q17 2Q18 3Q18 YoY QoQ Total Assets 231, , , % 1.6% Total Loan 184, , , % 4.1% Total Third Party Fund 168, , , % 2.9% Current Account 44,510 48,630 48, % -0.9% Saving 37,170 39,460 41, % 6.4% Time Deposits 86, , , % 3.3% IDR Bn 9M17 1H18 9M18 YoY QoQ FY18E % of MNCS FY18E Net Interest Income 6,547 4,765 7, % 16.1% 11,069 68% Non-interest Income 1, , % -19.8% Operating Income 7,756 5,746 8, % 9.2% Provision Expenses (598) (418) (867) 45.0% 112.8% Operating Expenses (4,571) (3,525) (5,312) 16.2% -1.8% Operating Profit 2,587 1,803 2, % 7.2% PPOP 3,185 2,221 3, % 26.6% Net Profit 2,005 1,424 2, % 9.7% 3,333 67% 3Q17 2Q18 3Q18 CAR 17.0% 17.4% 18.0% LFR 109.8% 111.5% 112.8% NIM 4.5% 4.4% 4.4% NPL Gross 2.1% 2.8% 1.8% Cost to Income Ratio (BOPO) 52.9% 56.7% 53.3% Exhibit Years Average of BBTN s PBV Band 2.1 PBV BBTN MEAN STD-1 STD-2 STD+1 STD Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18 Source : Bloomberg as of October 24, 2018 Page 3

4 Exhibit 06. Financial Projections Income Statement Balance Sheet IDR Billion FY15 FY16 FY17 FY18E FY19F IDR Billion FY15 FY16 FY17 FY18E FY19F Interest Income 14,966 17,138 19,271 23,153 27,919 Cash 1,181 1,006 1,027 1,033 1,039 Interest Expense (8,155) (8,975) (9,930) (12,083) (14,887) CA with BI 10,986 10,697 12,554 14,891 17,895 Net Interest Income 6,811 8,163 9,341 11,069 13,031 CA with Other Banks Non-Interest Income 1,107 1,282 1,605 1,679 1,917 Placement with BI and Banks 7,839 17,581 24,697 24,693 26,828 Operating Income 7,918 9,445 10,946 12,748 14,949 Marketable Securities 1,808 4,172 7,706 8,913 9,914 Operating Expense (4,490) (5,385) (6,170) (7,314) (8,593) Loans 126, , , , ,434 Pre-Provision Income 3,428 4,060 4,776 5,434 6,356 Fixed Assets 1,553 4,659 4,837 5,022 5,214 Provision Expense (894) (707) (884) (1,148) (1,607) Other Assets 22,232 27,235 31,009 37,770 43,778 Pre-tax Profit 2,542 3,331 3,862 4,256 4,719 Total Assets 171, , , , ,860 Tax (691) (711) (834) (924) (1,024) Current Account 31,368 44,906 52,769 65,064 80,178 Minority Interest Saving Account 30,758 33,345 38,840 49,012 60,755 Net Profit 1,851 2,620 3,028 3,333 3,695 Time Deposit 65,583 69,536 85,482 98, ,709 Third Party Funds 127, , , , ,642 EPS (full amount) Deposit from Other Banks 1,721 3,643 5,063 5,654 6,336 BVS (full amount) 1,320 1,822 2,063 2,293 2,548 Securities Issued 12,492 14,919 20,480 21,504 22,579 Borrowings 7,727 4,999 7,991 7,991 7,991 Other Liabilities 8,299 11,481 12,812 14,870 17,318 Total Liabilities 157, , , , ,102 Ratio Percentage (%) FY15 FY16 FY17 FY18E FY19F ROAE ROAA Shareholder's Equity 13,860 19,132 21,665 24,073 26,758 Total Liabilities and Equity 171, , , , ,860 LDR CASA NPL Gross Growth Coverage Ratio Percentage (%) FY15 FY16 FY17 FY18E FY19F Cost Efficiency Loan Growth Cost to Income Deposit Growth CAR Net Interest Income Growth Net Profit Growth Source: BBTN, MNCS Page 4

5 Thendra Crisnanda Head of Institutional Research, Strategy (021) ext Victoria Venny Telco, Toll Road, Logistics, Consumer, Poultry (021) ext MNC SEKURITAS RESEARCH TEAM Edwin J. Sebayang Head of Retail Research, Technical, Auto, Mining (021) ext Tomy Zulfikar Research Analyst (021) ext I Made Adi Saputra Head of Fixed Income Research imade.saputra@mncgroup.com (021) ext Ikhsan Hadi Santoso Junior Analyst of Fixed Income ikhsan.santoso@mncgroup.com (021) ext Rr. Nurulita Harwaningrum Banking, Auto, Plantation roro.harwaningrum@mncgroup.com (021) ext Muhamad Rudy Setiawan Research Associate, Property, Construction muhamad.setiawan@mncgroup.com (021) ext Khazar Srikandi Research Associate khazar.srikandi@mncgroup.com (021) ext Krestanti Nugrahane Widhi Research Associate, Plantation, Consumer krestanti.widhi@mncgroup.com (021) ext Sukisnawati Puspitasari Research Associate, Cement, Mining sukisnawati.sari@mncgroup.com (021) ext MNC SEKURITAS EQUITY SALES TEAM T. Heldy Arifien Head of Institution heldy.arifien@mncgroup.com (021) ext Harun Nurrosyid harun.nurrosyid@mncgroup.com (021) ext Agus Eko Santoso agus.santoso@mncgroup.com (021) ext Okhy Ibrahim okhy.ibrahim@mncgroup.com (021) ext Gilang Ramadhan gilang.ramadhan@mncgroup.com (021) ext Gina Mutiara Junior Equity Sales gina.purnamasari@mncgroup.com (021) ext Nesya Kharismawati nesya.kharismawati@mncgroup.com (021) ext Iman Hadimulya, ST iman.hadimulya@mncgroup.com (021) ext MNC Research Investment Ratings Guidance BUY : Share price may exceed 10% over the next 12 months HOLD : Share price may fall within the range of +/- 10% of the next 12 months SELL : Share price may fall by more than 10% over the next 12 months Not Rated : Stock is not within regular research coverage PT MNC SEKURITAS MNC Financial Center Lt Jl. Kebon Sirih No , Jakarta Pusat Telp : (021) Fax : (021) Call Center : Disclaimer This research report has been issued by PT MNC Sekuritas, It may not be reproduced or further distributed or published, in whole or in part, for any puidrose. PT MNC Sekuritas has based this document on information obtained from sources it believes to be reliable but which it has not independently verified; PT MNC Sekuritas makes no guarantee, representation or warranty and accepts no responsibility to liability as to its accuracy or completeness. Expression of opinion herein are those of the research department only and are subject to change without notice. This document is not and should not be construed as an offer or the solicitation of an offer to purchase or subscribe or sell any investment. PT MNC Sekuritas and its affiliates and/or their offices, director and employees may own or have positions in any investment mentioned herein or any investment related thereto and may from time to time add to or dispose of any such investment. PT MNC Sekuritas and its affiliates may act as market maker or have assumed an underwriting position in the securities of companies discusses herein (or investment related thereto) and may sell them to or buy them from customers on a principal basis and may also perform or seek to perform investment banking or underwriting services for or relating to those companies. Page 5