Equity Research Company Update Friday, 24 March 2017 BUY Maintain Last price (IDR) 16,600 Target Price (IDR) 18,300 Upside/Downside +10.2% Previous Target Price (IDR) 17,900 Stock Statistics Sector Bloomberg Ticker Banking BBCA IJ No of Shrs (mn) 24,655 Mkt. Cap (IDRbn/USDmn) 385,235/28,820 Avg. daily T/O (IDRbn/USDmn) 248.6/18.6 Major shareholders FarIndo Investments (Mauritius) Ltd 47.2% Estimated free float (%) 50.85 EPS Consensus (IDR) 2017F 2018F 2019F Danareksa 920 1,015 1,129 Consensus 906.5 1,027.1 1,183 Danareksa/Cons 1.5 (1.2) (4.8) BBCA relative to JCI Index Bank Central Asia (BBCA IJ) Premium Performance We reiterate our BUY call on BBCA given its competitive edge which enabled the bank to book better-than-expected FY16 results albeit sluggish loans growth. Our FY17, FY18 and FY19 net earnings forecasts are revised up by 19.8%, 20.2% and 18.9%, respectively. We also raise our TP to IDR18,300, implying 3.5x FY17 PB. Excellent results despite lower loans growth. Bank Central Asia (BBCA) reported above-expected FY16 results thanks to a higher assets yield and lower provisioning expenses. Nonetheless, loans growth was admittedly sluggish in FY16, reaching just 7.3% yoy, and we expect this to be the case in FY17 as well. Our FY17 loans growth forecast is 10% yoy, or in line with the management s guidance, reflecting the moderate performance of the Indonesian economy. Yet despite BBCA s lower-than-industry loans growth, we remain hopeful that the bank can maintain decent net earnings growth, supported by its efficient operations and low cost of credit with the bank maintaining good assets quality. Cautiously optimistic. The bank s management has set guidance for 10% loans growth in 2017. At the same time, the management also expects loans growth to return to its pattern seen in the pre-2012 era, when loans growth was strong in 2H. Despite the management s optimism, we are more cautious, noting that the main driver of the bank s loans will be economic growth itself. As for NPLs, the bank s management remains conservative and acknowledges the risk that they may worsen if economic/political conditions deteriorate even though NPLs did see an improvement in 2016. Forecast revised up. We revise our loans growth estimate to 10.3% and our LDR assumption to 81.7%. In our view, the bank will be able to maintain a low cost of funds amid a declining assets yield. As such, we expect the NIM to decline to 7.2%. Assuming the bank s efficiency ratio doesn t change, we forecast 10.1% yoy net earnings growth in FY17, or 19.8% higher than our previous estimate. We also revise up our FY18 and FY19 net earnings forecasts by 20.2%% and 18.9%, respectively. Maintain BUY, the stock deserves its premium. With decent earnings growth, high profitability, improving efficiency and, more importantly, its good assets quality amid unfavorable economic conditions while its peers are suffering from ballooning NPLs, BBCA has demonstrated that it is the nation s best managed bank. As such, we believe that the stock deserves its premium valuation. Our TP is set at IDR18,300, implying 3.5x FY17 PB, (ROE:18.8%; Ke: 12%; and g=9.3%), at a premium to its peers. Source : Bloomberg Key Financials Agus Pramono, CFA Year to 31 Dec 2015A 2016A 2017F 2018F 2019F Agus.pramono@danareksa.com PPOP, (IDRbn) 26,162 30,400 32,574 35,063 36,719 021 29555 888 ext 3500 Net profit (IDRbn) 18,019 20,606 22,682 25,017 27,826 EPS (IDR) 730.8 835.8 920.0 1,014.7 1,128.6 EPS growth (%) 7.2 14.4 10.1 10.3 11.2 BVPS, (IDR) 3,624.8 4,560.3 5,250.2 6,011.3 6,857.7 PER (x) 22.0 19.2 17.5 15.8 14.2 PBV (x) 4.4 3.5 3.1 2.7 2.3 Dividend yield (%) (88.4) (96.7) (127.1) (140.2) (155.9) ROAE (%) 21.9 20.5 18.8 18.1 17.6 www.danareksa.com Source : BBCA, Danareksa Estimates See important disclosure at the back of this report 1
3/7/2014 5/7/2014 7/7/2014 9/7/2014 11/7/2014 1/7/2015 3/7/2015 5/7/2015 7/7/2015 9/7/2015 11/7/2015 1/7/2016 3/7/2016 5/7/2016 7/7/2016 9/7/2016 11/7/2016 1/7/2017 3/7/2017 Exhibit 1. Forecast Changes Old Forecast New Forecast Changes In IDR bn 2017F 2018F 2019F 2017F 2018F 2019F 2017F 2018F 2019F Interest Income 53,884 59,558 67,033 55,322 59,814 63,779 2.7 0.4-4.9 Interest Expense (12,289) (14,090) (16,563) (12,036) (13,142) (14,530) -2.1-6.7-12.3 Net Interest Income 41,594 45,468 50,470 43,285 46,672 49,249 4.1 2.6-2.4 Non Interest Income 13,784 15,435 17,241 14,781 16,190 17,787 7.2 4.9 3.2 Operating Expense (26,757) (29,705) (32,981) (25,492) (27,799) (30,317) -4.7-6.4-8.1 Pre Provision Operating Profit 28,621 31,198 34,730 32,574 35,063 36,719 13.8 12.4 5.7 Provision and Alllowances (2,772) (2,034) (891) (4,277) (3,772) (1,895) 54.3 85.5 112.7 EBIT 23,691 26,044 29,311 28,449 31,387 34,921 20.1 20.5 19.1 Tax (4,738) (5,209) (5,862) (5,733) (6,325) (7,037) 21.0 21.4 20.0 Post Tax Profit 18,953 20,835 23,449 22,716 25,062 27,884 19.9 20.3 18.9 Minorities (22) (29) (38) (35) (45) (58) 55.1 55.1 55.1 Reported Net Profit 18,931 20,806 23,412 22,682 25,017 27,826 19.8 20.2 18.9 Financial ratios (%) Loan growth (Gross) 13.3 15.0 13.1 10.3 11.0 11.7 Customer Deposit Growth 15.7 15.7 15.8 9.0 11.6 12.1 NIM 6.6 6.3 6.0 7.2 7.2 7.0 CASA 75.1 74.6 74.1 77.3 77.8 78.3 LDR 80.1 79.6 77.8 81.7 81.2 81.0 Source : Danareksa Sekuritas Exhibit 2. PB Band 5.5 5 4.5 SD+2 = 5.0 SD+1=4.6 4 3.5 3 SD-1=3.7 SD-2=3.2 Average sd+1 sd+2 sd-1 sd-2 PB Source : Danareksa Sekuritas www.danareksa.com See important disclosure at the back of this report 2
Exhibit 3. Income Statement Interest Income 47,082 50,426 55,322 59,814 63,779 Interest Expense (11,213) (10,347) (12,036) (13,142) (14,530) Net Interest Income 35,869 40,079 43,285 46,672 49,249 Non-Interest Income (NII) 9,900 11,354 12,904 14,689 16,586 Oper. Income 45,769 51,433 56,190 61,361 65,835 Oper. Expenses (21,714) (23,379) (25,492) (27,799) (30,317) Pre-provisions profit 26,162 30,400 32,574 35,063 36,719 Provisions & Allowances (3,505) (4,561) (4,277) (3,772) (1,895) Operating Profits 22,657 25,839 28,298 31,292 34,824 Non-Operating Income 0 0 151 96 97 Exceptionals 0 0 0 0 0 Pre-tax Profit 22,657 25,839 28,449 31,387 34,921 Income Tax (4,621) (5,207) (5,733) (6,325) (7,037) Minorities (17) (27) (35) (45) (58) Net Profit 18,019 20,606 22,682 25,017 27,826 Exhibit 4. Balance Sheet Gross Loans 398,312 427,866 472,092 524,017 585,496 Provisions (9,352) (12,849) (14,281) (15,197) (14,052) Net Loans 388,959 415,017 457,812 508,821 571,444 Govt. Bonds 30,095 45,107 45,107 45,107 45,107 Securities 22,842 68,730 68,730 68,730 68,730 Other Earnings Assets 10,082 11,156 11,156 11,156 11,156 Total Earnings Assets 564,318 643,831 686,409 744,190 812,381 Fixed Assets 9,712 16,991 19,539 22,470 25,841 Non-Earnings Assets 11,845 12,821 12,821 12,821 12,821 Total Assets 594,373 676,739 741,610 827,405 926,291 Customer Deposits 473,666 530,134 578,058 645,002 722,908 Banks Deposits 7,310 8,733 8,733 8,733 8,733 Int. Bearing Liab. - Others 489,954 548,309 596,098 663,043 740,949 Total Liabilities 504,748 564,024 611,813 678,757 756,664 Share capital & Reserves 7,374 13,930 13,930 13,930 13,930 Retained Earnings 81,995 98,503 115,515 134,278 155,147 Shareholders' Funds 89,369 112,433 129,444 148,207 169,077 Minority interests 256 282 352 441 551 Total Assets 594,373 676,739 741,610 827,405 926,291 www.danareksa.com See important disclosure at the back of this report 3
Exhibit 5. Ratios Yield on Earning Assets 8.7 8.3 8.3 8.4 8.2 Cost of funds 2.4 2.0 2.1 2.1 2.1 Interest Spread 6.3 6.4 6.2 6.3 6.1 Net Interest Margin 6.6 6.6 6.5 6.5 6.3 Cost/Income Ratio 45.4 43.5 43.9 44.2 45.2 Oper. Exp./Oper. Gross Inc. 61.7 59.7 59.6 58.8 57.3 Gross NPL Ratio 0.7 1.3 1.1 1.0 0.8 LLP/Gross NPL 325.3 229.1 275.0 290.0 300.0 Cost of Credit 0.6 0.8 0.6 0.5 0.2 Loan to Deposit Ratio 0.8 0.8 0.8 0.8 0.8 Loan to Funding Ratio 80.8 77.4 78.6 78.5 78.5 CASA Mix 74.9 75.8 76.2 76.8 77.3 ROAE 21.9 20.4 18.8 18.0 17.5 ROAA 3.1 3.2 3.2 3.2 3.2 CAR 1,865.0 2,189.6 2,010.1 2,082.6 2,141.9 Exhibit 6. Dupont & Growth Year to 31 Dec 2015A 2016A 2017F 2018F 2019F Dupont Pre-Tax ROAA 3.9 4.1 4.0 4.0 4.0 Tax Retention rate 79.6 79.8 79.8 79.8 79.8 Post-Tax ROAA 3.1 3.2 3.2 3.2 3.2 Goodwil, Assoc& Min 0.0 0.0 0.0 0.0 0.0 Leverage 7.0 6.3 5.9 5.7 5.5 ROAE 21.9 20.5 18.8 18.1 17.6 Growth (%) Interest income 7.6 7.1 9.7 8.1 6.6 Net Interest Income 12.0 11.7 8.0 7.8 5.5 Other Oper. Expenses 18.6 7.7 9.0 9.0 9.1 Fee Based Income 15.9 11.2 15.5 15.5 14.3 Pre-Provision Oper. Profit 13.4 16.2 7.2 7.6 4.7 Net Profit 7.2 14.4 10.1 10.3 11.2 Shareholders Equity 18.4 25.8 15.1 14.5 14.1 Loan 11.9 7.4 10.3 11.0 11.7 Earnings Asset 8.1 14.1 6.6 8.4 9.2 Deposit 6.0 12.0 8.9 11.4 11.9 Int. Bearing Liab. 5.5 11.9 8.7 11.2 11.7 CASA 7.1 13.3 9.5 12.3 12.7 Total Asset 7.5 13.9 9.6 11.6 12.0 Source : BBCA, Danareksa Estimates