Sunday, April 3, 2011

Bank Rakyat Indonesia (BBRI)

by Samuel Securities

Very Surprising

Highlights: As of 4Q10, BBRI posted strong net interest income and net income as much Rp11.8 tr (+62.2% QoQ) and Rp4.8 tr (+106%), respectively, far above our projection & market’s consensus. On full year basis, net interest income and net income as much as Rp32.9 tr (+43% YoY) and Rp11.5 tr (+57% YoY), or 122% and 123% of our projection.

Comments: Strong net interest income was supported by low cost of fund as much 4.9% (from previously 6.02%) and strong lending rate. Thus, NIM increased by 163 bps to 10.77%. On this year we believe NIM will decline due the following reasons; 1) competition on MSME will be tight and 2) increasing of BI rate. Our expectation also meets with our management target at +/- 9% for FY11. LDR stood at 75.2% (from previously 81%) because the additional demand deposits from treasury single account (TSA) on end of 2010. The addition of deposit channeled to placement in BI and as the impact placement in BI increase significantly by 101%. CAR stood at 13.8% and management still comfort with this level. We believe it is caused majority of loan is channeled micro and SOE which give low risk.

Management gives the guidance, if dividend paid as much 30% from FY10 net income loan will grow by +/-20% with CAR around 13%. Management also has option to paid dividend as much 10% to support +/- 25% growth. Others option to achieve +/- 25% growth is to issue sub debt (assumption pay out more than 10%). We maintain 22% growth with assumption 30% pay out and possible to change forecast if management set pay out as much 10% or issue sub debt. The increase on bottom line was also supported by recovery as much Rp1.5 tr as impact PSAK 50-55 implementation (previously recovery is not booked as income).

Action and recommendation: We maintain our target price at Rp6,750 per share translates PBV3,8x. Our target price reflects BBRI trade at premium of sectors (vs 2.7x). We believe BBRI is feasible to trade at premium because of its higher ROE than peers. Compare to BBCA with ROE relative same with BBRI, BBCA is trading at PBV’11 4.5x Maintain BUY


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