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Sunday, May 8, 2011

Harvest Time - Mandala Multifinance Tbk

by IndoPremier Securities

MFIN reported higher than expected performance in 1Q11. The net profit skyrocket to Rp 50.9 bn, leaped to double than 1Q10 and outperform our FY11 target. 2011 is the harvest time after robust new booking of Rp 3.7 bn in 2010. MFIN also benefit from PSAK implementation that lower provisioning in 2011 forward, potentially boosting net income. We upgrade our TP to Rp 890 per share from Rp 810 per share previously. 19% potential upside from current price.

Robust Interest Income Ahead

MFIN is starting to realize interest income from Rp 3.7 bn new financing booked in 2010 and 1Q11 revenue soared 60.4% YoY and 12.1% QoQ, reaching Rp 276.3 bn, or represented 25.6% of our FY11 target. We believe the robust growth will continue and we estimate Rp 1,079 bn revenue in 2011. Additionally, MFIN also booked Rp 898 bn new financing, or 32.6% YoY increase from Rp 677 bn in 1Q10. We maintain our FY11 new financing booked forecast of Rp 4.8 tn as we anticipate new financing will touch its peak during June-August (prior to Moslem festive month).

Higher Than Expected Bottom Line

The 1Q11 net income has doubled to Rp 50.9 bn, already represent 33.5% of our original forecast for 2011. The achievement was driven by lower provisioning expense on the implementation of PSAK 50/55, aside improving risk management. Since 2008 until 2010, MFIN has set a decreasing provision cost from 2% to 1.3% of total outstanding account receivable given the realization is always below the target. For 2010, the actual provision cost was only 1.05% vs  target of 1.3%. Indeed, the implementation of PSAK 50/55 is expected to provide lower provision cost for multi-finance companies, including MFIN. The 1Q11 financing provision continues to decrease to approximately 1%, and should be lower if the economic condition remains conducive, and vice versa. We forecast MFIN to deliver Rp 195.5 bn net income in 2011, or grow 47.3% YoY.

Buy Recommendation

We upgrade our TP to Rp 890 per shares (from Rp 810 previously) on the back strong growth and low provision cost that will benefit the FY11 net income and forward. Our target price reflect 6.0x PER and 1.6x PBV in 2011.



2009
2010
2011F
2012F
2013F
Year End 31 Dec





Net Interest Income
427.6
593.1
723.2
873.5
976.5
Income Before Tax
148.2
176.9
260.6
307.9
377.6
Net Income
108.1
132.7
195.5
230.9
283.2
EPS
81.6
100.1
147.5
174.3
213.7
EPS Growth (%)
2.7
22.7
47.3
18.1
22.6
BVPS
356.9
440.8
566.4
704.6
874.2
PER (x)
3.0
4.3
5.0
4.2
3.5
PBV (x)
0.7
1.0
1.3
1.1
0.8
Source: company, IPS calculation

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