Sunday, May 29, 2011

Sustainable strong dividend return - Bank Mandiri. Tbk

by Samuel Securities

Strong dividend return. AGM has approved dividend payout of 35% (Rp138.3 per· share), in line with our expectation. By incorporating right issue of Rp11.7 tr in beginning of this year and assumption of payout ratio 40% (FY11F - FY15F), we believe loan growth will be 21% on average per year with CAR 14%-15% for the next five years. By incorporating an average of 40% payout ratio per year, 21% average loan growth, strong fee income, and good  efficiency, BMRI offers strong dividend return to investors compared to BBRI  and BBCA which are may seeking capital to maintain growth and CAR.

Acquisition of Asuransi Dharma Bangsa. AGM also has approved to acquire· majority  of  PT  Asuransi  Dharma  Bangsa  (ADB),  an  insurance  company.  Eventually, BMRI will have majority in ADB with 60% ownership; therefore ADB will be consolidated to company. Assuming ABD  has been consolidated to BMRI in FY09 result, contribution of ABD to the company was only 0.02% of operating income. However, it will complete general business on finance business after have Mandiri Tunas Finance (multifinance), Mandiri Sekuritas (securities), Axa Mandiri (insurance company) and Mandiri Syariah (syariah bank). Through ADB, BMRI plans to focus on harnessing the retail, syariah, small business segment.

Maintain target price, Rp8,300. We still maintain our view on the company· because dividend payout is in line with our assumption and contribution of ADB to company is too small. We maintain our target price at Rp8,300 (3.7x PBV’11) or 17% upside with catalyst from strong ROE, low cost to income, and manageable NPL. We believe strong ROE, low cost to income, and manageable NPL are the competitive advantages of the company to create good equity value to investors. Maintain BUY

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