Thursday, July 14, 2011

PT Bank BJB Tbk - Sitting On The Biggest Province

by AAA Securities

Sitting on the biggest province by size of economy with low loan penetration, Bank BJB future loan growth is still robust. Expansion to micro will drive ROE to over 22% in 2011F and 26% in 2012F. BUY

1Q11 Results, 24% yoy Bottom Line Growth

In 1Q11 Bank BJB net profit up 24% yoy to Rp260 billion, driven by lower provisioning expense, -29% yoy. On the upper line, net interest income fell 1% yoy to Rp665 billion as interest expense grew faster 16% yoy than interest income 40% yoy. Higher interest expense growth was more caused by bank’s bond issuance in January 2011 amounted Rp2 trillion. Proceed will be used for loan expansion thus better upper line performance in 1H11 should be seen.

Gaining More Market Share

Looking at Bank BJB loan market share to WJ & Banten total loan, Bank BJB’s competitiveness is increasing; it gained more market share in 1Q11 to 13.1% as loan grew 29% yoy, higher than other players which loan only up 25% yoy. Going forward we believe Bank BJB with good loan performance in terms of market share coupled with loan penetration to WJ and Banten’s GDP only stands at 2.5%, Bank BJB strong future growth is warranted. For the full year of 2011, we estimate the bank’s loan growth at 29% yoy spurred by higher growth on micro loan.

Assets Quality Should Improve on Bigger Loan Collection Workforce

Bank BJB NPL was increasing in from 0.7% to 1.9% in end FY10, and again up to 2.4% in 1Q11, highest level in the bank’s own history which was due to lack of collection workforces however to cope with the problem the bank will use DSA which we see is positive to tame down NPL below 2% this year.

Valuation, TP Rp1,500 - BUY

We initiate coverage on Bank BJB with TP of Rp1,500 per share that derived from Gordon Growth Methodology. Our TP reflects 2.7x/2.3x PBV FY11F/FY12F. Currently the bank’s share is traded at 2.1x PBV FY11F, far below its FY10 valuation when it traded at 2.8x PBV at a time when full year 2010 net profit grew 25% yoy vs FY11F net profit growth of 34% yoy. BUY.

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