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Tuesday, September 27, 2011

Bank Mandiri. Tbk

by Batavia Prosperindo Securities

Favorable 1H11 result

BMRI kept up the pace of its revenue growth in 1H11 as net interest income rose 15% yoy to Rp10.38 trillions, resulted in a net income increase of 57% yoy to Rp6.32 trillions. Necessary note for 1H11 profit was the substantial leap in extraordinary income mainly from Garuda Indonesia’s writebacks.

Reported 1H11 NIM was 5.2%, contributed by disbursed loan which grew 26% yoy. Quality of disbursed loan continued at nifty level by declining in 1H11 gross NPL at 2.42% compared to 2.54% at 1H10.

Subsidiaries income contribution

We noticed that there has been a significant increase in premium income from subsidiaries which booked initially in 3Q10. Premium income for 1H11 rose 137% ytd, booked at Rp2.42 trillions, and contributed 12% to BMRI 1H11 consolidated interest and premium income. As a new business income, premium income would be a significant driver for BMRI to boost its net income in the future.

Future outlook

Repose to 1H11 result, BMRI had 59% of CASA in its total deposits. Time deposits and other interest rate sensitive components could lay a negative impact for future NIM growth, when inflation rate tends to move up.

Nevertheless, we perceive that BMRI would still have a room to grow its income refer to its 1H11 loan growth which is above industries average.

BMRI would also relish the 5% corporate income tax benefit from its latest rights issue which increased the public share in BMRI.

Revise our TP to Rp 8,400 and maintain BUY

We use book value valuation for BMRI, under the assumption of 35% pay out ratio, and lead to target price of Rp 8,400 reflecting 2.75X 2011F Fair PBV. Our target price reflects potential upside of 18% from BMRI current price, and this enacts us to maintain our BUY recommendation.

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