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Thursday, September 22, 2011

Maintaining Perfomance - 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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