by DBS :
Bank Tabungan Negara : BUY; Rp1,460;
Price Target : Rp1,700; BBTN IJ
Rights issue details announced
By Lim Sue Lin
Indonesia Research Team
· Rights issue price to range between Rp1,000-1,400 (4-32% discount); ex-date on 19 Nov 2012
· Estimated FY12F EPS and ROE dilution of 15% and 2-3ppts respectively; total CAR enhanced by 4ppts
· Maintain BUY with TP Rp1,700
Rights issue details and pro-forma impact; capital ratios enhanced by 3ppts, ROE diluted by 2-3ppts. BBTN released in an abridged prospectus today with its rights issue price ranging between Rp1,000-1,400 (equivalent to 4-32% discount from last closing price of Rp1,460) - slightly lower than our initial estimate. This is compared to 11.5% discount for BMRI in Feb-11 and 19% discount for BBNI in Dec-10. Post rights, we estimate FY12F EPS will be diluted by 15% while ROE will be diluted by 2-3ppts. However, Tier-1 CAR would improve to 18-19% (2Q12: 14.8%), while total CAR would be nudged up to 19-20% (2Q12:15.6%).
Government’s stake will reduce; expect 5ppt tax break. Government will not subscribe for the rights, hence its stake will be diluted to 60% from 71.9% currently. BBTN will also enjoy a 5ppt tax break if it can keep its free float above 40% for 183 days post rights. BBTN has decided to bring forward the capital raising exercise to take advantage of market conditions pre-elections. Markets usually face uncertainties during the election period and Indonesia will hold their Presidential election in 2014. Current capital level is still adequate under BI’s minimum capital regulation of 8. Capital is still sufficient for growth, nonetheless the proceeds will allow BBTN to grow their books further.
Future fund raising activities via mortgage backed securities and bonds. BBTN’s rights issue proceeds will be used to boost growth for non-subsidised mortgages. Separately, BBTN is also planning to issue KIK-EBA or mortgage backed securities amounting Rp1tr by the end of the year as well as bond issuance early next year.
Maintain BUY with TP Rp1,700. Based on Gordon Growth Model (18% ROE, 11% growth and 16% cost of equity) implying 1.5x FY13F P/BV. Despite uncertainties, BBTN has proven its ability to deliver results. Share price performance has surged 7% following approval for the rights issue by Parliament last week.