BBTN Consistent Credit Growth Is Pivotal 20180809 NHKS Company Report (English)

  Buy Dec 2018 TP (IDR) 3,280 Consensus Price (IDR) 3,311 TP to Consensus Price

• 0.9% vs. Last Price +25.2%

  Finance Bank Bloomberg

  41.98 Avg. Trd Val - 3M (bn) 108.02 Foreign Ownership 20.5%

  2Q18 Performance Review BBTN enjoyed the 2Q18’s growth of 12.4% y-y to IDR5.1 trillion in interest income coupled with the slightly lower growth of 8.5% y-y to IDR2.9 trillion in net interest income. It also posted the surge of 9.3% y-y to IDR739 billion in net profit lower than the 1Q18’s jump of 15.1%.

  Reliance on Stable Growth of Mortgage Loan BBTN managed to record the 2Q18’s growth of 19.1% y-y in credit. Its mortgage loan (KPR) enjoyed the increment of 30.3% and dominated 39.4% of its overall credit portfolios. We project that in the end of 2018 its credit growth likely hits 18.1%, slightly lower than the 2017’s growth of 21.0%.

  The estimated lagging growth of 18.1% is capable of stimulating the acceleration in the 2018’s growth of 19.7% in interest income (vs. the 2017’s lower growth of 12.4%). Thanks to the downtrend of lower benchmark rate accelerating the 2Q18’s growth; thus, it likely enjoys the loan yield estimated to stably stand at the minimum of 10%.

  We estimate that the 2018’s growth in net profit likely lags as in 2H18, the higher cost of deposit cushioning the decline in current account saving account (CASA). However, the 2019’s net profit is estimated to be accelerated. The little risks of benchmark rate decline coupled with the credit growth stably topping 18% likely ceases the impact of the upbeat cost of deposit.

  40.0 Outstanding sh.(mn) 10,590 Market Cap (IDR bn) 29,440 Market Cap (USD mn) 2,043 Avg. Trd Vol - 3M (mn)

  Last Price (IDR) 2,620 Price date as of Aug 08, 2018 52 wk range (Hi/Lo) 3,890 / 2,110 Free float (%)

  Shares data

BBTN IJ

• 62 21 797 6202, ext:214

  Operating Revenue 9,446 10,945 12,414 14,612 Net profit 2,619 3,027 3,360 4,025 EPS (IDR) 247 286 317 380

  Bank Tabungan Negara Tbk | Summary (IDR bn) 2016/12A 2017/12A 2018/12E 2019/12E

  Rel. Ret. -22.5% 7.5% -11.3%

  Abs. Ret. -26.6% 12.4%

  12M

  3M

  1M

  Share Price Performance YTD

  raphon@nhsec.co.id

  Reuters BBTN.JK Raphon Prima

  Please consider the rating criteria & important disclaimer NH Korindo Sekuritas Indonesia Company Report | Aug 09, 2018 Bank Tabungan Negara Tbk (BBTN) Consistent Credit Growth Is Pivotal

  Target Price of IDR3,280 We use an assumption of forward P/B of 1.3x (1 SD higher than the last 4- year average) as the basis of valuation method. The target price implies a 2018E P/B of 1.4x (vs. the current P/B of 1.1x).

  Interest Income 17,139 19,272 23,077 27,077

  EPS growth 41.5% 15.6% 11.0% 19.8%

  growth 14.5% 12.4% 19.7% 17.3%

  Dividend yield 3.7% 1.6% 2.4% 2.9% Source: Company Data, Bloomberg, NHKS Research

  49 57 63 76

  ROIC 8.0% 7.6% 6.8% 6.9% P/E 5.4x 12.5x 8.3x 6.9x P/BV 0.7x 1.7x 1.1x 1.0x DPS (IDR)

  1.4% 1.3% 1.2% 1.2%

  15.9% 14.8% 14.6% 15.5%

  ROE

  2.8% 2.7% 2.5% 2.3%

  NPL

  100.5% 100.5% 105.5% 106.7%

  BVPS (IDR) 1,806 2,046 2,302 2,615 Net Interest Margin 4.4% 4.1% 3.9% 4.0% Loan/Deposits

  ROA

• 5.8%
• 1.9%
• 6.8%

A number of Malaysia and Singapore-based banks such as OCBC, CIMB, and Malayan Banking can outpace the growth of 10%-20% in net profit posted by Indonesia-based banks. However, those three banks have bigger assets than Indonesia-based banks have.

  Although facing the challenge of decline in reference rate, Indonesia-based banks are still capable of maintaining NIM topping the NIM achieved by its peers in ASEAN. The higher NIM is capable of being translated into a higher ROE.

  Thailand

  Indonesian’s Bank Competitiveness in ASEAN Indonesia-based banking industry is the investment priority in ASEAN as it offers higher credit rate than do its peers in ASEAN. It is the takeaway factor to the excellent characteristic of Indonesia-based banking industry.

  It becomes the government’s major partner in promoting the subsidized KPR program aiming to the vision of providing 1 million houses. The program targets Indonesian having income lower than IDR4 million per month.

  BBTN at A Glance BBTN is a state-owned banking focusing on the distribution of KPR. In 2Q18, it distributed KPR of IDR155.4 trillion or 74% from the total credit distribution. Its KPR service targets

the housing financing for the low to middle-income classes.

  BDO Unibank 10,698 53,371 6.4% 4.1% 9.5% 20.7x 1.9x 0.9% Metropolitan Bank 5,733 41,612 6.5% 3.8% 8.3% 12.9x 1.1x 1.3% Philippine Island Bank 8,234 38,084 3.2% 3.6% 10.5% 18.5x 1.8x 1.8%

  Philippine

  Bank of Ayudhya 9,254 64,128 7.5% 3.7% 10.7% 12.7x 1.3x 2.0%

  Bangkok Bank 11,964 94,446 6.7% 2.4% 8.9% 11.4x 1.0x 3.1% Siam Commercial 14,989 92,841

  CIMB 13,636 124,711 17.0% 2.4% 9.8% 11.7x 1.2x 4.2% Malayan Banking 26,569 188,433 9.5% 1.8% 10.7% 13.5x 1.5x 5.6% Hong Leong 5,134 50,939 4.3% 1.6% 10.0% 12.2x 1.2x 2.2%

  Company Report

  Malaysia

  DBS 48,884 387,334 11.1% 1.9% 10.3% 13.8x 1.4x 6.5% UOB 34,684 268,287 19.2% 1.8% 11.3% 12.5x 1.4x 3.5% OCBC 36,892 340,370 21.4% 1.7% 11.5% 11.5x 1.3x 3.1%

  Singapore

  BBTN 2,036 19,235 11.7% 4.4% 15.1% 9.2x 1.3x 2.1% BBRI 28,510 82,886 11.0% 7.9% 19.6% 13.4x 2.5x 3.2% BMRI 23,484 82,772 44.3% 5.5% 14.5% 14.5x 2.0x 2.7% BBCA 41,200 55,219 12.2% 6.5% 18.8% 24.5x 4.3x 1.1% BBNI 10,355 52,203 9.4% 5.7% 15.5% 10.2x 1.5x 3.2%

  Company Market Cap (USD mn) Total Asset (USD mn) Net Profit Growth (LTM) Net Interest Margin (LTM) ROE (LTM) P/E (LTM) P/BV (LTM) Dividend Yield

  Source: Bloomberg, NHKS research

  ASEAN Banks

  Aug 09, 2018

• 13.0% 3.2% 11.7% 11.9x 1.4x 3.8%

  Company Report

  Aug 09, 2018

  Performance Highlights Interest Income (IDR bn) | 3Q15 - 2Q18 Net Profit (IDR bn) | 3Q15 - 2Q18

  Source: Company, NHKS research Source: Company, NHKS research

  Outstanding Loan (IDR bn) | 3Q15 - 2Q18 Deposit (IDR bn) | 3Q15 - 2Q18

  Source: Company, NHKS research Source: Company, NHKS research

  Loan Composition | 2Q18 Loan Yield, Cost of Deposit, NIM | 3Q15 - 2Q18

  Source: Company, NHKS research Source: Company, NHKS research

  Company Report

  Aug 09, 2018

  Multiple Valuation Forward P/B band | Last 4 years Dynamic Forward P/B band | Last 4 years

  Source: NHKS research Source: NHKS research

  Rating and target price update Target Price Revision Date Rating Target Price Last Price Consensus vs Last Price vs Consensus

  03/08/2018 Hold 3,790 (Dec 2018) 3,770 3,825 +0.5% 0.9%

• 08/09/2018 Buy 3,280 (Dec 2018) 2,620 3,311 +25.2% 0.9%
• Source: NHKS research, Bloomberg

  Analyst Coverage Rating Closing and Target Price

  Source: Bloomberg Source: NHKS research

  NH Korindo Sekuritas Indonesia (NHKS) stock ratings

  1. Period: End of year target price

  2. Rating system based on a stock’s absolute return from the date of publication : Greater than +15%

   Buy : -15% to +15%  Hold : Less than -15%  Sell

  Company Report

  Aug 09, 2018

  Summary of Financials

DISCLAIMER

INCOME STATEMENT BALANCE SHEET

  

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errors, omissions, misstatements, negligence, inaccuracy arising herefrom. All rights reserved by PT NH Korindo Securities Indonesia ^{BBTN Summary Last Price (IDR) 2,620}

^{Target Price (IDR) 3,280 2016/12A 2017/12A 2018/12E 2019/12E}

^{Rating: Buy ROE 15.9% 14.8% 14.6% 15.5% ROA 1.4% 1.3% 1.2% 1.2% ROIC 8.0% 7.6% 6.8% 6.9% Opera ti ng ROA 4.9% 4.6% 4.4% 4.5%}

^{in IDR bn 2016/12A 2017/12A 2018/12E 2019/12E Pre-Provi s i on ROA 2.1% 2.0% 1.8% 1.9%}

^{Interest Income 17,139 19,272 23,077 27,077 Non-Interes t Income/Op. Rev 13.6% 14.7% 15.2% 15.2%}

^{Growth (% y/y) 14.5% 12.4% 19.7% 17.3% Cos t/Income 57.0% 56.4% 58.5% 58.5%}

^{Interes t Expens es (8,975) (9,931) (12,556) (14,693) Ca s h Di vi dend (IDR bn) 524 605 672 805}

^{Net Interest Income 8,164 9,341 10,521 12,384 Di vi dend Yi el d (%) 3.7% 1.6% 2.4% 2.9%}

^{Net Interest Margin 4.4% 4.1% 3.9% 4.0% Pa yout Ra ti o (%) 20.0% 20.0% 20.0% 20.0%}

^{Net Fee Income 591 750 850 1,000 Equi ty/As s ets 8.9% 8.3% 8.1% 8.0%}

^{Tra di ng Income 282 403 414 487 Loa n/Depos i ts 100.5% 100.5% 105.5% 106.7%}

^{Other Opera ti ng Income 409 451 630 741 Loa n/As s ets 76.8% 76.1% 78.3% 79.9%}

^{Operating Revenue 9,446 10,945 12,414 14,612 NPL 2.8% 2.7% 2.5% 2.3%}

^{Opera ti ng Expens es (5,387) (6,169) (7,262) (8,547) Loa n Los s Res erves /Loa ns 1.3% 1.2% 1.0% 1.0%}

^{Pre-provisioning OP (PPOP) 4,060 4,776 5,153 6,065 Depos i ts /Li a bi l i ti es 83.9% 82.6% 80.7% 81.4%}

^{Provi s i on for Impa i rment (708) (884) (882) (923) CASA/Depos i ts 49.3% 48.3% 47.6% 46.7%}

^{EBT 3,330 3,862 4,285 5,135 Ti me Depos i ts /Depos i ts 48.5% 48.9% 50.0% 50.6%}

^{Income Ta x (711) (834) (926) (1,109) Pa r Va l ue (IDR) 500 500 500 500}

^{Non-control l i ng Interes t - - - - Tota l Sha res (mn) 10,590 10,590 10,590 10,590}

^{Net Profit 2,619 3,027 3,360 4,025 Sha re Pri ce (IDR) 1,340 3,570 2,620 2,620}

^{Growth (% y/y) 41.5% 15.6% 11.0% 19.8% Ma rket Ca p (IDR tn) 14.2 37.8 27.7 27.7}

^{in IDR bn 2016/12A 2017/12A 2018/12E 2019/12E 2016/12A 2017/12A 2018/12E 2019/12E}

^{Ca s h 1,007 1,028 979 1,273 Pri ce /Ea rni ngs 5.4x 12.5x 8.3x 6.9x}

^{Pl a cement i n Ba nks 28,600 37,808 35,251 34,731 Pri ce /Book Va l ue 0.7x 1.7x 1.1x 1.0x}

^{Net Loa ns 162,330 196,635 232,600 275,219 Pri ce/Op. Revenue 1.5x 3.5x 2.2x 1.9x}

^{Inves tment 13,415 15,890 18,786 22,203 PE/EPS Growth 0.1x 0.8x 0.8x 0.3x}

^{Fi xed As s et 4,659 4,837 4,870 4,893 EV/Opera ti ng Revenue 2.5x 2.9x 3.2x 3.0x}

^{Other As s ets 4,157 5,167 7,812 9,235 EV/PPOP 5.7x 6.7x 7.7x 7.1x}

^{Total Assets 214,168 261,365 300,298 347,554 EV (IDR bn) 23,311 31,866 39,478 43,213}

^{Depos i ts 163,640 197,919 222,746 260,335 Op. Revenue CAGR (3-Yr) 13.8% 19.8% 16.2% 15.7%}

^{Debt 24,304 32,856 40,429 44,458 EPS CAGR (3-Yr) 18.8% 39.5% 22.0% 15.4%}

^{Other l i a bi l i ti es 7,094 8,927 12,745 15,068 Ba s i c EPS (IDR) 247 286 317 380}

^{Total Liabilities 195,038 239,702 275,919 319,860 Di l uted EPS (IDR) 247 286 317 380}

^{Ca pi ta l Stock 5,295 5,295 5,295 5,295 BVPS (IDR) 1,806 2,046 2,302 2,615}

^{Reta i ned Ea rni ngs 9,008 11,512 14,266 17,619 Op. Revenue PS (IDR) 892 1,034 1,172 1,380}

^{Shareholders' Equity 19,131 21,663 24,379 27,694 DPS (IDR) 49 57 63 Net Income 2,619 3,027 3,360 4,025 DCF (IDR bn) 76}

^{in IDR bn 2016/12A 2017/12A 2018/12E 2019/12E 2016/12A 2017/12A 2018/12E 2019/12E}

^{Deprec & Provi s i on 924 1,099 580 465 NOPAT 3,193 3,745 4,039 4,755}

^{Chg. In Worki ng Ca pi ta l 111 (2,875) (2,015) 899 +Depr./Amor. 924 1,099 580 465}

^{CFO 3,655 1,252 1,925 5,389 -Chg. i n Loa n (26,150) (35,210) (51,283) (42,320)}

^{Net Cha nges i n Loa n (26,150) (35,210) (51,283) (42,320) -Incr. (Decr.) i n Worki ng Ca p. 111 (2,875) (2,015) 899}

^{CFI (28,124) (34,377) (47,491) (46,003) (Unl evered) FCFF (21,921) (33,241) (48,679) (36,202)}

^{Di vi dends Pa i d (370) (524) (605) (672) WACC}

^{Net Cha nges i n Depos i t 32,279 32,859 21,420 37,589 Cos t of Debt (Ta x Adj.) 8.2% 5.7% 7.3% 7.4%}

^{CFF 33,867 42,355 31,856 40,908 Cos t of Equi ty (COE) 9.5% 10.3% 12.9% 13.0%}

^{Net Changes in Cash 9,398 9,229 (13,711) 294 WACC (%) 8.7% 8.2% 9.6% 9.5%}

^{RIM Sprea d (FROE-COE) (%) 9.4% 5.6% 2.6% 3.5% Res i dua l Income (IDR bn) 1,307 1,062 557 848}

^{By Geography % Shareholders % Equi ty Cha rge 1,312 1,965 2,802 3,178}

^{Indones i a 79.5 Republ i c of Indones i a 60.0 EVA Uni ted Sta tes 8.4 Di mens i ona l Fund 1.9 Inves ted Ca pi ta l (IDR bn) 36,214 43,434 54,519 64,808 Luxembourg 4.8 Va ngua rd 1.2 ROIC-WACC (%) 0.2% 0.5% -2.2% -2.2% Sweden 2.6 Svens ka Ha ndel s . 1.2 EVA (IDR bn) 54 196 (1,175) (1,428)}

  CASH FLOW STATEMENT DCF, RIM & EVA OWNERSHIP PROFITABILITY & STABILITY _{August 8, 2018 Dec 2018}

  ^{Analyst: Raphon Prima}