BASML BBRI Upgrade TP;5,750

We upgrade BBRI PxT by 16% to Rp 5,750. Indonesian banks are relatively free from global toxic, and in addition here we have gov't expansionary fiscal policy and monetary easing; All Indonesian banks should benefit! Elsewhere Daisy highlights her warns about BUMI FY08

Upgrade BBRI
Arief raised his PxT for Bank Rakyat (BBRI IJ) by 16% to Rp 5,750 due to stronger loan growth forecasts & lower loan loss provisions. Management has hinted that they have seen little impact from the current financial meltdown given their heavy exposure to micro lending (33% of loans) and are officially guiding for +15-20% growth in loans in 2009 with +20-25% growth in micro lending. Rakyat trades on a price/book multiple of 2.1x 09 which is at a 40% premium to the sector but this is justified by the bank's ROE of above 26% and its unrivalled micro banking franchise. Arief forecasts EPS growth of +14.5% and +16.1% for 09 and 10 respectively and it trades on PE multiples of 8.9x 2009 and 7.6x 2010. His PxT derived from a Gordon Growth Model and assumes a sustainable RoE of 26%, dividend payout of 30%, WACC rate of 16% and terminal growth rate of 10.4%, and reflects 2.8x forward P/BV. No exposure to Lithuania, no CDOs, nothing toxic, just simple basic lending in an emerging economy that is set to be biggest than Germany's within 5 years.