FY08 PAT surprises at 12% higher than our estimate: BCA reported FY08 net profit of Rp5.8T, 12% higher than our forecast and 10% higher than consensus. PPOP was 8.5% higher than our forecast, while PBT was 4% higher than our and consensus estimates.
FY08 tax rate revised to 25% in 4Q, expected to be lower in FY09: 60% of the FY08 net profit variance from our forecast was on account of income tax. BCA provided for a 25% tax rate in FY08 (previously 30%), based on new regulations issued late last year, which allow a 5% rebate for firms satisfying certain conditions, principally that free float be over 40%. BCA is the first company under our coverage to utilize this provision, and management expects the FY09 tax rate to be 23%.
Adequate capacity, no capital-raising seen: BCA raised its loan loss cover to 408% by Dec FY08. Management said it was comfortable that the current 15.6% CAR would leave ample capacity to grow credit in FY09 after considering expected FY09 performance and dividends, and it did not foresee any fresh capital issuance needs.
We believe forecasts need to be revised higher: We expect that both our and consensus forecasts need to be raised on the back of these results to reflect both the healthy operating performance (FY08 interest income 5% higher than forecast), more prudent provisioning, and lower tax rates.
Upside limited by valuation: BCA’s liquid balance sheet and prudent management make it a relatively safe port in the current turmoil, in our view, supporting our OW rating. However, at 3.1x FY09E PBV, BCA’s lofty valuations pose a risk and mayt upside. We raise our Dec FY09 DDM-based price target slightly to Rp3,250 (from Rp3,100), to reflect lower effective tax rates. Our PT is based on a 13% risk-free rate, and an 18.3% cost of equity, translating into a fair FY09E 3.3x P/BV.
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