Share price has discounted a lot of good news The 183% rise in Bank Danamon Indonesia’s (Danamon) share price from its low on 11 February 2009 was partly justified given record low interest rates, in our view. However, we believe the implied sustainable ROE of 22% is unlikely to be achieved in 2010, even if the cost of credit normalises as early as 2010. We think the share price has run ahead of fundamentals and downgrade the stock from Neutral to Sell.
Buying at this level requires an extremely positive environment Our explicit forecast already assumes 53% EPS growth in 2010 and 34% in 2011 on record NIM and 20% loan growth. Should provisioning charges normalise, the ROE in 2010 would still be lower than 22%. Given internal constraints, we also think Danamon is unlikely to deliver a higher than 20% loan growth in 2010. We upgrade our EPS estimates for 2009/10/11 from Rp219/283/379 to Rp225/346/463.
Still the preferred bank in an expensive sector With this downgrade, all the big four Indonesian banks under our coverage are Sells. We still think Danamon is the preferred stock in an expensive sector. Danamon has the strongest capital and a higher potential of positive earnings surprise. It is a key beneficiary of lower interest rates; it is more disciplined in recognising NPL given its mass-market focus and that expectation on credit costs is already the highest for 2010.
Valuation: raise price target from Rp2,775 to Rp3,500, downgrade to Sell We derive our Rp3,500 price target using the Gordon Growth method. We assume a risk-free rate of 11.9%, sustainable ROE of 21.2%, and a June 2009 cut-off date.
My Family
Langganan:
Posting Komentar (Atom)
Tidak ada komentar:
Posting Komentar