Bank Mandiri (BMRI) reportedly will offer rupiah sub-debts by the third week of this month. The total bond issue size will be c.Rp3tr, which can be increased to Rp5tr if there is strong demand from the market.
BMRI’s issue of sub-debts is driven by expected strong loan growth next year. The bank targets 20% loan growth, higher than our forecast of 12.5% y-o-y. The growth will be driven by all segments. Although the largest contributor should still be the corporate segment, other sectors such as consumer and micro should grow stronger next year. BMRI targets 30% from auto loan which will be driven by its auto financing subsidiary Mandiri Tunas Finance. Micro segment, although still small in terms of proportion to total loan (2.7%), is expected to grow by 20-30% next year.
At the same time, we believe this is the best time to issue sub-debts and other fixed income instruments as the BI rate is at a historic low of 6.5%. BMRI plans to issue foreign denominated bonds next year if the bond market for the said instruments improves.
We maintain our forecast at this moment and reiterate our Buy call on the stock with target price of Rp6.000 at 3.1x FY10 PBV.
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