We maintain our BUY call on Bank Danamon with the revised TP of IDR6,100
based on 2.8x P/BV 2010E.
* After a slow 2009 the bank is expected to see much higher loan growth of
18% in 2010 with loan demand from the mass market segment, accounting for
54% of total loans, remains healthy.
* Of the mass market loans, we are positive on motorcycle financing with the
expected industry sales growth of 15% on new motorcycle sales. Adira Finance
financed more than 13% of the new motorcycle sales and 3% on new car sales
in 2009.
* Cost of funds is forecast to be lower in 2010 despite high reliance on
time deposits. This is because of the cap in deposit rate agreed among large
banks since mid 2009. Though we expect lower lending rates on mass market
loans, NIM is forecast to remain high at 11.8% in 2010-11.
* NPL should improve, in line with improving economic outlook, while
coverage ratio increase.
* We upgrade 2010 earnings by 7% and 2011 by 4%. With ROE getting closer
towards 20% again, we value the stock at 2.8x P/BV 2010E, compared to the
average valuation of 3x P/BV in the past nine years.
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