■ Another sterling quarter: BMRI reported 1Q10A net income of Rp2,003 bn, 43% YoY, 22% of our forecasts (versus 1Q09A which contributes 20% of FY09A), and 24% of consensus’ forecasts. BMRI’s 1Q10A PPOP of Rp3,392 bn came 24% of our FY10E expectations.
■ Robust fundamentals: BMRI’s repeat sterling performance provides a very convincing evidence that it is no longer transforming, but rather is a bank with robust fundamentals and growth outlook poised to take the top position in the Indonesian banking sector. BMRI currently exhibits the second lowest LDR with 15.7% 1Q10A CAR, implying significant growth potential ahead. BMRI’s robust fundamentals are well illustrated by its ability to deliver the second highest provision coverage, the second lowest NPL ratio and the third highest ROE of the six Indonesian banks under our coverage.
■ More potential for rerating: Despite its past rerating, we believe BMRI’s current share price does not yet adequately reflect the company’s fundamental strength. BMRI is still trading at 24% and 60% discounts to MSCI Indonesia and MSCI NJA banks, respectively.
■ Undemanding valuations: The large discount against MSCI Indonesia and MSCI NJA banks, despite its fundamentals being stronger than its peers implies that BMRI’s share price still offers an attractive entry point. We maintain our OUTPERFORM rating on BMRI and target price of Rp6,900, implying 3.6x 2010E P/B and 15.8x 2010E P/E. We maintain BMRI as our top pick in the Indonesia banks sector.
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