* The re-appointment of Agus Martowardojo as Bank Mandiri’s CEO over the next five year increases the likelihood for the bank to smoothly enlarge its high yielding businesses.
* Its agreement with Pos Indonesia, the state-owned post company with massive distribution network, will instantly allow Bank Mandiri to enlarge its high yielding businesses point of sale by 7.6x to roughly 10,500 (vs. Bank Rakyat Indonesia’s (BRI) of 4,500).
* I also believe that the JV with Pos Indonesia could increase the bank’s micro and retail return on equity from currently 37% to 42-47%.
* The bank’s multiple has been re-rated over the past five years on the back of the capability of Agus Martowardojo’s team in lowering NPLs and enlarging low cost deposits. I think the bank’s multiple will be further re-rated over the next 3-5 years on the back of its smart strategy in entering the Indonesian micro banking space.
* Given its sizeable market cap (of US$12.6B) and decent daily liquidity (of US$18.3M), Bank Mandiri should obviously be one of long-term core holdings in Indonesia.
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