Takeaways from Jakarta — Bank Central Asia presented at Citi's Indonesia
Investor Conference on Aug.4-5.Below are key takeaways.
Loan growth pickup — Loan growth has picked up strongly since Q2,,and
2010 growth is likely to be at least 20%.Corporate loans have been the
positive surprise,and demand is a balance between investment and working
capital loans.No risk of economy heating up in the near future.
Credit costs — Lower credit cost is more a function of absence of new NPLs.
This is driven by the strong economic environment.The recovery trend has
been as in the past.
Challenges — While management is striving to grow loans,achieving the
75%desired level (of Bank Indonesia)is unlikely.Total loans (Rp131trn)are
51%of deposits,but total loans plus facilities (Rp191trn)are 75%of
deposits.The impact on CAR is also unclear,as achieving the desired level
of LDR will bring it below 12pc (another BIs desired floor).Mortgage risk
charge is only 40pc,so is a desirable growth avenue,particularly with low
cost of funds.
Deposit growth — Deposit growth momentum is healthy,and CASA growth is
meeting the loan growth.Saving deposit growth is slow,in line with the
industry.
Valuation
Our target price of Rp5,600 is based on a 2011E P/E of 15.3x,+1sd (1.8x)
above the stock's average (13.5x)since 2006 because we believe we are in an
upcycle.A P/E approach helps capture the growth potential of the bank.
Risks
We rate BBCA shares Medium Risk,while our quantitative risk-rating system,
which tracks 260-day historical share price volatility,rates Indonesian banks
High Risk.With the Indonesian economy stabilizing quickly,BCA warrants a
Medium Risk rating,in our view.Upside risks to our target price include
sustained liquidity inflow,strong loan demand due to benign inflation
(consumer/microfinance)and a sharp export recovery (corporate).Downside
risks to our target include:1)lower-than-projected growth;and 2)reversal of
the US carry trade.
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