DBS Bank Mandiri: Buy; Rp5,900; TP Rp7,000; BMRI IJ

Green NPL recovery target achievement

Bank Mandiri (BMRI) would like to close the year, achieving its loan recovery target of Rp1tr. Till July 2010, BMRI has managed to book NPL recovery of Rp700bn or 70% of annual target. In addition, BMRI plans to book around Rp279-290bn from Benua Indah’s loan collaterals auction in September. Benua Indah has been a big debtor since crisis era in 1998 with total outstanding loan of Rp480bn. On top of that, BMRI has reached agreement with Bakrie Sumatra Plantations (UNSP) to sell Domba Mas where UNSP has paid Rp935bn as first installment of acquisition price in June. Domba Mas has indebted to BMRI for Rp3.3tr. However, the acquisition negotiation progress with UNSP has been put off. It is reported that BMRI will cancel the agreement and look for other investors should UNSP not finalize its commitment. BMRI is also restructuring 20 debtors including Garuda Indonesia which will execute its IPO plan in November. Therefore, BMRI will sell its stake in Garuda Indonesia and book proceeds from IPO this year.