BNI {Ticker: BBNI.JK, Closing Price: 3,375 IDR, Target Price: 3,900 IDR, Recommendation: Buy}
BNI will continue to pursue its rights issue plan in 4Q10, with the proposal has been submitted to parliament for approval. Our recent discussion with management suggests that the bank may want to increase the amount of rights issue (RI), while keeping the number of new shares issued at approximately 3,376m shares. The new size of RI issuance range would be Rp6.7-10.1tr, which is an increase from Rp4.0-7.0tr range. The increase comes as no surprise given the stock's recent share price performance. Given this, we gather that the market would be fully supportive of the proposed issuance.
We believe that raising the RI target would enhance the bank's valuations. In the table below we have provided several scenario analysis on the bank's fair valuation based on different pricing (Rp2,050, Rp2,500 abd Rp3,000) for RI and hence several different RI amounts. Based on our asessment, CAR would rise by380/460/550bps to 16.3/17.1/18.0% for FY10F. Our valuation would have risen to Rp4,155/4,360/4,587 respectively, from our current TP of Rp3,900. Maintain BUY.
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