Deutsche Bank - Equity Research - Asia BNI : More opportunities with RI; target price up to

BNI : More opportunities with RI; target price up to Rp5,000

BNI {Ticker: BBNI.JK, Closing Price: 3,725 IDR, Target Price: 5,000 IDR,
Recommendation: Buy}

Bringing it to next level; target price upgraded to Rp5,000 (from Rp3,900)

The Indonesian parliament approved BNI's proposed Rights Issue (RI). We
view the RI as value-enhancing for BNI's long-term growth. Under the
proposal, BNI will issue approx. 3.4bn new shares. At our estimated RI
price of Rp3,000, it will raise Rp10tr in new capital, increasing 2011F
CAR by 432bps to 16.9% - ahead of its peer average and allowing it to
accelerate loan growth. EPS dilution is more than offset by higher BVPS.
As such, we retain BNI as one of our sector top picks with a revised
post-RI target price of Rp5,000, implying a post-RI 2011F PBx of 2.55x.

Capital well-positioned

The Indonesian parliament approved BNI's proposed RI of approx. Rp10tr (by
issuing 3.4bn new shares). This will raise CAR by 432bps to 16.9% in
2011F, which will be ahead of its peer average. This should allow BNI to
have higher loan growth of >20%.

BVPS uplift should offset EPS dilution; ROAE recoveries within two years

Post-RI adjustments, our revised NP for 2011/12/13F are respectively
Rp4.8tr, Rp6.1tr and Rp7.7tr (+15% from our pre-RI forecasts). ROAE
recoveries to the pre-RI level would be within a two-year time frame
(i.e., post-RI 2013F ROAE = pre-RI 2011F ROAE of 17.2%). Post-RI, BVPS
should increase by 16/13/10% in 2011/12/13F, which should more than offset
the 5% EPS dilution.

Target price Rp5,000; risks: lower loan growth/yields, higher NPL/costs

After making our adjustments, we believe RI is value-enhancing for BNI.
Consequently, we have raised our target price to Rp5,000 (vs. the pre-RI
target price of Rp3,900). This is derived from (ROAE-g)/(COE-g)
methodology. Risks are lower loan growth and yields due to competition,
higher NPLs and COF and operating costs.