Our Top-Picks in the Banking sector are BMRI, BBNI, BBRI while maintaining Hold on BBCA due to its premium valuation!
· Teddy Oetomo (Daily attached): We believe BBNI is now entering a new stage of transformation. After completing its book restructuring and upgrading top management quality, BBNI is now entering into a phase of operational transformations.
· BBRI and BMRI have delivered similar transformations. Historical records of BBRI and BMRI’s transformations indicate the potential upside that may be available for BBNI, subject to its execution ability to deliver the ongoing transformations.
· We believe BBNI is well positioned to repeat the success delivered by BBRI and BMRI. However, currently, BBNI needs to further strengthen the alignment of interest between management and shareholders, and appropriately offer incentives to management to minimise execution risk.
· We believe BBNI provides significant upside potential, subject to its ability to complete the transformation. We maintain our OUTPERFORM rating on BBNI and target price of Rp4400, implying 2.42x 11E P/B and 14.5x 11E P/E.
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