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Danareksa Equity Snapshot - BTPS, 23 April 2019
April 23, 2019 15:49


The strong growth continues


We reiterate our BUY call on BTPS with a GGM-derived TP of IDR2,400 (implying 3.5x 2019F P/BV) following the release of the 1Q19 results that are inline with our expectation. NIM will remain high in our view despite the gradual decline to 38.0% this yearas BTPS will maintain its core business in theproductive female borrowers segment. As for the funding mix, it will still be dominated by TD with a 79.8% contribution to deposits by 2019F. All in all, we assume a 408bps credit cost and 19.7% yoy net profits growth this year.


1Q19highlights. The 1Q19 net profits of IDR288bn (+35.8% yoy) are inline with our estimate supported by strong 20.3% yoy financing growth and a lower credit cost of 353bps with a 1.4% gross NPLs ratio as of March 2019. The loans loss coverage (LLC) ratio climbed to 227% as of March 2019 due to the bank’s decision to allocate ample provisions on its financing exposure in Lombok and coastal towns on the Sunda Straits. If we strip out this one-off event, the LLC ratio would stand at 159%.


An exceptionally high NIM. Thanks to BTPS’ one-of-a-kind business model, its NIM will remain far above the industry level. However, we do expect the NIM to gradually decline to 38.0% in FY19F given higher individual financing exposure. This individual financing is still in the pilot project stage and only offered to borrowers who have already passed cycle 5 (each cycle has a 52-week tenor). Meanwhile, funding is still largely provided by wealthy individuals who place their funds in TD products (under the mudharabah scheme). Thus, we assume a 5.8% blended CoF this year.


Decent ROAE outlook at above 20%. High loans growth of at least 20% in the next two years should offset the lower expected NIM. Fee-income is not yet the focus as BTPS still seeks to grow its assets further. Credit costs, additionally, should be predictable given the bank’s financing portfolio. We assume dividends will only be distributed from FY21F’s net profit and beyond. This is because BTPN, as BTPS’ biggest shareholder, views that BTPS still needs sufficient capital to support its expansive financing growth. Thus, assuming net profits growth of 19.7% this year, the ROAE should reach 26.0%.


Maintain BUY with a higher TP of IDR2,400. We maintain our BUY call on BTPS with a higher GGM-derived TP of IDR2,400 assuming 8.9% CoE, 23.9% sustainable ROAE and 3% long-term growth. Our TP implies 3.5x 2019F P/BV.


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