BDMN
Contact our analyst Lingga
11% upside. Hold.
11th August, 2020
Price Rp2800
Target price Rp3110
Net Profit drops
The 2Q20 Net Loss of IDR 400 billion, resulted in a -53% decline in 1H20 net profit to IDR 845 billion. There was still a 3% increase in Net Interest Income in 1H20, and Non-Interest Income, rose quite significantly too by 18%, partly thanks to a long-term agreement with Zurich Insurance which is starting to produce revenue. The increase in Non-Interest Income was not enough to offset the higher Cost of Credit which increased by 87% because of loan restructuring.
Loan Restructure Process
In June 2020, restructured loans amounted to IDR 28.3 trillion, 19% of the total loans. Loan restructuring involves deferring principal payments to maturity for corporate, lower interest rates for the commercial segment, and deferred interest payments for SMEs. The largest contributor to restructuring was Adira Finance representing 83.5% and the SME segment was 18%. BDMN targets restructured loans to reach 20% of the total loans in FY2020.
Loan Growth has decreased
At the end of 2Q20, lending decreased -4% YoY driven by the SME segment which was down -22% YoY, Adira Finance decreased -7% YoY. The corporate segment increased +4% YoY due to synergy with the MUFG network. BDMN is focusing on growing loans to blue-chip corporations and SOEs, and reducing disbursement of loans to the ADMF and SME segments.
Valuation: 11% Upside, Hold.
Based on our DDM Valuation, we set a target price within one year of IDR 3,110, which means the shares will be traded at 0.6x PBV and gives 11% potential upside. Hold.
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