Analisa Saham BBTN | 24 Agustus 2018

Trimegah (LG) 8 Agt 2018 : BBTN BUY Upgrade TP 3700 (fr 2800)

Bank Tabungan Negara Double upgrade to Buy

We are turning positive on BBTN as we expect positive ROE momentum in the next couple of years, primarily stemming from higher loan growth outlook as the company is taking over subsidized mortgage loans from other banks. Moreover, we think concerns about NIM should fade as BBTN raised non-subsidized lending rates this month. Lastly, the stock risk-reward is more attractive than some LQ45 stocks, making BBTN worth overweighting for now. As we rollover valuation to 2019F, we believe investors would be willing to priced-in BBTN’s 20% YoY EPS growth. Henceforth, we double upgrade BBTN rating to Buy from previously Sell.

Higher loan growth outlook warrants higher EPS in 2019/20F A local news outlet (link) mentioned that BBTN is ready to take over suboptimal subsidized mortgage loan disbursement from 8 banks, which consequently would raise BBTN’s loan growth estimates in 2018-20F. Our argument is that BBTN would be given higher disbursement target by govt going forward given its public housing loan expertise. This should justify our new loan growth assumption
of 26/21/17%  in 2018/19/20F (previously 22/20/14%), which raises 2019/20F EPS estimates by 13/26%. Note that we adjust down 2018F EPS estimates by 9% as we expect BBTN to add more loan provisions as loans-at-risk coverage in 2Q18 (6.8%) is the lowest since mid-2013.

Raising our NIM forecast by 11/15bp in 2019/20F Three reasons that justify higher NIM forecast are:
1) management has stated to raise non-subsidized mortgage lending rates this month,
2) 31% of loan book are now under floating rate, and 3) the subsidized mortgage fixed loans (39% of loan book with 5% p.a. lending rate) will be funded by new FLPP scheme with the cost of 1.49% (fixed). 

Current risk-reward is attractive, even compared to some LQ45 stocks BBTN is now valued at 1.1/1.0x 2018/19F PBV and 9/7x 2018/19F PE, relatively inexpensive considering: 1) BBTN’s 14% ROE outlook, 2) its 16% CAGR EPS growth outlook in 2018-20F, 3) BBTN’s market leadership in public housing loans, and 4) strong govt support on the public housing program. On a relative basis, as an LQ45 stock, BBTN’s risk-reward is more attractive than BMRI, which offers 13% ROE but valued at 1.7x/13x PBV/PE for 2019F. It is also better than ASII (valued at c12x 2018F PE but it is facing tight competition from other automakers), TLKM (14.7x 2018F PE but with rising risk of data tariffs competition), as well as UNVR and HMSP (both are expensive in valuation), in our view. Hence, we think BBTN is worth overweighting now.

Valuation: rolling over to 2019F with IDR3,700 TP (41% ups.) Our new GGM-based TP assumes 14.3% sustainable ROE for 2019-21F (previously 12.4% for 2018-20F), 5% long-term growth rate (unch.), 11.5% cost of equity (unch.), and 7% risk-free rate (unch.). The new TP implies 1.4x 2019F PBV and 10.3x 2019F PE.