I n d o n e s i a D a i l y Thursday, 18 October 2018

PLEASE CLICK ON THE PAGE NUMBER TO MOVE TO THE RELEVANT PAGE. REGIONAL MARKET
Market Close +/- Chg (%)
KEY HIGHLIGHTS MSCI Indonesia 6,578.6 94.8 1.4
MSCI Asia-Ex Japan 599.7 0.6 0.1
Results KLCI 1,740.6 3.8 0.2
FSSTI 3,071.1 36.8 1.2
Bank Mandiri (BMRI IJ/BUY/Rp6,575/Target: Rp7,600) Page 2 SET 1,695.0 (2.8) (0.2)
9M18: NPL ratio down at 3% for the first time since early-16. Moderate tailwinds from Hang Seng 25,462.3 - -
Nikkei 22,841.1 291.9 1.3
improving asset quality. Shanghai Comp 2,561.6 15.3 0.6
Dow Jones 25,706.7 (91.7) (0.4)
TRADERS’ CORNER Page 5 Source: Bloomberg
Bumi Serpong Damai (BSDE IJ): Technical BUY
INDONESIA STOCK EXCHANGE
Indofood Sukses Makmur (INDF IJ): Technical BUY Level +/- Chg (%)
Index 5,868.6 67.8 1.2
LQ-45 928.7 11.3 1.2
Value (US$m) 417.3 2.7 0.6

FOREIGN TRADE IN IDX

Net (US$m) Buy Sell Total (%)
34.7 124.4 89.7 25.7

TOP VOLUME
Company Price Chg Volume
(Rp) (%) ('000)
Trada Alam Minera 200 0.5 542,321
Bumi Resources 182 1.7 316,954
Inti Agri Resources 212 0.0 289,325
Panin Financial 290 0.7 213,415
Perusahaan Gas Negara 2,310 5.0 136,397

TOP GAINERS
Company Price Chg Volume
(Rp) (%) ('000)
Indah Kiat 13,525 10.4 10,446
Tjiwi Kimia 11,200 8.7 12,363
Jaya Konstruksi 488 8.0 4
Matahari PP 177 7.3 7,664
Delta Dunia 805 6.6 74,391

TOP LOSERS
Company Price Chg Volume
(Rp) (%) ('000)
Metropolitan Kentjana 22,000 (8.3) 1
Holcim Indonesia 1,625 (7.1) 17,846
Medco Energi 900 (1.6) 23,781
Bank Pan Indonesia 1,075 (1.4) 3,472
Unilever Indonesia 45,000 (1.3) 1,329

COMMODITY TREND
17 Oct 18 Chg (%)
Closing 1-day 1-mth
Forex (Rp/US$) 15,177 0.1 1.9
Crude Oil NYMEX (US$/bbl) 69.75 (3.0) 1.2
Coal Fut Newc (US$/tonne) 109.15 0.0 n.a.
Nickel 3M LME 12,375 (1.7) 1.1
Tin 3M LME 19,080 (0.6) 0.3
Gold SPOT (US$/oz) 1,225 (0.3) 2.3
CPO Fut Msia (MYR/tonne) 2,156 0.7 (2.3)
Wheat CBT (US$/bu) 549 (1.0) 1.8
Source: Bloomberg, UOB Kay Hian

Refer to last page for important disclosures. 1

I n d o n e s i a D a i l y Thursday, 18 October 2018

COMPANY RESULTS BUY

Bank Mandiri (BMRI IJ) (Maintained)
9M18: NPL Ratio Down At 3% For The First Time Since Early-16. Tailwinds From Share Price Rp6,575
Improving Asset Quality Target Price Rp7,600
BMRI reported healthy, in-line 9M18 net profit of Rp18.1t, up 20% yoy, or 5.5% yoy in Upside +15.6%
3Q18 mostly on a continued recovery in revenue and higher loan growth of 14% yoy
which was attributed to a jump in corporate loans (+28% yoy). NPL ratio has come COMPANY DESCRIPTION
State owned bank with largest market share
down to 3% for the first time since 1Q16 with minor loan loss reserve increases and
corporate segment.
moderate write-offs. We maintain BUY with a target price of 7,600 on an improving
outlook and we do not see major asset quality surprises ahead.
STOCK DATA
3Q18 RESULTS GICS sector Financials
Year to 31 Dec (Rpt) 3Q18 3Q17 yoy % chg Comments
Bloomberg ticker: BMRI IJ
Net Interest Income 13,908 13,152 5.7 Int.income +5.5% qoq vs expenses +8%qoq
Non-Interest + 6,585 6,437 2.3 Shares issued (m): 46,666.7
Pure fees & commissions +9% yoy
Pr.Income Market cap (Rpb): 306,833.3
Gross Operating 20,493 19,589 4.6
Income Market cap (US$m): 20,253.0
Operating Expenses (9,559) (9,251) 3.3 G&A +14% yoy, Personnel +10% yoy 3-mth avg daily t'over (US$m): 15.3
PPOP 10,934 10,338 5.8
Credit Costs (3,070) (2,889) 6.3 ytd write-offs of Rp11t (Rp11t guidance 2018F)
Price Performance (%)
PBT 7,919 7,404 7.0
52-week high/low Rp9,050/Rp6,200
Net Profit 5,914 5,606 5.5
yoy chg 1mth 3mth 6mth 1yr YTD
Financial Ratios (%) 3Q18 3Q17 (ppt) Comments 1.9 4.0 (16.8) (6.4) (17.8)
NIM 5.8 5.9 -0.10 Average loan yield +20bp from 2Q18
Loan Growth, yoy 13.8 9.8 4.0 Corporate loans +28%yoy Major Shareholders %
3rd Party Funds, yoy 9.2 10.2 -1.0 Time deposits +4% qoq Republic of Indonesia 60.0
Loan/Deposit Ratio 93.5 89.9 3.6
Cost/Income Ratio 44.2 44.8 -0.6 FY18 NAV/Share (Rp) 3,830
ROE 14.1 12.8 1.3 FY18 CAR Tier-1 (%) 12.86
NPL Ratio 3.0 3.8 -0.7 Rp3t downgrades to NPL in 3Q18
Credit Costs (bp) 0.016 0.017 0.00 Credit cost target for 2018 at 2.0-2.2% PRICE CHART
Loan Loss Coverage 137.0 135.0 2.0 Lowest among SOE peers
CAR 21.4 22.0 -0.6 (lcy)
BANK MANDIRI PERSERO TBK PT
(%)
BANK MANDIRI PERSERO TBK PT/JCI INDEX

Source: BMRI, UOB Kay Hian 10000 140

RESULTS 9000
130

• 3Q18 net profit at Rp5.9t, up 5.5% yoy and down 6.4% qoq. Bank Mandiri’s (BMRI) 120

yoy net profit increase in 3Q18 was driven by lower provisions and a recovery in interest 8000 110
income. 100
• Stronger 3Q18 net interest income (+6% yoy) but weak non-interest income (-1% 7000

yoy). PPOP was up 6% yoy. Interest income grew 3% yoy (due to stronger loan growth) 90

vs interest expenses which were down 3% yoy (higher time deposit (TD) collections: +4% 6000
200
80

qoq). In terms of negatives, non-interest income growth was weak at -1% yoy/-14% qoq, 150 Volume (m)

attributed to one-off non-recurring items as in previous quarters. Opex was strictly under 100
50
control and saw only 3% yoy growth. 0

• Large corporate loans growth (+28% yoy) in 9M18 drove loans growth of 14% yoy. Oct 17 Dec 17 Feb 18 Apr 18 Jun 18 Aug 18 Oct 18

Loans surged 14% yoy in 9M18 with corporate, consumer and micro loans growing 28%,
Source: Bloomberg
13% and 27% yoy respectively. On the other hand, deposits grew 9% yoy with some pick
up in funding costs. ANALYST(S)
KEY FINANCIALS Alexander Margaronis
Year to 31 Dec (Rpb) 2016 2017 2018F 2019F 2020F +6221 2993 3876
Net interest income 51,825 52,327 56,873 63,566 69,097 alexandermargaronis@uobkayhian.com
Non-interest income 21,939 24,747 26,298 28,911 31,667
Net profit (rep./act.) 13,807 20,640 23,716 28,151 31,786
Net profit (adj.) 13,807 20,639 23,716 28,150 31,785
EPS (Rp) 295.9 442.3 508.2 603.2 681.1
PE (x) 22.2 14.9 12.9 10.9 9.7
P/B (x) 2.0 1.8 1.7 1.6 1.4
Dividend yield (%) 2.0 2.2 3.4 3.9 4.6
Net int margin (%) 6.2 5.6 5.5 5.5 5.4
Cost/income (%) 41.4 44.1 44.8 44.2 44.5
Loan loss cover (%) 124.5 135.0 170.1 179.8 183.5
Consensus net profit - - 24,332 28,288 32,388
UOBKH/Consensus (x) - - 0.97 1.00 0.98
Source: Bank Mandiri, Bloomberg, UOB Kay Hian

Refer to last page for important disclosures. 2

I n d o n e s i a D a i l y Thursday, 18 October 2018

• NPL ratio at 3% for first time since early-16…NPL ratio declined for the 5th consecutive NPL BY SEGMENT & NPL MOVEMENT
quarter with NPL ratio coming down by another 12bp qoq to 3.01% in 3Q18. This was (%) Bank only Sep 17 Dec 17 Mar 18 Jun 18 Sep18
attributed to the strong loan growth and Rp2.7t in write-offs in 3Q18 (total of Rp11t as of Corporate 0.40 0.37 0.33 0.27 0.23
9M18). Outstanding NPL balance remained relatively flat at Rp21t. Commercial 10.16 10.01 10.48 10.55 10.86
SME 3.81 3.79 4.12 3.88 2.96
• …but pressures remain as the quarterly NPL downgrades were still large at Rp3t vs loan Micro 2.51 2.22 1.31 1.23 1.06
Consumer 2.13 1.94 2.15 2.23 2.36
upgrades of Rp0.5t. Provisions remained high at Rp3t in 3Q18 (+6% yoy), on pressures Total NPL 3.74 3.45 3.35 3.13 3.04
from a continued and moderate level of downgrades across most segments. However, the Special Mention 4.7 4.1 4.9 4.8 4.5
provisions are still within management’s guidance of Rp14t-16t for 2018 and credit cost loans
guidance at 2.0-2.2%. Loan-loss coverage also increased marginally to 137% and it is still Coverage Ratio 135.0 135.1 136 136 137
Restructured 49.9 52.1 49.6 50.6 50.5
the lowest among peers. loans in Rpt
• Quarterly pick-up in NIM despite higher funding cost due to loan re-pricing. Source: BMRI, UOB Kay Hian
Quarterly NIM came in at 5.54%, up 12bp from 2Q18. This was attributed to a higher FORWARD P/B BAND
average loan yield which was up 10bp (reflects the bank’s loans’ re-pricing to a certain
level as >50% of its loan portfolio is on floating rates) vs the +20bp increase in cost of
funds (+4% qoq increase in TDs and due to some TD re-pricings as interest expenses
were up 8% qoq).
STOCK IMPACT
• Sentiment has been very negative over the past few months, with investors worrying
mostly about the possible negative impact from a global trade war, rupiah currency
depreciation and asset quality issues at BMRI. The continuous earnings beat ahead and
lower NPLs should provide support and upside to the stock amid better sentiment in the
global market.
RESTRUCTURED LOANS NPL (RPT) – BANK ONLY
Source: Bloomberg, UOB Kay Hian

Source: BMRI, UOB Kay Hian Source: BMRI, UOB Kay Hiann

EARNINGS REVISION/RISK
• None. 9M18 net profit accounted for 76% of our full-year estimate.
• The single biggest risk factor for BMRI is asset quality risk. BMRI has enormous
cushioning in the form of reserves to weather significant bad loan surprises. We previously
highlighted that BMRI would have to record more than a 6.5% NPL ratio (or more than
Rp25t in new bad loans) as well as a credit cost of more than 5% to see net income drop
to zero and capital erosion. This is an extreme scenario which is unlikely to pan out.
SHARE PRICE CATALYST
• Significant improvement in asset quality and NPL below 3% could lead to positive
sentiment on the stock.
VALUATION/RECOMMENDATION
• Why not a HOLD? BMRI reported decent results for a 5th consecutive quarter with a
moderate revenue and earnings beats. The market is aware of BMRI’s strong earnings
growth potential, mostly due to much lower yoy provisions in 2018. While conservatives
may believe that BMRI’s shares will continue to be sold at a fair value of -1SD, we think the
risk-reward ratio has improved on the share price decline and given that it is not priced at a
premium. Currency depreciation and rate hikes are not likely to pose a threat to
fundamentals and loan growth as the bank benefits from large infrastructure investment
opportunities. NPL ratio could continue to come down with BMRI unloading bad loans off
its books. Even though this is not an optimal solution, it is necessary. All in all, there has
been an improvement in operations rather than deterioration. Our Buy call on BMRI is also
a directional bet based on a market turnaround and as the economy still doing fine.
• Maintain BUY with a target price of Rp7,600. The stock is trading at 1.6 2018F P/B (or -
1SD of its historical P/B band). Our target price implies 1.8x 2019F P/B, which is still below
its historical mean of 2x P/B.

Refer to last page for important disclosures. 3

I n d o n e s i a D a i l y Thursday, 18 October 2018

PROFIT & LOSS BALANCE SHEET

Year to 31 Dec (Rpb) 2017 2018F 2019F 2020F Year to 31 Dec (Rpb) 2017 2018F 2019F 2020F
Interest income 79,502 85,701 94,097 102,395 Cash with central bank 133,683 126,527 155,159 194,135
Interest expense (27,174) (28,828) (30,531) (33,298) Govt treasury bills & securities 103,411 108,108 113,017 118,150
Net interest income 52,327 56,873 63,566 69,097 Interbank loans 27,704 28,721 29,731 30,777
Fees & commissions 14,948 16,609 18,398 20,314 Customer loans 693,075 785,285 888,757 998,153
Other income 9,799 9,689 10,513 11,352 Investment securities 56,630 62,293 68,522 75,374
Non-interest income 24,747 26,298 28,911 31,667 Derivative receivables 446 469 492 517
Total income 77,074 83,171 92,477 100,763 Fixed assets (incl. prop.) 46,991 47,542 48,093 48,644
Staff costs (14,859) (16,196) (17,654) (19,242) Other assets 62,760 62,940 68,802 72,621
Other operating expense (19,094) (21,061) (23,228) (25,614) Total assets 1,124,701 1,221,884 1,372,573 1,538,372
Pre-provision profit 43,122 45,914 51,596 55,907 Interbank deposits 8,350 8,844 8,597 8,721
Loan loss provision (15,646) (14,922) (14,988) (14,688) Customer deposits 816,252 922,732 1,051,321 1,194,963
Other provisions (305) 0 0 0 Derivative payables 276 389 333 361
Other non-operating income (13) (26) (20) (23) Debt equivalents 52,547 56,118 60,045 64,365
Pre-tax profit 27,157 30,966 36,588 41,196 Other liabilities 77,270 51,069 52,542 51,806
Tax (5,714) (6,540) (7,728) (8,701) Total liabilities 954,695 1,039,152 1,172,838 1,320,216
Minorities (803) (710) (710) (710) Shareholders' funds 166,719 178,735 195,029 212,740
Net profit 20,640 23,716 28,151 31,786 Minority interest - accumulated 3,287 3,997 4,706 5,416
Net profit (adj.) 20,639 23,716 28,150 31,785 Total equity & liabilities 1,124,701 1,221,884 1,372,573 1,538,372

OPERATING RATIOS KEY METRICS

Year to 31 Dec (%) 2017 2018F 2019F 2020F Year to 31 Dec (%) 2017 2018F 2019F 2020F
Capital Adequacy Growth
Tier-1 CAR 12.9 12.9 12.8 12.9 Net interest income, yoy chg 1.0 8.7 11.8 8.7
Total CAR 14.2 14.1 14.1 14.2 Fees & commissions, yoy chg 6.1 11.1 10.8 10.4
Total assets/equity (x) 6.7 6.8 7.0 7.2 Pre-provision profit, yoy chg (0.3) 6.5 12.4 8.4
Tangible assets/tangible common 6.7 6.8 7.0 7.2 Net profit, yoy chg 49.5 14.9 18.7 12.9
equity (x)

Net profit (adj.), yoy chg 49.5 14.9 18.7 12.9

Asset Quality Customer loans, yoy chg 10.3 13.3 13.2 12.3
NPL ratio 3.3 3.1 2.9 2.7 Customer deposits, yoy chg 7.0 13.0 13.9 13.7
Loan loss coverage 135.0 170.1 179.8 183.5 Profitability
Loan loss reserve/gross loans 4.5 5.3 5.1 4.9 Net interest margin 5.6 5.5 5.5 5.4
Increase in NPLs (4.6) 1.7 3.9 4.1 Cost/income ratio 44.1 44.8 44.2 44.5
Adjusted ROA 1.9 2.0 2.2 2.2
Liquidity Reported ROE 13.0 13.7 15.1 15.6
Loan/deposit ratio 85.4 86.1 85.3 84.1 Adjusted ROE 13.0 13.7 15.1 15.6
Liquid assets/short-term liabilities 32.1 28.3 28.1 28.5 Valuation
Liquid assets/total assets 23.5 21.6 21.7 22.3 P/BV (x) 1.8 1.7 1.6 1.4
P/NTA (x) 1.8 1.7 1.6 1.4
Adjusted P/E (x) 14.9 12.9 10.9 9.7
Dividend Yield 2.2 3.4 3.9 4.6
Payout ratio 33.4 43.5 42.1 44.3

Refer to last page for important disclosures. 4

I n d o n e s i a D a i l y Thursday, 18 October 2018

TRADERS’ CORNER
BSDE.JK - Daily 10/17/2018 Open 1035, Hi 1100, Lo 1015, Close 1090 (6.3%) MA(Close,21) = 1,076.67 2,000
Bumi Serpong Damai (BSDE
1,900
IJ)
1,800

Technical buy with 10% potential return

1,700

Resistance : Rp1,175, Rp1,290

1,600

Support : Rp1,035, Rp990

1,500

1,400
Stop Loss : Rp1,035

1,300
BSDE’s stock price closed positive yesterday,
forming a bullish candlestick. Share price is
1,200
expected to continue strengthening, supported by
1,100
1,090
1,076.67
movement of indicators, such as the MACD,
1,000 which has given a golden cross signal. In
addition, trading volume also increased compared
Mar Apr May Jun Jul Aug Sep Oct
BSDE.JK - RSI(13) = 51.33 70 with the previous days. Thus, we recommend a
51.3281 BUY at Rp1,065 and to take profit at Rp1,175.
30
Approximate timeframe on average: 1 week.
BSDE.JK - Volume = 27,011,000.00, MA(Volume,5) = 23,433,160.00 50M

Our institutional research has a fundamental

40M
30M
20M
27,011,000
10M
23,433,160 BUY and target price of Rp1,600.
Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com

Source: Amibroker

INDF.JK - Daily 10/17/2018 Open 5675, Hi 6025, Lo 5675, Close 6000 (6.2%) MA(Close,21) = 5,834.52
8,000
Indofood Sukses Makmur
7,800

7,600
(INDF IJ)
7,400 Technical buy with 5% potential return
7,200 Resistance : Rp6,100, Rp6,250
Support : Rp5,825, Rp5,650
7,000

6,800

6,600
Stop Loss : Rp5,825
6,400 INDF’s stock price formed a significant bullish
6,200
candlestick yesterday. Share price is also
6,000
6,000
expected to potentially re-strengthen, supported
5,834.52
5,800
by the MACD indicator movement that has given
a golden cross signal and the RSI indicator that
5,600
has returned to its bullish territory. Trading
Mar Apr May Jun Jul Aug Sep Oct
INDF.JK - RSI(13) = 55.35 volume also increased significantly from last
week. We recommend a BUY at Rp5,925 and to
55.3462

take profit at Rp6,250.

30

INDF.JK - Volume = 11,591,500.00, MA(Volume,5) = 7,713,640.00 14M

12M Approximate timeframe on average: 1 week.
10M
11,591,500
8M
7,713,640
6M
4M Our institutional research has a fundamental BUY
and target price of Rp7,900.
Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com

Source: Amibroker

ANALYST(S)
Maskun Ramli, CFTe
+6221 2993 3915
maskunramli@uobkayhian.com

Refer to last page for important disclosures. 5

I n d o n e s i a D a i l y Thursday, 18 October 2018

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I n d o n e s i a D a i l y Thursday, 18 October 2018

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