Becoming an Idol Bank for Foreign Investors, Here’s a Leak of BMRI’s Price Target

Jakarta, CNBC Indonesia – The rapidly growing business and financial performance has made PT Bank Mandiri (Persero) Tbk (BMRI)’s share price shoot up this year.

BMRI’s share price continues to climb towards its All Time High level in 2022. Year to date (ytd) the share price of the bank with the largest assets in Indonesia has increased by almost 50% and has become the KBMI IV bank with the largest capital gain beating its competitors such as PT Bank Central Asia Tbk (BBCA) which rose 22%, PT Bank Rakyat Indonesia Tbk (BBRI) with a strengthening of 19%, and PT Bank Negara Indonesia Tbk (BBNI) with an appreciation of 44%.

The increase in BMRI’s share price was also inseparable from the action of buying up investors, especially foreign ones. Compared to its competitor banks, BMRI shares have been the most purchased by foreign investors this year with a net buy of IDR 10.2 trillion as of Friday (2/12/2022).

ADVERTISEMENT

SCROLL TO RESUME CONTENT

There are many factors that have made BMRI the most sought-after ‘big’ bank by investors this year. One of the striking financial performance. The net profit of the bank, which is currently chaired by Darmawan Junaidi, jumped 59.4% year on year (yoy) to IDR 30.6 trillion until September 2022.

Photo: BMRI
BMRI

If analyzed more deeply, the fantastic increase in net profit was mainly due to an increase in net interest income and expenses for reserves.

BMRI’s interest income grew 12.44% yoy to IDR 81.3 trillion while interest expenses fell 8.86% yoy to IDR 17.3 trillion which resulted in an increase in net interest income reaching 20% ​​yoy to almost IDR 64 trillion.

See also  Tesla presents the first Model Y made in Germany - Automotive

BMRI’s net interest income margin ratio on a consolidated basis increased 55 bps to 5.53% as of September 2022. The increase in NIM reflects that BMRI has succeeded in increasing the yield (yield) of its productive assets and maintaining the cost of funds or Cost of Fund (CoF).

When compared to the third quarter of 2021, the yield generated from assets in the form of credit was observed to have increased by 9 bps to 7.01% per quarter III-2022. However, the cost of interest bearing liabilities was 16 bps lower than the previous year to 1.46%.

BMRIPhoto: BMRI
BMRI

BMRI’s interest income boost is not only in terms of yield but also volume. BMRI’s credit on a consolidated basis rose 14.3% yoy as of September 2022. The funding structure originating from BMRI’s low-cost funds (Current Account Saving Account/CASA) can also be maintained at a healthy level and is able to maintain around 70%. These are the factors that increase BMRI’s net interest income and NIM.

Meanwhile, from the reserve side, BMRI recorded a decrease of almost 28% yoy to IDR 11.8 trillion. The cost of this provision is of course closely related to the quality of banking assets which is usually reflected in the ratio of bad loans (Non-Performing Loans / NPLs). The higher the NPL, the bank will usually increase the reserves. However, BMRI succeeded in reducing the NPL ratio by 72 bps yoy to 2.24% as of September 2022. This is the main key why the cost of reserves or provisions can be reduced.

See also  The new-generation Volkswagen Amarok shows on the first sketches

However, what is reflected in the figures above is actually the result of the strategy implemented by this state-owned bank. The combination of spurring growth through lending that also pays attention to risk, massive digitalization to obtain cheap funding is the main key for BMRI to make fantastic profits.

Just note that if you use a simple method, namely annualized calculations, BMRI’s net profit in 2022 can reach IDR 40.9 trillion.

The outlook for 2023 is still positive. Bank Indonesia (BI) estimates that the credit growth rate could reach 10-12% next year. That is BI’s forecast for industrial credit growth figures.

However, as a bank that holds the status of the bank with the largest assets in RI, of course the industry figures are raised from loans from banks with large assets such as BMRI. This means that there is still a chance for BMRI to record credit growth to double digits in 2023.

If you look at BMRI’s liquidity side, which is reflected in the Loan to Deposit (LDR) ratio, which is still below 88%, it means that the space for extending credit is still wide open. With credit opportunities that are still growing in double digits and if it continues with improving asset quality, it is not impossible that BMRI’s net profit until 2023 will also increase in double digits.

According to estimates by the CNBC Indonesia Research Team, BMRI’s net profit could increase by 13% in 2023 to IDR 44.6 trillion.

If using the Dividend Discount Model (DDM) valuation model using the assumption of compounding net profit growth until 2025 of 9.8%, assuming a dividend payout ratio of 60% until 2024 and 70% in 2025.

See also  Georgieva, Food Price Shock Alarm - Last Hour

Furthermore, the cost of equity is 9.7% and terminal growth follows the prospect of national economic growth of 5%, so according to calculations by the CNBC Indonesia Research Team the fair value of BMRI’s shares is Rp. 11,550/unit.

Assumptions 2022-2025

Score

EPS CAGR

9.8%

DPR

60-70%

CoE

9.7%

Terminal Growth

5%

Fair Value

11,573

Target Price

11,550

If using the closing price of last week’s trade, Friday (2/12/22) at a price of IDR 10,525/unit, it can be implied that there is a potential profit of 9.7% of the BMRI target price according to calculations by the CNBC Indonesia Research Team at IDR 11,550/unit.

CNBC INDONESIA RESEARCH TEAM

Disclaimer: This story is not intended to encourage readers to buy or sell the related stock. The investment decision is entirely up to you, and CNBC Indonesia is not responsible for any losses or profits arising from that decision.

[Gambas:Video CNBC]

Next Article

Had Strengthened in Session 1, Today’s JCI Closed Weak

(trp/trp)


Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.