JPM Indo: BDMN to BMRI switch idea

Bank Mandiri – deal behind us, refocus on the positives

Aditya Srinath (analyst) raised his FY11/FY12 net profit estimates by 21% and 18%, placing them 7-8% higher than consensus. Post rights, a 40% float should entitle BMRI to a 5% lower tax rate, which has not been built into the consensus. Based on a TERP of Rp5,855 the stock currently trades on 2.25x FY11E BV and 12.1x FY11E P/E. We see these valuations as attractive, and expect the bank to continue to earn a 20% RoE. Longer term, BMRI’s ability to leverage new capital to gain market share and grow its higher-yield businesses will be key for its rerating path to resume, in our view.

https://mm.jpmorgan.com/PubServlet?action=email&doc=GPS-536557-0.pdf


Bank Danamon – false rumor regarding acquisition by DBS

Official statement from DBS official regarding the rumor on the closing of Bank Danamon acquisition by DBS at a set price of Rp6,500/share. BDMN trades on 2.4x FY11E BV 13.3x FY11E P/E, with weaker deposit franchise versus BMRI. Lock-in the unsustainable profit now.


"Any scenarios linking DBS to specific names are purely hypothetical and speculative. As we strengthen our presence in Asia, DBS aims to have a more diversified geographic reach over time, however, strengthening our existing operations and growing our business organically takes immediate precedence."