Indonesia Banks Big Picture - April 2011: Foreign Investors Remain Overweight, Prefer Low PB - Citigroup

 Foreign investors prefer BMRI, BBNI and BBTN over BBRI accounting change — In the post strong CY10 result month (March), net foreign buying was concentrated in BMRI, BBNI and BBTN (Fig. 1). Banking sector 2010 EPS growth of 43% was well above 27% forecast. BMRI, BBNI and BBTN were 5-10% above expectations. While BBRI surprised the most with 56% EPS growth, with the stock up +12% in April, the data show no significant changes in foreign ownership. There was marginal buying in BBCA and selling in BDMN.
 Valuations back to above mean — Bank shares have exhibited a V-shaped recovery since their 2010 peak, as inflation fears have receded. BBCA is the most expensive stock (almost +2 std above its mean) while BDMN has fallen to mean multiples. BDMN was the only stock to deliver below-forecast 2010 EPS and currently has the highest consensus 2011 EPS growth forecast (23.5%), but with a recent trend of earning cuts.
 Consensus EPS forecast 4% higher in April 2011 vs Nov 2010 — The consensus 2011F forecast has been raised by 4%, since Nov. 2010, mostly for BBRI’s surprise result in March 2011. However, due to higher base (2010 earnings), EPS growth is now only 10.6% (market 2011F EPS growth is 19.1%).
 Foreign investors remain overweight in Indonesia banks (Fig 7) — Comparing MSCI Components with KSEI foreign ownership data, banks are overweight with an allocation of 35%, 240bps above the MSCI weight. BBCA, BBRI and BMRI are overweight stocks while BBNI remains the only underweight. Other overweight sectors include Energy, Auto and Telecom. Food, Beverages & Tobacco is the biggest underweight sector.
 BMRI is our Top Buy and BBCA our Top Sell — We have Buy ratings on BMRI and BBRI based on 1) valuations and 2) 12M growth expectations.