COMPANY_NOTES BDMN_Mixed Result - Indopremier Securities

Mixed result came from BDMN FY2010 performance. In full year basis, net profit has showed remarkable growth by 88.2% YoY to reach Rp 2.8 tn, thanks to robust loan expansion and low cost of credit. Look deeper on quarter basis, 4Q10 net profit was lower 11.6% QoQ to Rp 680.2 bn due to falling assets yield, higher cost of fund, and higher operational cost. Mixed impact will come to BDMN’s performance in 2011 in our view. BDMN has plenty room for growth, however it may be limited by funding constraint. Hold recommendation for BDMN with TP Rp 6,500 per share. Our TP implies 2.3% potential downside.

Rally with Motorcycle
BMDN registered 30.6% YoY 2010 loans growth to Rp 82.7 tn, or above industry growth of 18.9% YoY. The growth was sustained by robust growth of mass market loan which enlarged by 40.4% YoY. Adira loan book increased by 60.3% YoY to Rp 30.6 tn due to automotive sales recovery, while Danamon Simpan Pinjam (DSP) recorded 24.6% YoY increase to Rp 15.3 tn on the back of strong GDP growth of 6.1%. We foresee Adira will deliver robust loans growth in 2011 as it would benefit from limitation of subsidized fuel for cars, given approximately 75% of Adira financing are distributed to motorcycles and the remaining to cars. In addition, we expect BDMN to set aside higher portion for DSP, SME and commercial loans instead of wholesale due to pass-through downward pressure to its funding.

An Interest Rate Uptrend
Interest rate uptrend is a risk for banks with tight funding, including BDMN. As of Dec 2010, BDMN’s LDR stays at vulnerable level of 103.9% and CASA at low gear of 39.6%. With high LDR, BDMN should work hard to collect more funding, while on the other side it will need additional cost to escalade funding given BDMN depends on above-the-market-deposit rate as marketing arms of funding. BI rate has increased 25bps to 6.75%, and we expect the central bank would need to escalate the benchmark rate further. Thus, we forecast cost of fund remains under pressure and it will press the net interest margin (NIM).

Valuation
HOLD recommendation for BDMN with TP of Rp 6,500 per share. Mixed result will come to BDMN’s upcoming performance on the back of strong mass market loans and rising BI rate. Our TP implies 14.8x and 2.7x of PE11 and PBV11.