Bank Rakyat (BBRI IJ), back to micro in a major way - CLSA

Bret Ginesky looked at Bank Rakyat (BBRI IJ) results. BBRI reported strong 1Q11 net profit of Rp3.3tn, up 52% YoY and 29% of our previous 11CL forecast. New accounting standard certainly helps.

But the most important key takeaway is that they expand the vastly profitable micro segment. BBRI micro loans have increased to nearly 32% of total loans and up 40% YoY. NPL in the micro segment remains manageable at 1.5%.

We maintain BUY rating and raise our TP to Rp7,500 reflecting a PER and PBV of 11.9x and 3.4x 11CL estimates. This means zero PER premium and 40% PB premium to Indonesian peers.

Other key points from the report:
BBRI’s reported strong 1Q11 net profit of Rp3.3tn, up 52% YoY and 29% of our previous 11CL forecast. After adjusting for the accounting change and normalizing the tax rate (to 23% from reported 18%), core profits were Rp2.5tn, up 18% YoY.
Loan growth increased by 21% YoY and 2% QoQ while deposits were up 23% (LDR -78bps YoY to 85.75%). NIM decreased by 110bps to 9.67% QoQ (+30bps YoY as reported). Adjusted PPOP increased a modest 10% YoY to Rp5.5tn.
We are raising our estimates to reflect the resulting higher earnings stream and better asset quality. New accounting standard, higher micro loans and lower dividend payout (20%) are catalysts.
Raising estimates for 11CL and 12CL to Rp13.3tn (+18%) and Rp15.5tn (+12%).