FROM EQUITY RESEARCH DESK

IDEA OF THE DAY

Bank BTPN Syariah: NPL Cycle Hits Bottom, A Long Road to Recovery Ahead; Re-initiate with a Hold Rating (BTPS.IJ Rp 1,215; HOLD TP Rp 1,300)

• BTPS’s NPL cycle has peaked, but we expect the recovery to be gradual, resulting in slow ROE improvement in FY24-26F.
• We see downside risk from potential disappointment in 4Q24, while low fund position might serve as support to the share price.
• We re-initiate coverage on BTPS with a Hold rating and a TP of Rp1,300 based on an iCoE of 11.6% (-1SD), LTG of 3%, and FY24F ROE of 11.5%.

To see the full version of this report, please click here

Macro Strategy: The Fulcrum of China’s Stimulus

• The broad China stimulus from both monetary and fiscal portray substantial escalation from previous measures, a key game changer.
• A stronger China supports Asia's overall growth outlook, including Indonesia, though not without some challenges.
• USD yield and DXY remains stable despite more recent dovish statement from Fed’s members. A stronger CNY would impact the IDR.

To see the full version of this report, please click here

To see the full version of this snapshoot, please click here

MARKET NEWS

AGRO Aug24 Results

8M24 Insight:

·         Net Profit: AGRO posted a net profit of Rp29bn (+132% yoy) in 8M24, driven by a significant improvement in CIR, despite incurring provision expenses of Rp245bn. The net profit also benefited from a low base effect, as the bank's tax expense dropped to Rp30bn in 8M24 from Rp125bn in 8M23.

·         CIR: CIR improved substantially, falling from 74.7% in 8M23 to 57.9% in 8M24, supported by 15% yoy growth in NII and a 75% yoy rise in other operating income.

·         NIM: NIM increased to 4.7% (+54bps yoy) in 8M24, bolstered by a higher LDR of 82.9% (-34bps mom, +744bps yoy) and a 101bps rise in EA yield to 8.7%, which offset the 83bps yoy increase in CoF to 5.6%.

·         Loans and Customer deposits: Loans and customer deposits grew by 20% and 9% yoy, respectively, with both remaining flat on a mom basis. The CASA ratio declined to 22.8% (-120bps mom, -265bps yoy).

·         CoC: CoC stood at 5.5% in 8M24.

Aug24 Insight:

·         Net Profit: AGRO reported a net profit of Rp4.3bn in Aug24 (+3% mom, +156% yoy). The yoy growth was driven by a sharp reduction in provisions (-64% yoy), while the mom growth was supported by a tax expense reversal of Rp6.1bn.

·         NIM: NIM dropped to 4.3% (-38bps mom, -37bps yoy) in Aug24, as CoF rose to 6.0% (+10bps mom, +97bps yoy), and EA yield fell to 8.5% (-22bps mom, +27bps yoy).

·         CIR: CIR surged to 84.2% (+762bps mom, +3,674bps yoy) in Aug24 due to a 42% mom and 41% yoy drop in other operating income. Despite lower opex on a mom basis, CIR increased due to a 14% decline in NII. On a yoy basis, opex rose by 46%, driven by a 62% yoy increase in salaries.

·         CoC: CoC rose to 2.1% (+80bps mom, -474bps yoy) in Aug24.

Summary:

·         Overall Performance: In our view, AGRO's performance in Aug24 was weak as its NIM declined substantially and other operating income dropped. Moreover, the risk of NIM compression remains if the upward trend in CoF continues. Additionally, asset quality concerns persist, as reflected in its 8M24 CoC of 5.5%. This, coupled with a 4.7% NIM, resulted in a risk-adjusted NIM of -0.85%, signaling potential issues with asset quality. (Victor Stefano & Naura Reyhan Muchlis – BRIDS)

BDMN Aug24 Bank Only Results

8M24 Insight:

• Net Profit: BDMN posted a net profit of Rp2.0tr (-7% yoy), driven by 8% and 10% yoy increases in operating expenses and provision expenses, respectively.
• NIM: NIM declined to 5.1% (-52bps yoy) in 8M24, despite a higher EA yield of 8.0% (+18bps yoy), as CoF surged to 3.7% in 8M24 from 2.8% in 8M23, likely due to a drop in CASA to 44.2% from 52.6%, in our view.
• CIR: CIR rose to 54.2% (+209bps yoy) in 8M24, driven by an 8% yoy increase in operating expenses, with salaries and other expenses rising by 5.8% and 9.7% yoy, respectively.
• CoC: CoC improved to 1.7% (-11bps yoy) in 8M24, mainly due to 13% yoy loan growth.

Aug24 Insight:

• Net Profit: BDMN reported a net profit of Rp366bn (+94% mom, +5% yoy), primarily supported by a substantial drop in provisions (-74% mom, -44% yoy).
• NIM: NIM remained steady mom at 5.0% in Aug24, as a 9bps mom rise in CoF was offset by a 3bps mom increase in EA yield. However, CoF increased sharply from 3.2% in Aug23 to 4.1% in Aug24, leading to NIM compression from 5.5% in Aug23.
• CIR:  CIR reached 55.6% (+174bps mom, +406bps yoy) in Aug24 due to a rise in operating expenses (+7% mom, +12% yoy). PPOP was flat mom and 5% lower yoy in Aug24.
• CoC: CoC improved significantly to 0.6% (-183bps mom, -65bps yoy).
• Loans and Customer Deposits: Loans and customer deposits grew 13% (+1% mom) and 14% yoy (flat mom), respectively. The LDR stood at 104.1% (+45bps mom, -116bps yoy), one of the highest among conventional banks. The CASA ratio dropped to 44.2% (-103bps mom, -846bps yoy).

Summary:

• Overall Performance: In our view, BDMN's performance was weak. Elevated CoF, driven by a substantial decline in CASA, outweighed gains in EA yield, compressing its NIM. Moreover, its high LDR raises concerns over potential liquidity and NIM issue going forward. (Victor Stefano & Naura Reyhan Muchlis – BRIDS)

BMRI Aug24 Bank Only Results

8M24 Insight:

• Net profit up 6% yoy: BMRI reported an 8M24 NP of Rp33.6tr, up by 6% yoy, slightly down from +7% in 7M24. The 8M24 NP forms 59% and 60% of our and the consensus' FY24F, slightly lower than the 8M23 seasonality of 62%.
• NII grew 4% yoy: Supported by 23% yoy loan growth, which outpaced deposit growth of 14% yoy, the bank was able to offset the lower NIM (-46bps).
• Lower NIM despite higher LDR: NIM decreased to 5.0% (from 5.4% in 8M23), mainly due to the increase in CoF from 2.2% to 2.7% (+55bps yoy). LDR rose to 93.8% from 87.6% last year.
• Contained provision expenses: Provisions increased by 5%, but the cost of credit (CoC) remained lower at 0.8% (vs 0.9% in 8M23) due to the higher lending balance.

Aug24 Insight:

• NP down month-on-month: In Aug24, BMRI posted an NP of Rp4.3tr (-5% mom, +6% yoy), in line with PPOP growth of -5% mom and +10% yoy. The drop in monthly NP was driven by a lower NIM and the absence of dividend income, offsetting lower opex (-8% yoy).
• NIM slightly down: NIM slipped to 4.9% in Aug24 from 5.0% in Jul24 due to an increase in CoF from 2.8% to 3.0%, while EA yield remained flat.
• Lower CIR from a significant decline in salaries: Opex dropped to Rp2.7tr (-8% mom, -6% yoy), driven by lower salary expenses (-74% mom, -61% yoy).
• Loan and deposit growth continue: The loan-to-deposit ratio (LDR) remained unchanged mom as both loans and deposits grew by 1% each.

Summary:

• Overall Performance: Aug24 results were slightly weak as NIM compression (due to higher CoF) persisted, offsetting the unusually sharp decline in salaries. On the positive side, loan continue to grow while CoC remained low. (Victor Stefano & Naura Reyhan Muchlis – BRIDS)

JSMR: Details on JTT Divestment

• JSMR officially signed SPA on JTT divestment by 27th Sept24. This agreement also includes the issuance of new shares on JTT level.
• After this transaction, JTT's final ownership would be: 65% JSMR, 24.5% Metro Pacific Tollways Indonesia Services (Salim), and 10.5% Warrington Investment Pte Ltd (GIC).
• JTT divestment proceeds would reach Rp 12.8tr (before tax) to the JSMR parent level, which could be used for deleveraging on the parent level. In addition, there would be Rp 2.5tr proceeds from the issuance of new JTT shares. This would be used to pay JTT's bridging loan in acquiring RDPT-MIET and KIK-DINFRA back in 2023 and early 2024. Thus, total proceeds would reach Rp 15.3tr.
• The proceeds of Rp12.8tr would be paid in 2 terms: Rp6.7tr in the 1st term, and Rp6.1tr in the 2nd term. We still expect the payment date to follow the timeline under Metro Pacific disclosures (Sep24 and Dec24).
• Overall, this event is in line with our expectation and should be positive for JSMR by removing the overhang on the JTT divestment. We think our FY25E core NP expectation at Rp4.2tr seems not that far-stretched (with assumptions of 10bps lower cost of debt in FY25E and total Rp8tr deleveraging in FY24E-FY25E). We are in the process of updating our model. We have a BUY rating on JSMR with a TP of Rp6,500. (Richard Jerry, CFA & Christian Sitorus – BRIDS)

NISP Aug24 Bank Only Results

8M24 Insight:

• Net Profit: NISP achieved a 30% yoy growth in net profit, reaching Rp3.6tr in 8M24, primarily driven by a provision reversal of Rp500bn.
• CIR: CIR rose to 50.0% (+815bps yoy), attributed to a 24% surge in opex, largely due to a 48% increase in other expenses.
• NIM: NIM remained relatively stable yoy at 4.5% in 8M24, as a 33bps yoy increase in CoF to 3.8% was offset by a 25bps yoy increase in EA yield to 7.5%.

Aug24 Insight:

• Net Profit: NISP reported a net profit of Rp319bn in Aug24 (-63% mom, -2% yoy), primarily impacted by other operating income, which amounted to only Rp9bn. This low base resulted from fee income of Rp112bn being offset by a Rp101bn loss from investment in shares under the equity method.
• CIR: CIR climbed to 45.5% in Aug24 from 29.2% in Jul24, driven by a high base in other operating income last month. However, CIR improved on a yoy basis from 56.3% in Aug23, as opex declined 20% yoy.
• Other operating income: The mom decline in other operating income in Aug24 resulted primarily from the high base in Jul24, owing to gains from investments in shares under the equity method related to the Commonwealth Bank acquisition.
• NIM: NIM stood at 4.6% (-12bps mom, +15bps yoy) in Aug24, as CoF increased to 4.0% (+30bps mom, +31bps yoy), offset on a yoy basis by a higher EA yield of 7.8% (+11bps mom, +36bps yoy), but not offset on a mom basis.
• Loans and Customer Deposits: Loans and customer deposits grew 6% yoy (-1% mom) and 3% yoy (-1% mom), respectively, resulting in an LDR of 78.0% (+220bps yoy) in Aug24.

Summary:

• Overall Performance:  While the Aug24 results showed a sharp mom decline in net profit and a rising CoF, the bank maintained stability in NIM and achieved healthy yoy growth in loans and customer deposits, in our view. (Victor Stefano & Naura Reyhan Muchlis – BRIDS)

MBMA 2Q results: below

• 2Q NP reached US$16.7mn, while 6M24 NP reached US$20.4mn, achieving 43%/34% of ours/cons estimate.
• 2Q revenue slightly grew to US$477.4mn, +7.5% qoq, while 6M24 revenue reached US$921.6mn, +163% yoy, achieving 51%/48% of ours/cons estimate.
• Overall, margin improvements are derived from widening cash margin from NPI of US$1,248/ton (vs. 1Q24: US$948/ton), Matte at US$1,831/ton (vs. 1Q24: US$553/ton), and Limonite at US$6.5/wmt (vs. 1Q24: US$1/wmt). However, 3Q cash margins are likely to be lower due to weakening nickel prices.
• MBMA participated on a 12.5% stake in Meiming HPAL @IMIP with a size of 25ktpa. Once operation commences, MBMA will supply the HPAL with limonite ore from its SCM mine.

Slight correction on FY24 guidance:

• Lowered limonite sales target from 10-11wmt to 9.5-10.5wmt.
• Lowered NPI sales volume target from 85-92ktpa to 80-85ktpa due to a scheduled reline of refractory on BSID smelter. (Timothy Wijaya – BRIDS)

MDKA 2Q results: Below

• Booked a 2Q NP of US$2.7mn, while 6M24 still a net loss of -US$12.5mn, reaching -86%/-110% of ours/cons estimate.
• 2Q revenue was flattish at USD553mn, +2.2% qoq, while 6M24 revenue grew to US$1,094mn, +110.3% yoy, reaching 51%/51% of ours/cons estimate.
• MDKA incurred a forex gain of US9mn in 2Q, which decreased other expense by 74% qoq. Nonetheless, there is a higher minority interest of US$27mn in 2Q (vs. US$5.9mn in 1Q) from MBMA. (Timothy Wijaya – BRIDS)

Poultry – 4th week of September 2024 Price Update

• Livebird (LB) prices declined to Rp17.3k/kg, bringing the average price for the fourth week of Sep24 down 5% wow to Rp17.8k/kg.
• No new data on DOC prices, but our source indicates that DOC prices remained stable at around Rp5k/chick.
• Local corn prices rose slightly to Rp5.1k/kg, with the weekly average price at Rp5.1k/kg in the fourth week of Sep24, representing a 0.8% wow increase from Rp5.0k/kg the previous week.
• The soybean meal (SBM) price in the last week of Sep24 *rose from its low base to a monthly high of around US$344/t. The average price for Sep24 increased slightly to US$320 (-1% mom, -20% yoy).
• Despite the slight decrease in LB prices, we expect to maintain a positive margin outlook in 3Q24, supported by lower feed costs. (Victor Stefano & Wilastita Sofi – BRIDS)