Analisa Saham BDMN | 10 Juli 2018

Mandiri (CC)

BDMN UPGRADE TO NEUTRAL TP 7000

*MUFG to Own 40% Stake in BDMN in 3Q18*


 MUFG is scheduled to finalize its acquisition of 20.1% stake in BDMN in 3Q18, raising its stake to 40%. Valuation will be the same as in stage 1, at 2.0x P/BV with certain adjustments. The next step is to get approval for >40%, expected sometime in 2020. We raise our TP to Rp7,000 from Rp4,600 and call to Neutral from Sell.

 Stage 2 of MUFG’s strategic investment in BDMN in 3Q18. Following the purchase of 19.9% stake in BDMN in Dec 17, MUFG is in the process of acquiring another 20.1%. This will increase its ownership to 40%, the maximum allowed for a financial company to own an Indonesian bank. MUFG indicated earlier this process will be done in 3Q18, pending the fit & proper test by OJK. The price is set similar to the valuation in stage 1, at 2.0x P/BV historical with certain adjustments. We estimate this will be at Rp8,500-8,700 based on the upcoming Jun18 data.

 Stage 3 in 2020. MUFG will have to wait at least 3 x consecutive 6-month periods post the 40% ownership to seek approval to own more stake in BDMN. The company would like to own at least 73.8% stake in the bank. During the waiting period, it has to secure grade 1 or 2 (out of 5) for the bank’s healthy rating and good corporate governance. If all requirements are met, this will be sometime in 2020.

 No merger plan between BDMN and MUFG. They indicated there is no merger between BDMN and MJFG, which is a branch office, not an Indonesian incorporated bank. To avoid the single presence policy, BDMN, however, will have to merge with BNP (Bank Nusantara Parahyangan), which is 75.5% controlled by MUFG together with ACOM CO, Ltd. Given BNP’s assets size of Rp8tr, the impact will be minimal to BDMN.

 Minor earnings revisions. We tweak our numbers for 2018-19 with lower expected loan growth but better margin due to some loan mix changes.

 Revised TP and recommendation. Given the expected purchase price and cash offer of Rp9,500-10,000 in stage 3 in 2020, we set our new TP at Rp7,000 (implying 1.5x P/BV 2019E) after discounting this price at 20% pa. This compares to Rp4,600 if we use the GGM, which sets the counter at 1x P/BV 2018-19. We expect minority shareholders to accept the cash offer by MUFG, which will affect the share trading liquidity in the future. We upgrade our call to Neutral from Sell.