Analisa Saham BNLI | 27 Februari 2019

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Bank Permata (BNLI IJ): StanChart Signals Sale In Permata
(Alvin Baramuli, Henry Wibowo - RHB Sekuritas) 

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Maintain BUY with TP IDR1,400, 38% upside, implying 1.7x P/BV towards 2019F BVPS. StanChart signals a potential to sell c.45% ownership in Bank Permata, that is considered "non-core", as part of its plan to free capital and boost profitability to investors. This is in line with our thesis that Permata’s majority shareholders may be open to the possibility of divesting their investment. We believe that the most likely potential buyers could either be a Japanese bank or SOE bank with M&A valuation likely around 1.5-2x P/BV. 

Is Astra selling too? They might be open to the possibility, especially post its decision to buy back 25% stake of Astra Sedaya Finance (ASF) from Permata in 2018 and we view Astra as having more synergy with its multifinance subsidiaries than Permata to support its auto business. 

Buyers likely to be Japanese or SOE. Two of the recent notable M&As in Indonesia came from Japanese banks ie SMBC-BTPN and MUFG-Danamon, with Mizuho as the only other Japanese banks operating in Indonesia, which has not purchased a local bank. Mizuho was also been looking to purchase a local bank ie ANZ’s stake in Panin in 2013-2015 but was subsequently cancelled according news report. With Panin having similar characteristics as Permata this would make it an ideal candidate for Mizuho. Furthermore, SOE banks such as Bank Mandiri said that it is looking for a mid-sized bank with a focus in SME and to grow its funding base. Mandiri has also said it has excess capital (c.IDR30-35trn) to finance M&A, without the need for external funding. 

Valuation remains key, likely to be 1.5-2x P/BV. Valuation of the recent M&A transactions in Indonesia banking sector range from 1.4x-3x P/BV, with the most notable mid-sized transactions such as MUFG-BDMN (2-2.3x P/BV) and SMBC-BTPN (1.4-1.5x P/BV) with ROEs 11-12%. We think that Permata’s valuation could range between 1.5-2x P/BV – still reasonable despite its lower ROE (4%) due to its decent size (FY18 total assets: IDR153trn), funding franchise (retail, SME) that is backed by the Astra ecosystem (10-15% of total funding), and lack of availability of other mid-sized banks (Top 10).