Analisa Saham BNLI | 6 Maret 2019

Bank Permata: M&A Story Intact; Strong Jan Numbers 

Alvin Baramuli, Henry Wibowo – RHB Sekuritas 

Maintain BUY, IDR1,400 TP, 27% upside. Bank Permata reported a stellar January, with earnings up 105% YoY (ROE: 7.6%), as provisions fell 67.5% YoY (CoC: 1% vs 1M18’s 3.1%). Mandiri and Northstar may be interested in buying into the bank. Permata is an ideal M&A candidate with potential valuations of 1.5-2x P/BV, within average of recent M&As in Indonesia, in our view. TP implies 1.7x P/BV on FY19E BVPS.

Strong start in 2019, EPS +105% YoY. Permata reported its 1M19, with net profit of IDR138bn (+105% YoY), (outperforming all its peers of the 12 banks under our coverage), which implied 7.6% ROE. This was driven by lower provision expenses, which declined 68% YoY. Correspondingly, CoC decreased to 1% in 1M19, from 3.1% in Jan 2018. Loans stood at IDR97trn (+6.8% YoY, vs -3.9% in 1M18). NIM also improved to 3.8%, from 3.6% in Jan 2018, while LDR inched up slightly to 84.2%, from 83.2%, for the same period.

Mandiri is said to be exploring the option of purchasing Permata and merge the bank with its subsidiary, Bank Mandiri Taspen (Mantap) with completion target this year. Permata is an ideal M&A candidate, given its: decent asset size as the 11th largest bank in Indonesia (IDR157trn), funding franchise which is backed by Astra and the lack of availability of other mid-sized banks. We think Mandiri would find it ideal to buy Permata to grow funding inorganically – note that Mandiri’s CASA declined 0.2% YoY, bringing total consolidated deposits growth to just 3.1% in FY18. Mandiri has excess capital of IDR30-35trn (CAR: c.21%) to undertake an M&A. 

Northstar – another potential buyer? Private equity firm Northstar is also reportedly interested in buying a stake in Permata. We think that Northstar could become another candidate – especially since it divested its investment in BTPN at an estimated USD1.8bn (2013-2018). Note that Northstar and TPG Capital jointly invested in BTPN in 2008 with a reported c.USD195m, for a 72% stake – which implied 2.1x P/BV.

Link to report: https://research.rhbtradesmart.com/attachments/40/rhb-report-ind_bank-permata_company-update_20190306_rhb-6049541472771635c7ef3a916118.pdf