Upgrading to BUY on the possibility of margin expansion
Key Takeaways :
• BBCA's quarterly increase in net income (+8.0% QoQ) bringing FY22 earnings to record an all-time-high hitting IDR40.74tn (+29.6% YoY/+105% consensus estimate).
• Despite having lower LDR (<70%) than its KBMI IV peers (>80%), BBCA could still lever it to drive NIM expansion to 5.9% FY23F through +12% FY23F loan growth, given its high CASA ratio (82.5% FY23F).
• We expect a sizeable dividend payment to be a key catalyst for BBCA's share price at least in 1Q23 as management reiterated an effort to increase DPR. Note that BBCA's DPR has doubled during FY17-FY21.
• Using DDM valuation method, we derived BBCA's fair value at IDR9,900/share- 4.9x/4.5x FY23F/FY24F P/B (vs IDR9,000/share) and thus upgrading its rating from HOLD to BUY.
• Key downsides : 1) weakening asset quality and 2) stock heavy weight on JCI as well as exposure to large foreign fund flows. Key upsides : 1) higher than expected NIM and 2) better liquidity utilization.
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