Indonesia Industry Focus Indonesian Banks and Multifinance Adira Dinamika Multi Finance 11,575 991...

www.dbsvickers.com

ed-TH / sa- MA

Awaiting the next leap

Banks to trade range-bound from here; near-termweakness plus slower growth to cap upside

Leasing business will remain slow for the year; autofinancing will dominate meantime

Assuming all goes well on the political front andmacro indicators improve, it will set a strong base for growth in 2015;

Rolling forward valuation base to 2015; BBNI andBBTN are our new top picks

Near-term uncertainty plus slower growth. We see valuations stretched for big cap Indonesian banks at 3.0x BV. Our assumptions for the banks for 2014 are: 16% loan growth, 85-90% loan-to-deposit ratio, flat NIM for large cap banks/lower NIM for smaller banks and slight blip in credit costs and NPL ratios. Upside surprise would arise from better-than-expected asset quality conditions. This is on the back of: no spiralling inflation/no fuel price hike, i.e. stable interest rate and macro conditions (GDP at 5.8%; CAD at 2.8% of GDP, inflation at 6-6.5%), improved rupiah valuation y-o-y (year-end target US$:Rp at 11,500), and if Jokowi wins the presidential elections by September. This means reforms cannot start until at least early 2015.

New arena for multifinance companies to unfold. Multifinance companies are still expected to be subdued for the rest of the year even though there is hope of improvements in the auto segment. Some new regulations are expected to be released in August to enable multifinance companies to finance small SMEs for the unbankable population. While there is still weakness in the leasing business, the eventual ability for multifinance companies to embark on SMEs should alleviate growth concerns. Stand-alone multifinance companies such as BFIN will remain on the M&A radar.

Expect a pickup in 2H14 to set a strong base for 2015; rolling forward valuation base to 2015. Growth momentum is expected to stay muted in 2Q14. We expect a decent pickup in 3Q14 from lebaran festivities while 4Q14 is a wildcard, usually on a positive bias. With the stage set, we roll forward our valuation base to 2015.

Staying below the surface; valuations do not warrant strong accumulation yet. We upgrade BBNI and BBTN to BUYs (from HOLDs); and they are our new top picks. BBNI should see catalysts from its fee income expansion while BBTN is poised for a turnaround. Large cap banks are all HOLDs in our rating universe despite rolling over our valuation base to 2015. Among the smaller banks, PNBN could still be in line for a new potential stakeholder (from ANZ’s 38% stake) though a tender offer is unlikely. BTPN’s potential has not been priced in despite having Sumitomo as its new stakeholder.

JCI : 4,893.91

Analyst LIM Sue Lin +603 2604 3969 [email protected]

Indonesian Research Team +6221 3003 4900 [email protected]

INDONESIAN BANKS COVERAGE

Source: AllianceDBS, DBS Vickers

INDONESIAN MULTIFINANCE COMPANIES


Indonesian Banks: Rolling forward PBV band

Mean, 1.74

+ 1SD, 2.11

+ 2SD, 2.47

- 1SD, 1.37

- 2SD, 1.01

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

03 04 05 06 07 08 09 10 11 12 13 14

Sector average Big 3 average Non-big 3 average

x

* Big 3 (> US$20bn market cap): BBCA, BBRI, BMRI

Source: Bloomberg Finance L.P., AllianceDBS, DBS Vickers

DBS Group Research . Equity 3 Jun 2014

Indonesia Industry Focus

Indonesian Banks and Multifinance Refer to important disclosures at the end of this report

Price Mkt Cap Target Price

Performance (%)

Rp US$m Rp 3 mth 12 mth Rating

Adira Dinamika Multi Finance 11,575 991 NA 25.5 18.7 NR BFI Finance 2,500 327 2,900 14.7 4.2 BUY Clipan Finance 420 136 460 1.0 (3.5) HOLD Mandala Multifinance 800 90.8 NA 14.3 6.7 NR

Price Mkt Cap Target Price

Performance (%)

Rp US$m Rp 3 mth 12 mth Rating

Bank Central Asia 10,775 22,754 11,100 5.4 (2.1) HOLD Bank Danamon 4,160 3,415 4,800 2.0 (27.7) NR Bank Mandiri 10,175 20,335 10,600 11.8 (0.3) HOLD Bank Negara Indonesia 4,775 7,627 5,800 5.0 (8.2) BUY Bank Rakyat Indonesia 10,200 21,552 11,600 10.0 10.3 HOLD Bank Tabungan Negara 1,090 986 1,270 0.9 (22.1) BUY Bank Tabungan Pensiunan Nasional 4,090 2,046 5,900 (3.2) (14.4) BUY

Panin Bank 870 1,795 1,100 6.1 (5.4) BUY

Industry Focus

Indonesian Banks

Page 2

Table of Contents

Indonesian Banks: Looking ahead after a challenging 1H14 3

Multifinance Companies: Still a slow year 5

Blending in macro and politics 9

Valuation and recommendation 10

ASEAN Banks: Peer valuation table 12

Stock Profiles: Banks 13

Bank Central Asia (BBCA) 14

Bank Danamon (BDMN) 16

Bank Mandiri (BMRI) 18

Bank Negara Indonesia (BBNI) 20

Bank Rakyat Indonesia (BBRI) 22

Bank Tabungan Negara (BBTN) 24

Bank Tabungan Pensiunan Nasional (BTPN) 26

Panin Bank (PNBN) 28

Stock Profiles: Multifinance companies 30

Adira Finance (ADMF) 31

BFI Finance (BFIN) 33

Clipan Finance (CFIN) 35

Mandala Finance (MFIN) 37

Industry Focus

Indonesian Banks

Page 3

Indonesian Banks: Looking ahead after a challenging 1H14

Liquidity may remain challenging. While we believe the Big 3 (BBCA, BMRI and BBRI) should be able to weather through issues pertaining to funding costs. Liquidity was tight towards end-4Q13 and funding costs spiked up. Although it has somewhat eased, we believe banks will remain vigilant in monitoring their liquidity position. Small and mid-sized banks may still face funding cost pressure in our view, which may in turn see NIM decelerate. With Bank Indonesia (BI)/Otoritas Jasa Keuangan (OJK) keeping a tight lid on credit growth, we believe loan-to-deposit ratio may taper a little by the year-end, albeit still high at 93% vs pre-2012. Loan-to-deposit ratio for the Big 3 stood at 84% as at end 2013. Other than BBCA’s which stood at 76%, BMRI and BBRI’s were at 84% and 89% respectively. Indonesian Banks: Loan-to-deposit ratio trends

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

110.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

110%

2009 2010 2011 2012 2013 2014F 2015F

BBCA BMRI BBRIBBNI BTPN BBTNPNBN Average (Big 3) Average (Non Big 3)Industry

Source: Companies, OJK, AllianceDBS

Indonesian Banks: Industry loan-to-deposit ratio hitting a

peak

38.4%

65.7%

80.6%77.1%

93.1%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13

Source: OJK, AllianceDBS, DBS Vickers

Keeping a tight lid on loan growth. From the beginning of 2014, BI has been emphasising on slower loan growth for the banks, targeting 15-17% loan growth for the year. All banks under our coverage have continued to guide for slower loan growth in 2014. We are forecasting a 16% loan growth in 2014, the slowest the banking sector has seen since 2009. Indonesian Banks: Loan growth in 2014 to be the slowest

since 2009

19%

27%26%

14%

26%

31%

10%

23% 24% 23% 22%

16%19%

0%

5%

10%

15%

20%

25%

30%

35%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F2015F

%

Source: OJK, AllianceDBS, DBS Vickers Larger banks should be able to defend NIM. Judging from 1Q14 trends, it appears that only BBCA would be able to ride out this liquidity phase and even hold out NIM better than peers by sheer reason of its CASA composition which has been resilient. BBCA’s CASA growth tends to be in tandem with GDP growth. Despite a slow 1Q14, BBCA’s CASA growth remained resilient, testimony of its strong deposit and transaction banking franchise. CASA growth for the industry appears to have outpaced BBCA in 2013 as banks in general scrambled to build low cost deposits amid rising interest rates. However, some banks literally “paid” for the CASA by offering promotional rates via campaigns. Indonesian Banks: BBCA’s CASA trends vs Industry and GDP

growth

4.6%

6.2%6.5% 6.2%

5.8%6.0% 6.1%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

2009 2010 2011 2012 2013 2014F 2015F

BBCA Average (ex BBCA) Industry GDP Growth %

Source: Companies, CEIC, AllianceDBS, , DBS Vickers DBS Group Research

Industry Focus

Indonesian Banks

Page 4

Indonesian Banks: CASA composition

78.9%

68.5% 67.5%64.7%

60.9%58.0% 56.4%

47.3% 45.1%40.0%

14.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

BBCA BBNI Average(Big 4)

BMRI PNBN BBRI Industry BDMN BBTN Average(Non Big

4)

BTPN

* Big 4 here includes BBNI in addition to BBCA, BMRI and BBRI

Source: Companies, OJK, AllianceDBS, DBS Vickers NIM trends mixed; large banks should defend trends. Banks have followed suit by raising time deposit rates in tandem. Lending rates have largely been re-priced up except for fixed rate loans, while micro lending rates have largely been left unchanged. As a result, NIM pressure would be more imminent for micro lenders such as BBRI and BTPN. Positively, as these lending yields are still much higher than conventional corporate and commercial loans, NIMs for BBRI and BTPN remain above industry average although on a downward bias. For smaller banks with weaker deposit franchise, NIM is expected to edge down. Indonesian Banks: NIM on slight downward trend as

funding costs rise

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

2008 2009 2010 2011 2012 2013 2014F 2015F

BBCA BDMN BMRI BBNI BBRI

BBTN BTPN PNBN Average industry

NIM (Banks) NIM (Average/Industry)

Source: OJK, Companies, AllianceDBS, DBS Vickers Asset quality is a wildcard. NPL was seasonally weak in 1Q14. Despite a slower growth year, we do not expect a significant deterioration in asset quality. The SME/Commercial segment, which BMRI and BBNI have larger exposures, would be

vulnerable. We have imputed slightly higher credit costs for 2014 in anticipation of slower economic growth but these should normalise in FY15. Indonesian Banks: NPL ratio on a slight uptrend in FY14

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2008 2009 2010 2011 2012 2013 2014F 2015F


BBTN BTPN PNBN Average Industry

Gros s NPL ratio (Banks) Gross NPL ratio (Average/Industry)

Source: OJK, Companies, AllianceDBS, DBS Vickers Indonesian Banks: Provision charge-off rates

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

(1.00%)

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

2008 2009 2010 2011 2012 2013 2014F 2015F


BBTN BTPN PNBN Average

Provision charge-off rate (Banks) Provision charge-off rate (average)

Source: Companies, AllianceDBS, DBS Vickers Capital raising risk remains minimal. We see little capital raising risk for Indonesian banks. Tier-1 capital comprises almost 90% of total capital and it is all core capital (no hybrid instruments). There is still no clarity on implementation of Basel III at this juncture. Banks with subsidiaries will likely be minimally affected when Basel III is implemented. Dividend payout to stay unchanged. On average, we expect dividend payout to remain stable at 25-30% of earnings. Only the state-owned banks may see changes depending on the state budget. From our conversations with the state-owned banks, they may propose a lower dividend payout in order to fund growth.

Industry Focus

Indonesian Banks

Page 5

Multifinance Companies: Still a slow year

Slower year ahead. The multifinance industry’s financing has been growing strongly at a 5-year CAGR of 19.1% (1Q14: +13% y-o-y), mainly driven by the consumer financing and leasing segments. APPI (Multifinance Association of Indonesia) expects the multifinance industry to grow at only 5-10% this year, which is lower than the banking sector’s guidance of 15-17%. The slower growth forecast is due to the increase in the BI rates last year, which has resulted in a tight liquidity environment as well as a soft commodity price outlook this year. Government regulations such as the increased loan-to-value (LTV) ratio will also adversely affect the industry. Separately, APPI predicts that 4W sales will hit 1.2m units (in line with our estimates at 1.1m), while 2W sales will record 7.7m units (below our estimates of 8.1m). The 1Q14 performance of multifinance companies and the industry was in line with our expectations of a soft quarter. Multifinance Companies: Financing trends

0%

5%

10%

15%

20%

25%

30%

35%

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

2008 2009 2010 2011 2012 2013 Mar-14

Consumer financing Leasing Factoring Financing Growth

Source: OJK, AllianceDBS, DBS Vickers Multifinance Companies: Financing growth vs GDP growth

6.1%

4.6%

6.1%6.5%

6.2%5.8%

5.2%

0%

1%

2%

3%

4%

5%

6%

7%

0%

5%

10%

15%

20%

25%

30%

35%

40%

2008 2009 2010 2011 2012 2013 Mar-14

Financing Growth GDP growth


Slowdown in leasing. Leasing grew slightly by +5% y-o-y in 1Q14. Leasing activities are expected to slow down in 2014 as commodity prices remain soft. Our coal analyst expects 2014 coal prices to average US$85 this year on slower demand and abundant supply; thus the demand for heavy equipment is expected to remain weak. Leasing fell to 33% of 1Q14 total multifinance receivables (from 34% in 1Q13). Komatsu sales fell by 5% y-o-y to 1,211 units in 1Q14. The volume increase of Komatsu unit sales (+12% FY14F) is expected to be offset by the sluggish growth in the average selling prices (+5% y-o-y) during 2014. We do not expect the coal mining and heavy equipment sector to rebound soon, thus financing companies such as BFIN and CFIN, which have exposure to the mining sector, will be affected. Both companies have indicated that they will take the necessary measures to reduce the leasing segment in their portfolio and refocus their financing on consumer financing despite the former’s higher yields. In FY13, BFIN recorded a decrease of 15% y-o-y in new leasing bookings. Although CFIN recorded a 24% y-o-y increase in new leasing bookings, its leasing receivables fell by 3% q-o-q. Multifinance Companies: Loan composition (1Q14)

Consumer financing

65%

Leasing33%

Factoring2%

Source: OJK, AllianceDBS, DBS Vickers Komatsu unit sales trends

5,404

8,467

6,202

4,200 4,700

5,100 5,609

-40%

-20%

0%

20%

40%

60%

80%

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2010 2011 2012 2013 2014F 2015F 2016F

Komatsu sales (units) % growth

Source: Company, AllianceDBS, DBS Vickers

Industry Focus

Indonesian Banks

Page 6

Komatsu sales (in Rp bn) and ASP trend

549

1,197

2,124

1,462

726 755 814 984

0

50

100

150

200

250

300

0

500

1,000

1,500

2,000

2,500

2009 2010 2011 2012 2013 2014F 2015F 2016F

Komatsu (in US$mn) Komatsu ASP (in US$ 000)

Source: Company, AllianceDBS, DBS Vickers Consumer segment to drive financing. The consumer financing segment grew 16% y-o-y in 1Q14 and made up 65% of total multifinance financing in Indonesia. It constitutes the bulk of the portfolios for multifinance companies such as BFIN and CFIN. However, the higher downpayment regulations coupled with higher rates have slowed down the 4W and 2W sales. Even then, we expect trends to normalise by 2H14. BFIN 1Q14 loan composition

Dealer New 4W19%

Dealer Used 4W28%

Non Dealer 4W27%

Leasing - New3%

Leasing - LCV4%

Non-dealer leasing

6%

Leasing heavy equipment

13%

Source: Company, AllianceDBS, DBS Vickers CFIN 1Q14 loan composition

Consumer financing

45%

Leasing17%

Factoring38%


Steady growth for 2W. We forecast a steady 5% growth for 2W volume sales in the next few years, which will bring motorcycle sales to 8.1%. Even though 2W sales have been adversely affected by the macroeconomic environment, it continues to be the basic means of transportation in Indonesia and will maintain its stable growth. Auto sales: 2W sales trends

7,373 8,013

7,064 7,744

8,131 8,538

8,965

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2010 2011 2012 2013 2014F 2015F 2016F

2W sales (000 units) % growth

Source: AISI, AllianceDBS, DBS Vickers 4W remains resilient through LCGC. 4W was less affected and we forecast a 7-8% annual growth which would bring unit sales to1.3m in 2014. The introduction of the low-cost green car (LCGC) to the market gave the 4W a boost with many LCGC launches this year. Demand for LCGC remains strong and we forecast sales to grow rapidly by 260% this year to 180k units due to the abundance of launches and early hype. For the future, we forecast an annual growth of 25% for LCGC. The low-cost multipurpose vehicle (LMPV) segment will also drive 4W as Honda’s Mobilio line proved to be a huge success. Going forward, LCGC provides an opportunity for multifinance companies as BFIN and ADMF have signed deals to finance Nissan’s LCGC segment. The majority of the mass market who are interested in buying LCGC will obtain financing to purchase the vehicle. However, average ticket size will also decrease for multifinance companies since LCGCs are a much cheaper alternative compared to traditional 4W. Having said this, LCGC may also cannibalise the traditional used 4W market that multfifinance companies normally finance.

Industry Focus

Indonesian Banks

Page 7

Auto sales: 4W sales trends

765 894

1,116 1,230 1,320 1,422 1,538 -

-

-50

180 225

281

0%

10%

20%

30%

40%

50%

60%

70%

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2010 2011 2012 2013 2014F 2015F 2016F

4W sales (000 units) LCGC sales (000 units) % growth

Source: Gaikindo, AllianceDBS, DBS Vickers Factoring still small but experienced highest growth. Factoring in the multifinance industry grew 44% y-o-y, the fastest compared to consumer financing and leasing. However, it is still currently only 2% of total multifinance portfolio. Not too many multifinance companies provide this service; the only company that has the largest factoring business is CFIN. Factoring remains to be an interesting sector going forward as competition and market penetration remains low. Risks of factoring are also low since it is fully collateralised, while generating the same yields as consumer loans at 15-17%. Funding still dominated by borrowings. Borrowings remained the main source of funding for the multifinance industry as it made up 82% of total funding as at 1Q14. Meanwhile, total funding grew 12% y-o-y as at 1Q14. Over the years, bond issuance has been on the rise and it grew 15% y-o-y in 1Q14. However, it is difficult for multifinance companies to obtain low coupon rates and to compete with bigger banks in issuing debts in the capital markets. With financing growth expected to be softer this year, bond issuance may not be high. Multifinance Companies: Funding trends

-10%

0%

10%

20%

30%

40%

50%

60%

70%

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2009 2010 2011 2012 2013 Mar-14

Borrowing Bonds Subordinated loan Growth


BFIN & CFIN: Funding composition

34% 29%

23%23%

44% 47%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

BFIN CFIN

Borrowing Bonds Equity

Source: Companies, AllianceDBS, DBS Vickers Room to grow from debt issuance. Gearing ratios for multifinance companies like BFIN (1.29) and CFIN (1.12) are still relatively low and they still have some leeway for more expansion, given that the maximum allowable gearing is 10x. Earlier this year, BFIN issued bonds worth Rp500tr with coupon rates ranging 10.5-11.5%, as part of its Rp2.5tr bond issuance to ramp up its funding. However, we also have to bear in mind that with the current macro conditions and tight liquidity, it will be difficult for multifinance companies to obtain cheap funding. Multifinance Companies: Gearing ratios

1.29 1.12

2.34

3.44

8.6

-

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

BFIN CFIN MFIN ADMF Industry

Source: OJK, Companies, AllianceDBS, DBS Vickers Financial metrics to be pressured. Multifinance companies will continue to struggle as macroeconomic conditions remains an overhang and cost of funds remains high. Many multifinance companies indicated that bond issuance is not favourable at current market conditions, as coupon rates remain very high. They are more confident of issuing debt in 2H14. Slower bookings will also dampen overall net interest income and NIM is expected to stay flat. NPL ratio is expected to spike up

Industry Focus

Indonesian Banks

Page 8

slightly by 10-30bps following slow outlook in the mining industry. Note that even though the NPL recognition is not regulated in the multifinance industry, BFIN and CFIN both consider financing past due of 90 days as bad debt. Multifinance Companies: NIM forecast

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

2009 2010 2011 2012 2013 2014F 2015F

BFIN CFIN MFIN ADMF

Source: Companies, AllianceDBS, DBS Vickers Allowing multifinance to finance SMEs. The talk regarding regulation of the multifinance sector by OJK is expected to be released this August. However, in order for the regulation to be released, multifinance companies will need to be able to finance working capital loans for SMEs. The regulations will focus on documentation for loan approval as well as collateral. This reinstates the fact that multifinance companies serve an

important function in the financial services industry and should not be viewed only as “shadow banking”. Going forward, we can expect multifinance companies to expand their financing horizons and start to finance commercial SME loans. Multifinance companies will not directly compete with other banks or micro-financing players since these multifinance companies have a niche market of their own, which are the unbankable clients. Multifinance companies can also offer commercial financing to their existing consumer or leasing clients. OJK appears to be opening up the unbankable population to the multifinance companies, in our view. We believe this is an additional step into enhancing financial inclusion, given Indonesia’s large unbankable population. Based on the World Bank survey (latest available at 2012), approximately only 30% of Indonesia’s population above the age of 15 has an account with a formal financial institution.

Industry Focus

Indonesian Banks

Page 9

Blending in macro and politics

Near-term macro prospects still questionable. While the attention has been on politics and future prospects beyond the presidential election, 2014 is not over yet and we should not discount the fact that the near-term prospect is still questionable. Moreover, the next leader who will take office in October 2014 will have plenty to deal with, starting with the 2015 budget.

Government revised macro forecasts downwards after a disappointing 1Q14. Following a disappointing 1Q14 GDP, the government revised their 2014 GDP forecast down to 5.5% from 6% previously, vs. 5.8% in 2013. Our economist also adjusted his forecast to 5.8% to reflect slower growth. However, this does not come as a full surprise as the government has always been too optimistic. In addition, government spending will be cut by RP100tr and the budget deficit assumption is now at 2.5% for this year vs. 1.7% previously. As such, we should not expect any stimulus from government spending to drive the economy in 2H and it will be the new government’s task to reaccelerate the economy. Longer-term plans aside, a key near-term challenge is the management of the 2014 and 2015 budgets. Presumably, this will be the biggest immediate test for the new government. The revised 2014 budget assumes a higher deficit of 2.5% of GDP. But the current Finance Minister cautions that it may even be as high as 4.7% of GDP, if the government cannot contain fuel subsidy consumption towards the year-end.

Indonesia: 2014 government forecasts

New Old

GDP 5.5% 6.0%

Inflation 5.5% 5.5%

USD/IDR 11,700 10,500

Budget deficit 2.5% 1.7%

Source: MoF

Indonesia: DBS’s macro assumptions

2014F 2015F

GDP 5.8% 6.1%

CPI 6.4% 5.6%

IDR 11,500 11,500

Current account -2.8% -2.5%

BI rate 7.5% NA

Source: DBS Group Research

Jokowi or Prabowo: Does it matter? This time, Indonesians are given the opportunity to choose a new leader who will shape the future of the country and the option is between a humble guy with a solid track record or a former general with some experience who is viewed as decisive. Both Jokowi and Prabowo are new in the sense that they have never been a president and regardless of their programme, both candidates are relatively untested at the national level. In our view, who will win matters but ultimately, what matters the most is whether the next leader will be able to deliver on his promises. Both candidates offer a comprehensive agenda with a long programme list, but the questions is can they really deliver on their many promises in the next five or ten years? Based on track record, Jokowi has proven that he can. The addition of Jusuf Kalla (JK) as his Vice President obviously makes it easier to see why they can. Plus JK is expected to help Jokowi navigate through the House of Representatives (DPR) jungle. However, we would be cautious in placing so much expectation on Jokowi-JK because at the end of the day, this is not a winner-take-all situation. Jokowi-JK still needs the Gerindra-led coalition’s support, which has 50% seats at DPR, in order to implement their programmes including the budget. How about Prabowo? While the track record alone will favour Jokowi, Prabowo is supported by Hatta Rajasa (Hatta), a former minister under SBY for two terms. To be fair, Jokowi-JK or Prabowo-Hatta alone cannot get things done at the national level and so, the appointment of the cabinet members could play a crucial role. Impact on banks/multifinance companies. Judging from the market’s performance, investors have been favouring Jokowi-JK to win the presidential election on July 9. Jokowi is perceived as being a new kind of leader who can change the country in some respects. On the other hand, Prabowo has always been associated with the 1998 incident and the kidnapping of a number of activists during the Soeharto era. Most likely, JCI will rally if Jokowi wins the July election on the back of high expectations. With banks being the largest components of the JCI (25%) and LQ45 (30%) indices, we expect the sector to rally along with the market. The Big 3 banks (BBCA, BMRI and BBRI) are currently trading 2-3% above their levels when Jokowi was announced as the country’s Presidential candidate. Using 3-year peak valuations as trading TPs, there could be another 20% upside to current levels. But note that there are no fundamentals attached to it but pure euphoria. As a rally of this sort may not last, we caution that investors who ignore fundamentals would be doing so at their own peril.

Industry Focus

Indonesian Banks

Page 10

Valuation and recommendation

Waiting for the next leap. We expect Indonesian banks to trade range-bound until results of the Presidential Elections are announced and concrete plans under the new administration are laid out. Meanwhile, growth prospects for 2014 are still expected to be slow, while concerns on funding costs are still on the rise as liquidity remains tight. So far, we have seen little evidence of deterioration in asset quality; this would be a key risk to watch. Assuming all goes well on the political front and macro indicators improve, they will set a strong base for growth in 2015. But for now, we believe valuations are stretched, with the Big 3 Indonesian banks trading at 3.0x FY14 BV and 2.5x FY15 BV. Indonesian Banks: Rolling forward PBV band

Mean, 1.74

+ 1SD, 2.11

+ 2SD, 2.47

- 1SD, 1.37

- 2SD, 1.01

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

03 04 05 06 07 08 09 10 11 12 13 14

Sector average Big 3 average Non-big 3 average

x

* Big 3 (> US$20bn market cap): BBCA, BBRI, BMRI

Source: Bloomberg Finance L.P., AllianceDBS, DBS Vickers Earnings growth to rebound in 2015. We expect Indonesian banks’ earnings to rebound in 2015, making the assumption that the macro environment and credit growth normalises. From a 10% earnings growth in 2014, we forecast a relatively bullish 18% earnings growth in 2015. We expect loan growth to revert to 19% and NIM conditions to improve, as funding cost pressure eases. Asset quality should also normalise. Days of high ROEs are unlikely to repeat. Even then, we expect the sector’s ROE to at least revert closer to 20% in 2015. Rolling forward valuation base to 2015. Growth momentum is expected to stay muted in 2Q14. We expect a decent pickup in 3Q14 from lebaran festivities while 4Q14 is a wildcard, usually on a positive bias. With the stage set, we roll forward our valuation base to 2015. We upgrade BBNI and BBTN to BUYs (from HOLDs); and they are our new top picks. Large cap banks are all HOLDs in our rating universe despite rolling over our valuation base to 2015.

Indonesian Banks: Earnings growth set to rebound in

2015 assuming normalised operating conditions

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

2008 2009 2010 2011 2012 2013 2014F 2015F


BBTN BTPN PNBN Total Source: Companies, AllianceDBS, DBS Vickers Indonesian Banks: ROE to inch back closer to 20% in 2015

(10.0%)

(5.0%)

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

2008 2009 2010 2011 2012 2013 2014F 2015F


BBTN BTPN PNBN Average

ROE (Banks) ROE (Average)

Source: Companies, AllianceDBS, DBS Vickers BBNI: Fee income catalyst. We see prospects of BBNI’s fee income strategy starting to deliver in FY15. With Sumitomo Life as BNI Life’s partner in business, we believe its bancassurance business should start to pick up, based on Mandiri-AXA’s experience in its early days of partnership. Elsewhere, BBNI has room to raise its deposit administrative fees to be on par with peers. We raise FY14-15F earnings by 7-8% while our TP is lifted to Rp5,800, implying 1.7x FY15 BV. BBTN: Turnaround imminent. BBTN has been going through a bad spell since Dec 12. The worst should be over for its NPLs after a seasonally slow 1Q and its year-end NPL target is 3%. Several initiatives have been put in place, particularly on collection and asset management (for repossession and foreclosure). A new subsidised mortgage scheme (effective from May) which is fully collateralised and guaranteed by government insurance, with a flat 7.25% rate for up to 20

Industry Focus

Indonesian Banks

Page 11

years, will be positive to BBTN. Any M&A prospects would most likely earliest emerge after elections. HOLDs on the Big 3. We have HOLDs on the large cap banks (BBCA, BMRI, BBRI) as we believe their valuations are rather stretched. Even after rolling forward our valuation base to FY15, our recommendations are unchanged despite higher TPs. Of the Big 3, BBCA is deemed a defensive play in times of uncertainty. But at 3.1x FY15 BV, its positives are largely priced in. BMRI and BBRI are seeing liquidity positions getting stretched with loan-to-deposit ratios just below 90%, their highest to date. Situational plays. BBTN’s M&A euphoria with BMRI has died down but there is a possibility that talks may resume post-elections. Nevertheless, our recommendation and TP for BBTN are based on fundamental improvements in its operations, especially its asset quality. PNBN could still be in line for a new

potential stakeholder (from ANZ’s 38% stake), though a tender offer is unlikely. BTPN’s potential has not been priced in despite having Sumitomo as its new stakeholder. Prefer BFIN over CFIN for multifinance companies. While the multifinance companies’ operations are not out of the woods yet, their valuations are cheap and have priced in most of the operational weaknesses. However, we still prefer BFIN over CFIN. While CFIN has better cost-to-income ratios and the backing of a bank (PNBN owns 54% of CFIN), we believe BFIN’s operations are unique and its ability to stand alone without the backing of a bank exemplifies the quality of its business. As the multifinance companies are still fragmented, we believe OJK will start to further regulate the sector. Standalone multifinance companies such as BFIN could be up for M&A.

.Indonesian Banks: Catalysts and risks

Bank Previous TP

Previous Rec

Revised TP

Revised Rec

Catalysts Risks

BBCA 10,100 HOLD 11,100 HOLD CASA composition still remains the youngest and NIM remains the most resilient in comparison to other banks

Valuations are too pricey; Pressure to increase deposit rates to ward off competition

BBRI 9,400 HOLD 11,600 HOLD Strong growth in micro as it aims to reach distant and rural areas by branchless banking

Upside potential have been largely priced in; a spike in special mention loan might be a worry

BMRI 9,100 HOLD 10,600 HOLD Positive infrastructure sentiments from both running political parties may boost infrastructure financing

Recap bonds might swing NIM down and still continue to drag liquidity; increase in special mention might be worrisome

BBNI 4,200 HOLD 5,700 BUY Improvement in non-interest income arising from its insurance tie-up as well as fee based income strategy

Rising small and micro NPLs is still a worry; shifting of customers from CASA to TD might pressure cost of funds

BBTN 1,130 HOLD 1,270 BUY Worse is over for NPL and turnaround is imminent especially with subsidized mortgage scheme

Non-subsidized mortgage rates starting to float this year, possible NPL formations might arise

BTPN 5,500 BUY 5,900 BUY Strong growth in productive poor (TUR) loans; New shareholder SMBC to provide standby funding

Low liquidity; high cost of funds as the majority of funding comes from time deposits

PNBN 960 BUY 1,100 BUY M&A possibility as Mizuho remains keen to acquire ANZ’s stake on Panin Bank

Liquidity remains thin; Growth is continuously slower than peers

BFIN 2,800 BUY 3,100 BUY Potential M&A prospects from Japanese companies; regain their 5ppt tax break

Slowdown in the leasing industry as well as flat 2W growth; higher cost of fund could hurt NIM

CFIN 430 HOLD 490 HOLD Unique factoring business which is growing rapidly and showing no signs of asset quality risk

Higher exposure to leasing than BFIN; LCGC might be a threat to its traditional used 4W market


Industry Focus

Indonesian Banks

Page 12

ASEAN Banks: Peer valuation table FYE Mkt Price Target Avg CAGR PE P/BV

Bank Cap (LCY) Price % 6-mth 12-14 (x) (x)(US$m) 5/30/2014 (LCY) Upside Rcmd YTD 1M 3M 6M 12M Vol (m) (%) 13A 14F 15F 13A 14F 15F 13A 14F 15F 13A 14F 15F

SingaporeDBS* Dec 32,954 16.90 NA NA NA -1 0 2 -2 0 4.1 8 11.3x 10.8x 9.7x 1.2x 1.1x 1.1x 3.4% 3.6% 3.3% 11.3% 10.9% 11.3%OCBC Dec 26,712 9.75 12.40 27% Buy -4 1 2 -7 -8 4.3 8 12.5x 11.5x 10.6x 1.4x 1.3x 1.2x 3.5% 3.6% 3.9% 11.5% 11.9% 12.0%UOB Dec 28,379 22.57 22.50 0% Hold 6 4 9 8 6 2.3 6 12.3x 11.9x 11.0x 1.5x 1.4x 1.3x 3.3% 3.4% 3.5% 12.3% 11.9% 12.0%

Weighted average 7 12.0x 11.4x 10.4x 1.4x 1.3x 1.2x 3.4% 3.5% 3.5% 11.7% 11.5% 11.7%Simple average 7 12.0x 11.4x 10.5x 1.4x 1.3x 1.2x 3.4% 3.5% 3.5% 11.7% 11.6% 11.7%

MalaysiaAffin Holdings Dec 1,694 3.65 4.05 11% Hold -12 -3 -11 -14 -12 0.3 -4 8.4x 11.5x 9.1x 0.9x 0.9x 0.9x 4.1% 3.0% 3.8% 10.5% 8.9% 9.8%Alliance Financial Group* Mar 2,345 4.89 NA NA NA 4 10 8 -1 -1 1.6 10 13.9x 12.6x 11.5x 1.9x 1.7x 1.6x 3.4% 4.5% 4.9% 13.8% 13.7% 13.8%AMMB Holdings Mar 6,871 7.34 7.50 2% Hold 1 2 1 -1 0 3.3 11 13.5x 12.1x 10.9x 1.8x 1.7x 1.5x 3.0% 3.3% 3.7% 14.1% 14.5% 14.8%CIMB Group Dec 19,004 7.34 7.90 8% Hold -4 -2 3 -3 -13 9.1 10 13.9x 12.3x 11.4x 1.9x 1.6x 1.5x 3.2% 3.1% 3.5% 16.0% 14.4% 13.9%Hong Leong Bank Jun 7,754 13.88 18.00 30% Buy -4 -1 -2 -2 -2 0.5 15 14.1x 12.1x 10.7x 2.0x 1.8x 1.6x 2.4% 2.4% 2.4% 15.2% 15.6% 15.8%Maybank Dec 27,226 9.88 11.80 19% Buy -1 0 1 1 -3 7.0 5 13.0x 12.8x 11.8x 1.9x 1.7x 1.7x 5.4% 5.4% 5.8% 14.9% 14.1% 14.5%Public Bank Dec 23,494 21.60 23.00 6% Buy 11 7 13 18 28 3.8 11 18.7x 16.8x 15.3x 3.7x 3.3x 2.9x 2.4% 2.5% 2.7% 21.3% 20.9% 20.4%RHB Capital Dec 6,645 8.40 9.10 8% Buy 6 1 2 10 -4 0.9 13 11.6x 10.3x 9.1x 1.3x 1.2x 1.1x 1.9% 2.9% 3.3% 11.5% 11.8% 12.4%BIMB Holdings Dec 1,828 3.94 4.30 9% Hold -13 -7 -2 -12 1 1.1 38 19.7x 11.3x 10.4x 2.2x 2.0x 1.8x 2.2% 4.4% 4.8% 10.8% 18.3% 18.1%Hong Leong Financial Group Dec 5,035 15.40 18.80 22% Buy -1 1 -3 -3 2 0.2 9 10.9x 10.1x 9.2x 1.6x 1.4x 0.0x 2.3% 2.3% 2.3% 16.1% 15.1% 14.7%

Weighted average (ex-HLFG) 10 15.0x 13.6x 12.4x 2.3x 2.1x 1.9x 3.6% 3.7% 4.1% 16.5% 16.1% 16.1%Simple average (ex-HLFG) 12 12.4x 11.1x 10.1x 1.8x 1.7x 1.6x 3.6% 3.2% 3.5% 14.3% 14.2% 14.3%

Indonesia 2.8x 2.4xBank Central Asia Dec 22,754 10,775 11,100 3% Hold 12 -2 5 12 0 15.2 15 18.6x 16.4x 14.1x 4.2x 3.5x 3.0x 1.1% 1.6% 1.8% 24.6% 23.3% 22.8%Bank Danamon* Dec 3,388 4,160 NA NA NA 9 -2 1 8 -28 4.0 7 9.9x 9.9x 7.0x 1.3x 1.2x 1.1x 3.0% 3.0% 3.3% 13.5% 12.4% 12.7%Bank Mandiri Dec 20,335 10,175 10,600 4% Hold 30 4 12 33 3 29.4 12 13.0x 12.4x 10.4x 2.7x 2.4x 2.1x 2.3% 2.7% 2.8% 22.5% 20.6% 21.6%Bank Negara Indonesia Dec 7,627 4,775 5,800 21% Buy 21 -1 5 16 -5 27.0 14 9.8x 8.7x 7.5x 1.9x 1.6x 1.4x 2.4% 3.1% 3.5% 19.9% 20.0% 19.9%Bank Rakyat Indonesia Dec 21,552 10,200 11,600 14% Hold 41 3 10 37 13 36.3 15 11.8x 10.7x 8.9x 3.2x 2.5x 2.0x 1.7% 1.9% 2.2% 29.7% 26.4% 25.3%Bank Tabungan Negara Dec 986 1,090 1,270 17% Buy 25 -6 1 12 -20 43.1 15 7.2x 6.2x 5.5x 1.0x 0.9x 0.8x 3.6% 4.2% 4.8% 14.3% 14.8% 15.1%Bank Tabungan Pensiunan Nasional Dec 2,046 4,090 5,900 44% Buy -5 0 -3 -1 -14 0.3 14 10.9x 9.6x 8.3x 2.3x 1.9x 1.5x 0.0% 0.0% 0.0% 24.2% 21.7% 20.3%Panin Bank Dec 1,795 870 1,100 26% Buy 32 0 6 28 -4 5.8 16 9.3x 8.4x 6.9x 1.1x 1.0x 0.9x 0.0% 0.0% 0.0% 12.9% 12.7% 13.5%Bank Jabar Banten* Dec 713 865 NA NA NA -3 -8 -15 2 -29 16.2 5 6.1x 6.2x 4.2x 1.3x 1.1x 1.0x 8.6% 8.6% 8.7% 21.7% 20.1% 19.7%Bank Bukopin* Dec 498 645 NA NA NA 5 1 8 14 -22 9.8 -7 5.5x 7.1x 6.3x 0.8x 0.8x 0.7x 4.5% 4.5% 4.0% 15.0% 15.0% 15.6%

Weighted average 14 13.6x 12.4x 10.5x 3.0x 2.6x 2.2x 1.7% 2.1% 2.4% 24.1% 22.3% 22.1%Simple average 14 11.3x 10.3x 8.6x 2.2x 1.9x 1.6x 1.8% 2.1% 2.3% 20.2% 19.0% 18.9%Weighted average (ex-BBCA) 13 11.7x 10.8x 9.0x 2.6x 2.2x 1.8x 2.0% 2.3% 2.6% 23.9% 21.9% 21.8%Simple average (ex-BBCA) 13 10.3x 9.4x 7.8x 1.9x 1.6x 1.4x 1.9% 2.1% 2.4% 19.6% 18.4% 18.3%

Indonesia multifinance BFI Finance Dec 327 2,500 2,900 16% Buy 0 -16 -5 -9 19 0.3 10 7.5x 6.8x 6.1x 1.1x 1.0x 0.9x 0.0% 5.6% 6.2% 16.3% 15.6% 15.8%Clipan Finance Dec 136 420 460 10% Hold 5 4 1 9 -5 0.7 14 4.1x 3.8x 3.0x 0.6x 0.5x 0.5x 4.3% 5.2% 6.4% 15.0% 14.2% 15.3%


ThailandBank of Ayudhya Dec 7,126 38.50 30.00 -22% Sell 26 2 11 0 12 2.2 27 16.7x 13.4x 10.3x 1.9x 1.7x 1.6x 2.1% 2.5% 3.3% 12.0% 13.6% 15.9%Bangkok Bank Dec 10,761 185.00 228.00 23% Buy 4 -2 8 -2 -9 6.4 11 9.8x 8.9x 8.0x 1.2x 1.1x 1.0x 4.1% 4.5% 5.0% 12.6% 12.9% 13.1%KASIKORNBANK Dec 13,675 187.50 210.00 12% Buy 20 -2 10 11 -5 8.1 15 10.9x 9.9x 8.3x 2.0x 1.8x 1.5x 1.6% 2.5% 3.0% 20.4% 19.3% 19.8%Krung Thai Bank Dec 8,050 18.90 23.00 22% Buy 15 4 6 2 -15 45.3 8 7.8x 7.4x 6.7x 1.3x 1.2x 1.1x 4.2% 5.4% 6.0% 17.4% 16.5% 16.6%Siam Commercial Bank Dec 16,446 159.00 170.00 7% Hold 11 -4 5 1 -11 6.7 10 10.8x 10.7x 8.9x 2.2x 1.9x 1.7x 2.8% 3.6% 4.4% 21.8% 19.2% 20.2%Thanachart Capital Dec 1,324 34.00 32.00 -6% Hold 5 -2 6 4 -26 2.4 44 12.5x 7.5x 6.0x 0.9x 0.8x 0.8x 4.1% 4.4% 4.7% 13.6% 11.7% 13.4%Tisco Financial Group Dec 958 39.25 39.00 -1% Hold 2 -1 -1 -1 -23 1.6 13 7.4x 7.6x 5.8x 1.4x 1.3x 1.1x 5.1% 5.9% 6.9% 20.6% 17.2% 20.2%Thai Military Bank Dec 3,061 2.30 2.39 4% Hold 12 -16 -16 23 55 122.9 29 17.5x 12.4x 10.6x 1.6x 1.5x 1.3x 1.4% 2.0% 2.4% 9.9% 12.4% 13.1%Kiatnakin* Dec 1,195 42.75 NA NA NA 18 2 11 9 -27 1.4 4 8.1x 9.0x 7.5x 1.0x 1.0x 0.9x 6.2% 5.8% 6.6% 13.0% 10.9% 12.5%


PhilippinesBank of Philippine Islands Dec 7,574 84.50 105.00 24% Buy 1 -7 -6 -6 -13 2.0 5 16.3x 15.4x 14.7x 2.9x 2.6x 2.3x 1.0% 1.1% 1.2% 18.7% 18.1% 16.8%Metropolitan Bank & Trust Dec 5,228 83.50 95.00 14% Buy 11 -1 2 6 -12 4.3 -6 10.2x 12.4x 11.5x 1.7x 1.5x 1.4x 1.4% 1.1% 1.2% 17.8% 12.9% 12.5%BDO Unibank Dec 7,221 88.40 96.00 9% Buy 29 0 5 13 -2 4.0 3 14.0x 14.0x 13.2x 2.0x 1.8x 1.6x 2.4% 2.4% 1.7% 14.7% 13.6% 13.1%Philippine National Bank Dec 2,337 91.50 87.00 -5% Hold 23 5 6 11 -4 0.5 10 15.7x 15.7x 13.0x 1.2x 1.2x 1.1x 0.0% 0.0% 0.0% 8.6% 7.8% 9.0%Rizal Commercial Bank Dec 1,612 55.40 68.00 23% Buy 30 15 23 28 -11 0.5 11 11.4x 11.4x 9.2x 1.6x 1.4x 1.3x 2.4% 2.2% 2.7% 13.5% 13.2% 14.6%Security Banking Corp* Dec 1,704 123.80 NA NA NA 9 4 7 9 -13 0.8 17 14.9x 12.7x 10.9x 1.8x 1.6x 1.4x 0.8% 1.5% 1.6% 12.9% 13.2% 13.3%Union Bank of Philippines* Dec 1,783 121.80 NA NA NA -3 -3 -5 -2 -18 0.1 -2 8.7x 9.8x 8.9x 1.7x 1.5x 1.3x 3.6% 3.1% 3.2% 19.6% 18.7% 17.4%China Banking Corp* Dec 1,986 54.75 NA NA NA -5 -2 -4 -7 -17 0.3 17 15.6x 12.9x 11.5x 1.5x 1.5x 1.4x 3.0% 3.0% 3.3% 12.4% 12.4% 12.6%East West Banking Corp* Dec 786 30.50 NA NA NA 27 0 9 22 -12 0.4 32 16.8x 13.4x 9.7x 1.8x 1.6x 1.4x 0.0% 0.3% 0.8% 11.2% 12.4% 15.1%

Weighted average 5 13.3x 13.0x 11.9x 1.9x 1.8x 1.6x 1.5% 1.5% 1.5% 14.8% 13.5% 13.2%Simple average 10 13.8x 13.0x 11.3x 1.8x 1.6x 1.5x 1.6% 1.7% 1.8% 14.2% 13.4% 13.7%Weighted average (ex-BPI) 6 13.1x 13.0x 11.6x 1.7x 1.6x 1.4x 1.8% 1.8% 1.7% 14.5% 13.0% 13.0%Simple average (ex-BPI) 11 13.5x 12.7x 10.9x 1.7x 1.5x 1.4x 1.7% 1.7% 1.9% 13.7% 12.9% 13.4%

Weighted Average (ASEAN) 10 13.0x 12.1x 10.7x 2.1x 1.8x 1.6x 2.6% 2.9% 3.1% 16.9% 16.0% 16.1%Simple Average (ASEAN) 12 12.2x 11.1x 9.7x 1.7x 1.6x 1.4x 2.8% 2.9% 3.2% 15.2% 14.6% 15.0%

Dividend Yield(%)Performance (%)

ROE(%)

Share Price

* Based on Bloomberg consensus Note: Share price performance excludes adjustments for dividends Share prices as at 30 May 2014 Source: Bloomberg Finance L.P., Company data, AllianceDBS, DBS Vickers

Industry Focus

Indonesian Banks

Page 13

INDONESIAN BANKS: STOCK PROFILES

Page 14

www.dbsvickers.com Refer to important disclosures at the end of this report ed: TH / sa: MA

Bloomberg: BBCA IJ | Reuters: BBCA.JK

HOLD Rp10,775 JCI : 4,893.91

Price Target : 12-Month Rp 11,100 (Prev Rp 10,100) Potential Catalyst: Strong CASA franchise ADBS vs Consensus: Above consensus


Indonesian Research Team +6221 3003 4900

Price Relative

7 4

9 4

1 1 4

1 3 4

1 5 4

1 7 4

1 9 4

2 1 4

4 , 7 7 0 . 0

5 , 7 7 0 . 0

6 , 7 7 0 . 0

7 , 7 7 0 . 0

8 , 7 7 0 . 0

9 , 7 7 0 . 0

1 0 , 7 7 0 . 0

1 1 , 7 7 0 . 0

M a y - 1 0 M a y - 1 1 M a y - 1 2 M a y - 1 3 M a y - 1 4

R e l a t i v e I n d e xR p

B a n k C e n t r a l A s ia ( L H S ) R e la t iv e J C I IN D E X ( R H S )

Forecasts and Valuation

FY Dec (Rp bn) 2013A 2014F 2015F 2016F

Pre-prov. Profit 19,094 20,025 23,214 27,527 Net Profit 14,256 16,234 18,802 22,290 Net Pft (Pre Ex.) 14,256 16,234 18,802 22,290 EPS (Rp) 578 658 762 904 EPS Pre Ex. (Rp) 578 658 762 904 EPS Gth (%) 22 14 16 19 EPS Gth Pre Ex (%) 22 14 16 19 Diluted EPS (Rp) 578 658 762 904 PE Pre Ex. (X) 18.6 16.4 14.1 11.9 Net DPS (Rp) 116 173 197 229 Div Yield (%) 1.1 1.6 1.8 2.1 ROAE Pre Ex. (%) 24.6 23.3 22.8 22.8 ROAE (%) 24.6 23.3 22.8 22.8 ROA (%) 3.0 3.0 3.0 3.1 BV Per Share (Rp) 2,589 3,055 3,620 4,295 P/Book Value (x) 4.2 3.5 3.0 2.5

Earnings Rev (%): 4 5 nm Consensus EPS (Rp): 653 754 876 Other Broker Recs: B: 14 S: 3 H: 17

ICB Industry : Financials ICB Sector: Banks Principal Business: Bank Central Asia (BBCA) is Indonesia's premium transactional bank given its legacy with the Salim group pre-Asian crisis. BBCA has successfully leveraged on ithis strength to deliver sustainable earnings growth. Source of all data: Company, AllianceDBS, DBS Vickers, Bloomberg Finance L.P

At A Glance

Issued Capital (m shrs) 24,655 Mkt. Cap (Rpbn/US$m) 265,658 / 22,754 Major Shareholders Farindo Invest Ltd (%) 51.2 Free Float (%) 48.8 Avg. Daily Vol.(‘000) 16,771

Industry Focus

Bank Central Asia

Still the king of CASA

Mortgage not impacted by housing regulations

CASA remains stable; maintain low NPL

Slower growth in 2014; may increase rates

Maintain HOLD; upgrade TP to Rp11,100

Mortgage not impacted by housing regulations. BBCA’s loan grew 20% in 1Q14, driven by corporate loans and mortgages. Its mortgages are mainly focused on the middle-upper market (houses priced over Rp1bn) and the bank is not impacted by LTV regulations as it had all along been requiring a 30% down payment. BBCA has an 18-20% market share in mortgage.

Stable CASA; superior asset quality. CASA remains stable and management states that CASA growth in FY14 would not be as strong as in previous years, but CASA rates will undergo some adjustments. CASA stood at 78% of total deposits as at 1Q14. NPL also remains low at 0.5% since most SME loans are collateralised, as high as 120% of total loans. In our view, there’s still potential for an immediate repricing of commercial and SME loans in FY14.

Slower growth in 2014. BBCA expects FY14 loan growth to be 13-15%, mostly driven by corporate loans while it expects a single-digit growth for mortgage. The bank also plans to follow its competitors and increase its deposit rates due to tighter competition. NPL is expected to increase slightly due to a tighter macro landscape. Provisions will fall (from Rp2tr in FY13). NIM is expected to be stable or slightly improve due to the repricing of loans.

Maintain HOLD; upgrade TP to Rp11,100. Our Gordon Growth Model assumptions are: 23.7% ROE, 14.9% cost of equity and 10.5% growth. We believe BBCA will hold up better than its peers in an uncertain environment, but is still a HOLD as its valuations are too pricey to justify a Buy. That said, we would advocate buying the stock on weakness.

Industry Focus

Bank Central Asia

Page 15

Income Statement (Rp bn) Balance Sheet (Rp bn)

FY Dec 2013A 2014F 2015F 2016F FY Dec 2013A 2014F 2015F 2016F

Net Interest Income 26,425 28,698 32,889 38,642 Cash/Bank Balance 63,484 86,251 102,104 121,228 Non-Interest Income 7,301 7,770 9,396 11,028 Government Securities 75,922 77,160 88,409 101,697 Operating Income 33,726 36,468 42,285 49,670 Inter Bank Assets 3,770 3,959 4,157 4,365 Operating Expenses (14,631) (16,443) (19,071) (22,143) Total Net Loans & Advs. 306,679 352,665 416,302 491,393 Pre-provision Profit 19,094 20,025 23,214 27,527 Investment 14,754 16,469 18,356 20,431 Provisions (2,016) (539) (635) (750) Associates 0 0 0 0 Associates 0 0 0 0 Fixed Assets 7,440 7,041 6,626 6,195 Exceptionals 0 0 0 0 Goodwill 0 0 0 0 Pre-tax Profit 17,816 20,287 23,496 27,855 Other Assets 24,254 25,489 29,422 33,040 Taxation (3,559) (4,053) (4,694) (5,565) Total Assets 496,305 569,035 665,375 778,349 Minority Interests 0 0 0 0 Customer Deposits 409,486 470,909 552,685 648,733 Preference Dividend 0 0 0 0 Inter Bank Deposits 3,301 2,932 3,117 3,024 Net Profit 14,256 16,234 18,802 22,290 Debts/Borrowings 3,634 3,972 4,343 4,750 Net Profit bef Except 14,256 16,234 18,802 22,290 Others 15,917 15,763 15,840 15,802 Minorities 101 101 101 101 Shareholders' Funds 63,866 75,358 89,290 105,939 Total Liab& S/H’s Funds 496,305 569,035 665,375 778,349 Profitability & Efficiency Ratios (%) Financial Stability Measures (%)


Margins, Costs & Efficiency Balance Sheet Structure Yld. On Earnings Assets 9.01 8.95 8.96 8.97 Loan-to-Deposit Ratio 76.3 76.2 76.6 77.0 Avg Cost Of Funds 2.00 2.33 2.31 2.28 Net Loans / Total Assets 61.8 62.0 62.6 63.1 Spread 7.01 6.62 6.65 6.69 Investment / Total Assets 3.0 2.9 2.8 2.6 Net Interest Margin 6.94 6.58 6.58 6.61 Cust . Dep./Int. Bear. Liab. 99.1 99.2 99.2 99.3 Cost-to-Income Ratio 43.4 45.1 45.1 44.6 Interbank Dep / Int. Bear. 0.8 0.6 0.6 0.5 Employees ( Year End) 0 0 0 0 Asset Quality Effective Tax Rate 20.0 20.0 20.0 20.0 NPL / Total Gross Loans 0.4 0.5 0.5 0.5 Business Mix NPL / Total Assets 0.3 0.3 0.3 0.3 Net Int. Inc / Opg Inc. 78.4 78.7 77.8 77.8 Loan Loss Reserve Coverage 408.8 356.3 345.0 335.3 Non-Int. Inc / Opg inc. 21.6 21.3 22.2 22.2 Provision Charge-Off Rate 0.6 0.2 0.2 0.2 Fee Inc / Opg Income 18.7 19.4 19.6 19.6 Capital Strength Oth Non-Int Inc/Opg Inc 2.9 1.9 2.6 2.6 Total CAR 16.4 16.9 16.7 16.7 Profitability Tier-1 CAR 15.2 15.6 15.5 15.5 ROAE Pre Ex. 24.6 23.3 22.8 22.8 Growth ROAE 24.6 23.3 22.8 22.8 Total Net Loans 21 15 18 18 ROA Pre Ex. 3.0 3.0 3.0 3.1 Customer Deposits 11 15 17 17 ROA 3.0 3.0 3.0 3.1 Quarterly / Interim Income Statement (Rpbn) Rolling forward PB band

FY Dec 2Q2013 3Q2013 4Q2013 1Q2014

Average

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03 04 05 06 07 08 09 10 11 12 13 14

(x)

Net Interest Income 6,258 6,818 7,334 7,629 Non-Interest Income 1,793 1,952 1,912 2,120 Operating Income 8,051 8,771 9,246 9,749 Operating Expenses (3,506) (3,445) (3,953) (4,693) Pre-Provision Profit 4,545 5,326 5,293 5,056 Provisions (362) (701) (561) (342) Associates 0 0 0 0 Exceptionals 0 0 0 0 Pretax Profit 4,300 5,020 4,871 4,629 Taxation (870) (983) (978) (958) Minority Interests (1) 1 5 (7) Net Profit 3,429 4,039 3,898 3,664 Source: Company, AllianceDBS, DBS Vickers

Page 16


Bloomberg: BDMN IJ | Reuters: BDMN.JK

HOLD JCI : 4,893.91 Price Target : N/A Potential Catalyst: N/A ADBS vs Consensus: N/A Analyst LIM Sue Lin +603 2604 3969 [email protected] Indonesian Research Team +6221 3003 4900

Price Relative

4 3

6 3

8 3

1 0 3

1 2 3

1 4 3

1 6 3

1 8 3

2 0 3

3 , 1 9 5 . 0

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4 , 1 9 5 . 0

4 , 6 9 5 . 0

5 , 1 9 5 . 0

5 , 6 9 5 . 0

6 , 1 9 5 . 0

6 , 6 9 5 . 0

7 , 1 9 5 . 0



B a n k D a n a m o n ( L H S ) R e la t iv e J C I IN D E X ( R H S ) Forecasts and Valuation FY Dec (Rp bn) 2010A 2011A 2012A 2013F


Other Broker Recs: B: 2 S: 11 H: 14 ICB Industry : Financials ICB Sector: Banks Principal Business: Banking

Source of all data: Company, AllianceDBS, DBS Vickers, Bloomberg Finance L.P

At A Glance Issued Capital (m shrs) 9,585 Mkt. Cap (Rpbn/US$m) 39,872 / 3,415 Major Shareholders Asia Finance (%) 68.9 Morgan Stanly Sec (%) 5.0 Free Float (%) 26.1 Avg. Daily Vol.(‘000) 3,963

Industry Focus

Bank Danamon

Increasing liquidity

Liquidity improves on strong deposits and sluggish loans amidst soft quarter

Shift to deposits increases cost of funds to 6.8%

Stable guidance of 15-17% loan growth and 8.6% NIM; dividend payout kept at 30%

A sharp reduction in loan-to-deposit ratio. Loan-to-deposit ratio was reduced from 103.5% to 94.1% y-o-y in order to cope with the tighter liquidity and macro environment. This is a result of strong deposit growth (+26% y-o-y), coupled with sluggish loan growth (+16% y-o-y) in a soft quarter for most banks. Loan growth was mainly driven by non-mass market loans (+27% y-o-y) which includes SMEs and commercial business. BDMN’s staple mass market grew by 6% y-o-y mainly due to joint financing with its multifinance subsidiary Adira. Meanwhile, its loan yield increased 40-70bps y-o-y. Cost of funds’ increase of +60bps y-o-y to 6.8% was mainly contributed by the shifting from CASA to time deposits, as time deposits grew +38% y-o-y and its composition increased to 58% of total deposits (from 53% in the previous year). This reflects the bank’s efforts to reduce LDR and increase liquidity. Going forward, BDMN is likely to recapture CASA by leveraging on Adira consumers with its pilot cross-selling project to be expanded to all Adira branches by the end of 2014. NPL decreased by 60bps y-o-y to 1.9% while micro NPL (1Q14: 5.7% contributed mainly from outside Java) remains the biggest concern. Stable guidance. Loan growth is expected to follow BI’s guidance at 15-17% and NIM is expected to stay stable throughout the year at 8.6%. LDR will be maintained at current levels. BDMN has kept its dividend payout at 30% and this will not hurt capital (1Q14 CAR: 18.4%).

Industry Focus

Bank Danamon

Page 17


FY Dec 2010A 2011A 2012A 2013F FY Dec 2010A 2011A 2012A 2013F

Net Interest Income 9,908 10,849 12,922 13,531 Cash/Bank Balance 8,919 11,475 13,072 21,182 Non-Interest Income 3,957 4,666 5,113 5,643 Government Securities 6,138 3,947 4,846 5,598 Operating Income 13,865 15,515 18,035 19,174 Inter Bank Assets 9,257 13,232 6,361 3,758 Operating Expenses (7,308) (8,097) (9,320) (10,221) Total Net Loans & Advs. 73,268 85,463 90,828 103,468 Pre-provision Profit 6,557 7,418 8,715 8,953 Investment 5,336 4,832 7,319 7,739 Provisions (2,134) (2,183) (2,532) (3,348) Associates 0 0 0 0 Associates 0 0 0 0 Fixed Assets 1,771 1,899 2,096 2,199 Exceptionals 0 0 0 0 Goodwill 1,576 1,507 1,440 1,378 Pre-tax Profit 4,002 4,612 5,487 5,530 Other Assets 11,940 19,580 29,830 38,914 Taxation (1,018) (1,163) (1,370) (1,371) Total Assets 118,207 141,934 155,791 184,237 Minority Interests (100) (113) (105) (118) Customer Deposits 79,643 85,978 89,898 109,161 Preference Dividend 0 0 0 0 Inter Bank Deposits 1,937 2,814 2,824 1,695 Net Profit 2,883 3,336 4,012 4,042 Debts/Borrowings 9,282 18,195 23,368 28,190 Net Profit bef Except 2,883 3,336 4,012 4,042 Others 8,735 9,111 10,968 13,638 Minorities 159 207 240 302 Shareholders' Funds 18,450 25,630 28,494 31,251 Total Liab& S/H’s Funds 118,207 141,934 155,791 184,237 Profitability & Efficiency Ratios (%) Financial Stability Measures (%)

FY Dec 2010A 2011A 2012A 2013F FY Dec 2010A 2011A 2012A 2013F


FY Dec 2Q2013 3Q2013 4Q2013 1Q2014

Average

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03 04 05 06 07 08 09 10 11 12 13 14

(x) Net Interest Income 3,349 3,766 3,569 3,555 Non-Interest Income 1,253 1,504 1,276 1,136 Operating Income 4,602 5,270 4,844 4,691 Operating Expenses (2,392) (2,903) (2,619) (2,615) Pre-Provision Profit 2,211 2,367 2,226 2,076 Provisions (828) (957) (793) (870) Associates 0 0 0 0 Exceptionals 0 0 0 0 Pretax Profit 1,345 1,403 1,412 1,200 Taxation (336) (349) (344) (296) Minority Interests (29) (32) (33) (29) Net Profit 980 1,022 1,035 875 Source: Company, AllianceDBS, DBS Vickers,

Page 18


Bloomberg: BMRI IJ | Reuters: BMRI.JK

HOLD Rp10,375 JCI : 4,973.06 Price Target : 12-Month Rp 10,600 (Prev Rp 9,100) Potential Catalyst: Ability to contain liquidity tightness ADBS vs Consensus: Below consensus Analyst LIM Sue Lin +603 2604 3969 [email protected] Indonesian Research Team +6221 3003 4900

Price Relative

7 6

9 6

1 1 6

1 3 6

1 5 6

1 7 6

1 9 6

2 1 6

4 , 4 6 9 . 1

5 , 4 6 9 . 1

6 , 4 6 9 . 1

7 , 4 6 9 . 1

8 , 4 6 9 . 1

9 , 4 6 9 . 1

1 0 , 4 6 9 . 1

1 1 , 4 6 9 . 1



B a n k M a n d i r i ( L H S ) R e la t iv e J C I IN D E X ( R H S ) Forecasts and Valuation FY Dec (Rp bn) 2013A 2014F 2015F 2016F

Pre-prov. Profit 28,408 30,319 35,709 41,839 Net Profit 18,204 19,086 22,749 26,635 Net Pft (Pre Ex.) 18,204 19,086 22,749 26,635 EPS (Rp) 780 818 975 1,142 EPS Pre Ex. (Rp) 780 818 975 1,142 EPS Gth (%) 17 5 19 17 EPS Gth Pre Ex (%) 17 5 19 17 Diluted EPS (Rp) 780 818 975 1,142 PE Pre Ex. (X) 13.3 12.7 10.6 9.1 Net DPS (Rp) 233 273 286 341 Div Yield (%) 2.2 2.6 2.8 3.3 ROAE Pre Ex. (%) 22.5 20.6 21.6 21.7 ROAE (%) 22.5 20.6 21.6 21.7 ROA (%) 2.8 2.5 2.6 2.7 BV Per Share (Rp) 3,747 4,177 4,866 5,666 P/Book Value (x) 2.8 2.5 2.1 1.8

Earnings Rev (%): 4 2 nm Consensus EPS (Rp): 853 988 1,137 Other Broker Recs: B: 20 S: 1 H: 12 ICB Industry : Financials ICB Sector: Banks Principal Business: Bank Mandiri (BMRI) is Indonesia's largest bank by assets. Currently 60% owned by the Government of Indonesia, BMRI has been undergoing a transformation process since 2003 and has delivered a clear success story, positioning itself to what it is today. Source of all data: Company, AllianceDBS,DBS Vickers, Bloomberg Finance L.P

At A Glance Issued Capital (m shrs) 23,333 Mkt. Cap (Rpbn/US$m) 242,083 / 20,842 Major Shareholders Govt. of Indonesia (%) 60.0 Free Float (%) 40.0 Avg. Daily Vol.(‘000) 32,386

Industry Focus

Bank Mandiri

Challenges ahead

Slower growth ahead; challenges for NIM, asset quality and liquidity

Infrastructure loans deemed undependable; M&A prospects delayed

Maintain HOLD; Raised TP to Rp10,600

Guiding for slower growth. BMRI’s 1Q14 loan growth (+21% y-o-y) remains strong though the bank expects loan growth to slow down to 16-18% towards the end of the year with credit cost floating in the 1.2-1.3% range. Loan yields have increased by 100bps to 11.8% since the rate hikes and cost of funds increased by 35bps to 3.15%. BMRI’s Rp73tr recap bonds will likely be the wildcard which could swing NIM down; as for 1Q14, gains in bonds aided BMRI’s asset yields. LDR (1Q14: 89%) is expected to ease by year end. Asset quality remains an issue as special mention (Cat.2.) loans have been on an uptrend. Infrastructure loans undependable. Even though Jokowi is favourite to win the presidential election and sentiments on infrastructure projects remain positive, BMRI views that potential infrastructure financing remains difficult to gauge as major infrastructure projects are financed by government and/or foreign investors. Potential M&A likely to be delayed. Any potential M&A is likely to be delayed as a change in shareholding was not discussed in both BMRI’s and BBTN’s EGM. Instead, the EGM finalised the acquisition of InHealth which should bring additional fee income via cash management and transaction banking. Maintain HOLD, raised TP to Rp10,600. Our TP is derived from the Gordon Growth Model (22% ROE, 10.5% growth and 15.8% cost of equity), implying 2.2x FY14F BV. We believe its positives are largely priced in and would wait for a better entry price.

Industry Focus

Bank Mandiri

Page 19



Net Interest Income 35,403 37,362 42,686 49,373 Cash/Bank Balance 95,789 102,600 120,530 136,883 Non-Interest Income 14,467 17,155 20,349 23,704 Government Securities 85,965 91,339 89,989 88,639 Operating Income 49,870 54,517 63,035 73,077 Inter Bank Assets 26,318 31,626 37,951 45,541 Operating Expenses (21,462) (24,198) (27,326) (31,238) Total Net Loans & Advs. 450,635 530,020 623,861 734,476 Pre-provision Profit 28,408 30,319 35,709 41,839 Investment 26,807 32,066 37,176 43,302 Provisions (4,856) (6,211) (7,028) (8,315) Associates 0 0 0 0 Associates 0 0 0 0 Fixed Assets 7,646 7,437 7,437 7,437 Exceptionals 0 0 0 0 Goodwill 0 0 0 0 Pre-tax Profit 24,062 24,647 29,297 34,235 Other Assets 39,940 41,953 42,404 42,599 Taxation (5,232) (4,871) (5,790) (6,767) Total Assets 733,100 837,041 959,348 1,098,876 Minority Interests (626) (689) (758) (833) Customer Deposits 556,342 650,535 756,768 881,037 Preference Dividend 0 0 0 0 Inter Bank Deposits 12,672 13,496 13,084 13,290 Net Profit 18,204 19,086 22,749 26,635 Debts/Borrowings 22,242 25,173 22,460 19,194 Net Profit bef Except 18,204 19,086 22,749 26,635 Others 53,054 48,306 50,680 49,493 Minorities 1,371 2,060 2,818 3,651 Shareholders' Funds 87,419 97,470 113,538 132,211 Total Liab& S/H’s Funds 733,100 837,041 959,348 1,098,876 Profitability & Efficiency Ratios (%) Financial Stability Measures (%)



FY Dec 2Q2013 3Q2013 4Q2013 1Q2014

Average

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03 04 05 06 07 08 09 10 11 12 13

(x) Net Interest Income 7,682 8,281 9,359 8,980 Non-Interest Income 3,964 4,505 4,780 4,111 Operating Income 11,645 12,786 14,139 13,091 Operating Expenses (5,067) (5,483) (6,309) (5,411) Pre-Provision Profit 6,578 7,303 7,830 7,680 Provisions (1,422) (1,494) (851) (1,217) Associates 0 0 0 0 Exceptionals 0 0 0 0 Pretax Profit 5,226 5,874 7,312 6,459 Taxation (1,398) (896) (2,380) (1,336) Minority Interests 163 (468) 468 (198) Net Profit 3,991 4,509 5,401 4,925 Source: Company, AllianceDBS, DBS Vickers,

Page 20


Bloomberg: BBNI IJ | Reuters: BBNI.JK

BUY Rp4,775 JCI : 4,893.91 (Upgrade from HOLD) Price Target : 12-Month Rp 5,800 (Prev Rp 4,200) Potential Catalyst: Ability to lift earnings from fee income initiatives ADBS vs Consensus: Above consensus for FY14F Analyst LIM Sue Lin +603 2604 3969 [email protected] Indonesian Research Team +6221 3003 4900

Price Relative

8 0

1 0 0

1 2 0

1 4 0

1 6 0

1 8 0

2 0 0

2 2 0

1 , 9 6 2 . 4

2 , 4 6 2 . 4

2 , 9 6 2 . 4

3 , 4 6 2 . 4

3 , 9 6 2 . 4

4 , 4 6 2 . 4

4 , 9 6 2 . 4

5 , 4 6 2 . 4

5 , 9 6 2 . 4



B a n k N e g a r a I n d o n e s ia ( L H S ) R e l a t i v e J C I IN D E X ( R H S ) Forecasts and Valuation FY Dec (Rp bn) 2013A 2014F 2015F 2016F


Earnings Rev (%): 7 8 nm Consensus EPS (Rp): 517 594 677 Other Broker Recs: B: 17 S: 2 H: 12 ICB Industry : Financials ICB Sector: Banks Principal Business: Bank Negara Indonesia (BBNI) is a state-owned bank that conducts commercial and consumer banking services. BBNI ranks fourth in the Indonesian banking sector based on assets, lending and third party deposits. Source of all data: Company, AllianceDBS, DBS Vickers, Bloomberg Finance L.P

At A Glance Issued Capital (m shrs) 18,649 Mkt. Cap (Rpbn/US$m) 89,047 / 7,627 Major Shareholders Republic of Indonesia (%) 60.0 Free Float (%) 40.0 Avg. Daily Vol.(‘000) 30,068

Industry Focus

Bank Negara Indonesia

Fee income catalyst

Leveraging on fee income as its next leap

Positive growth for Syariah unit

Slow outlook in 2014; asset quality threatened

Upgrade to BUY; raised TP to Rp5,800

Leveraging on fee-based income. BBNI has room to expand its fee income by increasing debit cards and raising ATM transactions and account maintenance fees to at least be on par with peers. Tapping suppliers of current SME clients to further increase the share of the wallet is another strategy. In addition, the bank’s tie-up with Sumitomo Life should further increase its bancassurance income. Imputing better fee income prospects, we raise FY14-15F earnings by 7-8%. Enhancing Syariah operations. BBNI transferred Rp908bn from its Hajj funds to BNI Syariah; this is the first phase of funding plan from BBNI to its Syariah unit that will amount to Rp2.1tr by May 2014. It is no secret that BNI Syariah is seeking a strategic partnership with foreign investors to reposition its business. Syariah banking in BNI mostly focuses on micro loans in third-tier cities and it is expected to grow by 30% this year. Soft 2014 but fee income should lift sentiments in 2015. Management has guided for loan growth to be close to industry growth of 14-17%. CASA is expected to pick up this year and NIM to stay at c.6%. Coverage ratio is expected to be stable at 127-130% as FY14 provision is estimated at Rp2.5-2.7tr. Improvements in NPL will depend on the micro segments. Recoveries are expected to taper off to Rp1-1.5tr (FY13: 2.4tr). Upgrade to BUY; raised TP to Rp5,800. We are rolling over our valuation base to FY15 BV, hence raising our TP to Rp5,800. Our TP is based on the Gordon Growth Model and assumes 19% ROE, 10% growth and 15.5% cost of equity. Improvement in non-interest income arising from its insurance tie-up as well as fee based income strategy will be the bank’s next catalyst.

Industry Focus

Bank Negara Indonesia

Page 21



Net Interest Income 19,058 20,967 23,527 26,712 Cash/Bank Balance 37,321 43,957 53,256 62,499 Non-Interest Income 7,303 9,144 10,725 12,593 Government Securities 43,329 43,655 44,064 44,562 Operating Income 26,361 30,111 34,253 39,306 Inter Bank Assets 23,473 24,646 25,878 27,172 Operating Expenses (14,573) (15,740) (17,796) (20,255) Total Net Loans & Advs. 243,758 282,187 327,983 381,133 Pre-provision Profit 11,789 14,371 16,457 19,051 Investment 12,005 13,114 14,358 15,726 Provisions (570) (1,571) (1,712) (2,345) Associates 0 0 0 0 Associates 0 0 0 0 Fixed Assets 5,514 5,584 5,625 5,637 Exceptionals 0 0 0 0 Goodwill 0 0 0 0 Pre-tax Profit 11,278 12,865 14,819 16,789 Other Assets 21,256 22,581 24,561 26,621 Taxation (2,220) (2,573) (2,964) (3,358) Total Assets 386,655 435,724 495,726 563,351 Minority Interests (4) (4) (5) (6) Customer Deposits 291,890 335,674 386,025 443,929 Preference Dividend 0 0 0 0 Inter Bank Deposits 3,185 3,215 3,200 3,208 Net Profit 9,054 10,288 11,850 13,425 Debts/Borrowings 24,987 24,727 24,756 25,028 Net Profit bef Except 9,054 10,288 11,850 13,425 Others 18,909 16,848 17,717 17,282 Minorities 83 88 93 99 Shareholders' Funds 47,600 55,172 63,935 73,805 Total Liab& S/H’s Funds 386,655 435,724 495,726 563,351 Profitability & Efficiency Ratios (%) Financial Stability Measures (%)


Margins, Costs & Efficiency Balance Sheet Structure Yld. On Earnings Assets 8.52 8.54 8.50 8.52 Loan-to-Deposit Ratio 85.9 86.6 87.4 88.1 Avg Cost Of Funds 2.51 2.77 2.75 2.74 Net Loans / Total Assets 63.0 64.8 66.2 67.7 Spread 6.00 5.78 5.75 5.78 Investment / Total Assets 3.1 3.0 2.9 2.8 Net Interest Margin 6.14 5.91 5.86 5.87 Cust . Dep./Int. Bear. Liab. 92.1 93.1 94.0 94.7 Cost-to-Income Ratio 55.3 52.3 52.0 51.5 Interbank Dep / Int. Bear. 1.0 0.9 0.8 0.7 Employees ( Year End) 17,000 17,000 17,000 17,000 Asset Quality Effective Tax Rate 19.7 20.0 20.0 20.0 NPL / Total Gross Loans 2.2 2.3 2.2 2.2 Business Mix NPL / Total Assets 1.4 1.5 1.5 1.5 Net Int. Inc / Opg Inc. 72.3 69.6 68.7 68.0 Loan Loss Reserve Coverage 126.9 127.9 125.0 117.2 Non-Int. Inc / Opg inc. 27.7 30.4 31.3 32.0 Provision Charge-Off Rate 0.2 0.5 0.5 0.6 Fee Inc / Opg Income 15.2 15.6 16.9 18.1 Capital Strength Oth Non-Int Inc/Opg Inc 12.5 14.8 14.4 14.0 Total CAR 16.7 16.3 16.0 15.7 Profitability Tier-1 CAR 15.5 15.1 14.8 14.6 ROAE Pre Ex. 19.9 20.0 19.9 19.5 Growth ROAE 19.9 20.0 19.9 19.5 Total Net Loans 26 16 16 16 ROA Pre Ex. 2.5 2.5 2.5 2.5 Customer Deposits 13 15 15 15 ROA 2.5 2.5 2.5 2.5 Quarterly / Interim Income Statement (Rpbn) Rolling forward PB band

FY Dec 2Q2013 3Q2013 4Q2013 1Q2014

Average

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(x) Net Interest Income 4,605 4,925 5,237 5,290 Non-Interest Income 2,317 2,591 2,295 2,368 Operating Income 6,922 7,516 7,532 7,658 Operating Expenses (3,352) (3,630) (4,338) (3,447) Pre-Provision Profit 3,570 3,886 3,194 4,211 Provisions (865) (805) (261) (1,233) Associates 0 0 0 0 Exceptionals 0 0 0 0 Pretax Profit 2,750 2,804 3,165 3,012 Taxation (539) (548) (643) (618) Minority Interests (1) 2 0 0 Net Profit 2,209 2,258 2,522 2,394 Source: Company, AllianceDBS, DBS Vickers

Page 22


Bloomberg: BBRI IJ | Reuters: BBRI.JK

HOLD Rp10,200 JCI : 4,893.91 Price Target : 12-Month Rp 11,600 (Prev Rp 9,400) Potential Catalyst: Continued focused growth in micro ADBS vs Consensus: Slightly below for FY14F but above for FY15F Analyst LIM Sue Lin +603 2604 3969 [email protected] Indonesian Research Team +6221 3003 4900

Price Relative

7 8

9 8

1 1 8

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1 9 8

2 1 8

3 , 7 5 7 . 5

4 , 7 5 7 . 5

5 , 7 5 7 . 5

6 , 7 5 7 . 5

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8 , 7 5 7 . 5

9 , 7 5 7 . 5

1 0 , 7 5 7 . 5

1 1 , 7 5 7 . 5



B a n k R a k y a t In d o n e s ia ( L H S ) R e la t iv e J C I IN D E X ( R H S ) Forecasts and Valuation FY Dec (Rp bn) 2013A 2014F 2015F 2016F

Pre-prov. Profit 30,074 33,637 40,247 49,331 Net Profit 21,344 23,599 28,202 34,563 Net Pft (Pre Ex.) 21,344 23,599 28,202 34,563 EPS (Rp) 865 957 1,143 1,401 EPS Pre Ex. (Rp) 865 957 1,143 1,401 EPS Gth (%) 14 11 20 23 EPS Gth Pre Ex (%) 14 11 20 23 Diluted EPS (Rp) 865 957 1,143 1,401 PE Pre Ex. (X) 11.8 10.7 8.9 7.3 Net DPS (Rp) 173 191 229 280 Div Yield (%) 1.7 1.9 2.2 2.7 ROAE Pre Ex. (%) 29.7 26.4 25.3 25.1 ROAE (%) 29.7 26.4 25.3 25.1 ROA (%) 3.6 3.5 3.5 3.5 BV Per Share (Rp) 3,209 4,041 4,993 6,166 P/Book Value (x) 3.2 2.5 2.0 1.7

Earnings Rev (%): 2 2 nm Consensus EPS (Rp): 965 1,088 1,251 Other Broker Recs: B: 28 S: 1 H: 7 ICB Industry : Financials ICB Sector: Banks Principal Business: Bank Rakyat Indonesia (BBRI) specialises in small-scale and microfinance lending mainly to retail clients largely in the rural areas. It also has a comparatively small but growing corporate business. It is currently 59% government owned Source of all data: Company, AllianceDBS, DBS Vickers, Bloomberg Finance L.P

At A Glance Issued Capital (m shrs) 24,669 Mkt. Cap (Rpbn/US$m) 251,625 / 21,552 Major Shareholders Govt of Indonesia (%) 59.0 Free Float (%) 41.0 Avg. Daily Vol.(‘000) 35,103

Industry Focus

Bank Rakyat Indonesia

Still growing through micro

Utilising micro for both loan and funding

Micro-driven loans; inorganic growth possibility via an acquisition

Maintain HOLD; raised TP to Rp11,600

Utilising micro for both loan and funding. BBRI focuses on micro loans under Rp100m with an average yield of 20% and it has 43% market share in this segment. Micro also drives funding since opening an account with the bank is a requirement in order to obtain loans. Micro loans are also driven by growth in KUR, as KUR borrowers typically migrate to become micro borrowers once their businesses expand and when they meet the requirements to qualify for micro loans. Micro will continue to drive growth as loan growth is expected to be 18-20% this year, with micro expected to be driven by the elections and grow by 24%. BBRI is also aiming to reach distant and rural areas where no banking services are available as it is a potentially large untapped market. Hence, the initiation of Teras Kapal (mobile ship branch) to cater mostly for the East Indonesia area to complement its existing micro business. NPL will slightly increase to 2.0-2.2%, mostly from SME loans, while NIM is expected to stay flat. This year, BBRI is still open for inorganic growth opportunities as it may acquire another bank, insurer or securities company. Maintain HOLD; raised TP to Rp11,600. We are rolling over our valuation base to FY15, hence raising our TP to Rp11,600. Our TP is based on the Gordon Growth Model and assumes 25% ROE, 10% growth and 16.8% cost to equity. Our FY14-15F earnings were marginally lifted on the back on our previous conservative assumption on NIM. BBRI has been a strong performer in the banking sector. Its earnings remain resilient amid an uncertain 2014, but this has been largely priced in. Upside risk to our call would be BBRI’s ability to sustain high levels of NIM. We expect a seasonally stronger micro loans segment in 2Q.

Industry Focus

Bank Rakyat Indonesia

Page 23



Net Interest Income 44,106 49,287 58,268 70,668 Cash/Bank Balance 93,036 117,694 134,014 157,391 Non-Interest Income 8,348 9,629 11,245 13,591 Government Securities 18,951 20,125 21,379 22,721 Operating Income 52,455 58,916 69,514 84,259 Inter Bank Assets 12,596 15,115 18,138 21,766 Operating Expenses (22,381) (25,280) (29,267) (34,928) Total Net Loans & Advs. 432,927 509,701 621,159 756,996 Pre-provision Profit 30,074 33,637 40,247 49,331 Investment 42,897 52,723 64,513 78,659 Provisions (3,946) (4,748) (5,723) (7,020) Associates 0 0 0 0 Associates 0 0 0 0 Fixed Assets 3,973 4,669 5,298 5,859 Exceptionals 0 0 0 0 Goodwill 0 0 0 0 Pre-tax Profit 27,910 30,860 36,879 45,197 Other Assets 21,803 19,778 20,970 20,659 Taxation (6,556) (7,249) (8,662) (10,616) Total Assets 626,183 739,805 885,471 1,064,049 Minority Interests (10) (12) (15) (18) Customer Deposits 504,281 601,150 724,727 875,981 Preference Dividend 0 0 0 0 Inter Bank Deposits 3,691 3,235 3,463 3,349 Net Profit 21,344 23,599 28,202 34,563 Debts/Borrowings 17,205 14,459 12,530 11,174 Net Profit bef Except 21,344 23,599 28,202 34,563 Others 21,678 21,091 21,385 21,238 Minorities 164 176 191 208 Shareholders' Funds 79,164 99,694 123,176 152,099 Total Liab& S/H’s Funds 626,183 739,805 885,471 1,064,049 Profitability & Efficiency Ratios (%) Financial Stability Measures (%)


Margins, Costs & Efficiency Balance Sheet Structure Yld. On Earnings Assets 11.89 11.41 11.34 11.28 Loan-to-Deposit Ratio 88.9 88.0 89.1 89.9 Avg Cost Of Funds 3.11 3.52 3.63 3.64 Net Loans / Total Assets 69.1 68.9 70.2 71.1 Spread 8.78 7.89 7.71 7.64 Investment / Total Assets 6.9 7.1 7.3 7.4 Net Interest Margin 8.82 8.12 7.98 7.95 Cust . Dep./Int. Bear. Liab. 96.7 97.7 98.3 98.7 Cost-to-Income Ratio 42.7 42.9 42.1 41.5 Interbank Dep / Int. Bear. 0.7 0.5 0.5 0.4 Employees ( Year End) 0 0 0 0 Asset Quality Effective Tax Rate 23.5 23.5 23.5 23.5 NPL / Total Gross Loans 1.5 1.5 1.4 1.4 Business Mix NPL / Total Assets 1.1 1.1 1.0 1.0 Net Int. Inc / Opg Inc. 84.1 83.7 83.8 83.9 Loan Loss Reserve Coverage 231.7 243.8 268.7 276.1 Non-Int. Inc / Opg inc. 15.9 16.3 16.2 16.1 Provision Charge-Off Rate 0.9 0.9 0.9 0.9 Fee Inc / Opg Income 9.3 8.2 8.3 8.3 Capital Strength Oth Non-Int Inc/Opg Inc 6.6 8.2 7.8 7.8 Total CAR 17.0 17.6 17.7 17.7 Profitability Tier-1 CAR 15.8 16.4 16.6 16.6 ROAE Pre Ex. 29.7 26.4 25.3 25.1 Growth ROAE 29.7 26.4 25.3 25.1 Total Net Loans 25 18 22 22 ROA Pre Ex. 3.6 3.5 3.5 3.5 Customer Deposits 12 19 21 21 ROA 3.6 3.5 3.5 3.5 Quarterly / Interim Income Statement (Rpbn) Rolling forward PBV band

FY Dec 2Q2013 3Q2013 4Q2013 1Q2014

Average

+1 stdev

+2 stdev

-1 stdev

-2 stdev

0.0

1.0

2.0

3.0

4.0

03 04 05 06 07 08 09 10 11 12 13 14

(x) Net Interest Income 10,109 11,167 12,911 12,401 Non-Interest Income 1,919 1,797 2,837 1,825 Operating Income 12,028 12,964 15,748 14,226 Operating Expenses (5,339) (5,986) (5,876) (6,321) Pre-Provision Profit 6,689 6,979 9,871 7,905 Provisions (816) (834) (1,621) (1,100) Associates 0 0 0 0 Exceptionals 0 0 0 0 Pretax Profit 6,089 6,663 8,942 7,411 Taxation (1,019) (1,366) (3,042) (1,474) Minority Interests 2 0 (10) 0 Net Profit 5,072 5,297 5,890 5,937 Source: Company, AllianceDBS, DBS Vickers

Page 24


Bloomberg: BBTN IJ | Reuters: BBTN.JK

BUY Rp1,090 JCI : 4,893.91(Upgrade from HOLD) Price Target : 12-Month Rp 1,270 (Prev Rp 1,130) Potential Catalyst: Asset quality recovery, M&A ADBS vs Consensus: Above consensus for FY14-15F



Price Relative

4 0

6 0

8 0

1 0 0

1 2 0

1 4 0

1 6 0

1 8 0

2 0 0

2 2 0

7 5 6 . 0

9 5 6 . 0

1 , 1 5 6 . 0

1 , 3 5 6 . 0

1 , 5 5 6 . 0

1 , 7 5 6 . 0

1 , 9 5 6 . 0



B a n k T a b u n g a n N e g a r a ( L H S ) R e la t iv e J C I IN D E X ( R H S )

Forecasts and Valuation

FY Dec (Rp bn) 2013A 2014F 2015F 2016F


Earnings Rev (%): - - - Consensus EPS (Rp): 166 192 227 Other Broker Recs: B: 12 S: 2 H: 9

ICB Industry : Financials ICB Sector: Financial Services Principal Business: Banking


At A Glance

Issued Capital (m shrs) 10,565 Mkt. Cap (Rpbn/US$m) 11,516 / 986 Major Shareholders Government of Indonesia (%) 60.1 Free Float (%) 39.9 Avg. Daily Vol.(‘000) 58,086

Industry Focus

Bank Tabungan Negara

Turning around

Still the leader in mortgages; non-subsidised mortgages remain its growth driver

Asset quality turnaround imminent

Upgrade to BUY; Rp1,270 TP

Driven by non-subsidised mortgages. BBTN remains the market leader for subsidised mortgage with a 92% market share and it is expected to grow by 13-14% this year. Going forward, it will focus on non-subsidised mortgages. BBTN is guiding for a 17% loan growth with NIM kept at 5.2-5.5% and loan-to-funding at 84-85%. Non-subsidised mortgages remain its growth driver. BBTN plans to increase CASA through the use of kiosks and cash offices. The bank also plans to issue Rp2tr bonds in 2H14 to boost its funding.

Tackling NPL concerns. BBTN continues to sell off its NPLs and is expected to sell Rp1tr this year (it sold Rp400bn last year). The worst is over for its NPL after a seasonally slow 1Q and its year-end target is 3%. Several initiatives have been put in place, particularly on collection and asset management (for repossession and foreclosure). Typically, the bank recovers 130% of the initial mortgage amount. Coverage ratio was 27% in 1Q14, however inclusive of collateral it would be 130%. A new subsidised mortgage scheme (effective from May) which is fully collateralised and guaranteed by government insurance, with a flat 7.25% rate for up to 20 years, was introduced. This will be positive for BBTN.

Upgrade to BUY with Rp1,270 TP. We are rolling over our valuation base to FY15 BV, hence raising our TP to Rp1,270. Our TP is based on the Gordon Growth Model with the following assumptions: 15% ROE, 10% growth and 15.5% cost of equity, implying 0.9x FY14 BV. Any M&A prospects would most likely emerge the earliest after elections.

Industry Focus

Bank Tabungan Negara

Page 25



Net Interest Income 5,653 6,434 7,522 8,713 Cash/Bank Balance 11,183 10,596 12,456 14,397 Non-Interest Income 764 827 976 1,152 Government Securities 8,385 9,223 10,146 11,160 Operating Income 6,417 7,261 8,497 9,865 Inter Bank Assets 4,839 5,662 5,945 6,242 Operating Expenses (3,849) (4,407) (5,230) (6,156) Total Net Loans & Advs. 99,330 116,068 136,804 161,266 Pre-provision Profit 2,568 2,854 3,267 3,709 Investment 4,202 5,454 4,897 4,641 Provisions (432) (531) (627) (740) Associates 0 0 0 0 Associates 0 0 0 0 Fixed Assets 1,523 1,374 1,210 1,031 Exceptionals 0 0 0 0 Goodwill 0 0 0 0 Pre-tax Profit 2,141 2,329 2,647 2,976 Other Assets 1,707 1,670 1,689 1,679 Taxation (579) (516) (587) (660) Total Assets 131,170 150,046 173,147 200,417 Minority Interests 0 0 0 0 Customer Deposits 96,208 113,281 133,445 157,267 Preference Dividend 0 0 0 0 Inter Bank Deposits 275 491 383 437 Net Profit 1,562 1,812 2,060 2,317 Debts/Borrowings 15,910 16,705 18,004 19,805 Net Profit bef Except 1,562 1,812 2,060 2,317 Others 7,220 6,668 6,898 6,793

Minorities 0 0 0 0 Shareholders' Funds 11,557 12,900 14,417 16,115 Total Liab& S/H’s Funds 131,170 150,046 173,147 200,417

Profitability & Efficiency Ratios (%) Financial Stability Measures (%)


Margins, Costs & Efficiency Balance Sheet Structure Yld. On Earnings Assets 9.81 9.64 9.63 9.64 Loan-to-Deposit Ratio 104.4 103.8 103.9 104.1 Avg Cost Of Funds 4.96 4.91 4.88 4.88 Net Loans / Total Assets 75.7 77.4 79.0 80.5 Spread 4.85 4.73 4.75 4.77 Investment / Total Assets 3.2 3.6 2.8 2.3 Net Interest Margin 5.14 5.01 5.03 5.02 Cust . Dep./Int. Bear. Liab. 85.8 87.1 88.1 88.8 Cost-to-Income Ratio 60.0 60.7 61.6 62.4 Interbank Dep / Int. Bear. 0.2 0.4 0.3 0.2 Employees ( Year End) 0 0 0 0 Asset Quality Effective Tax Rate 27.0 22.2 22.2 22.2 NPL / Total Gross Loans 4.0 3.5 3.2 3.1 Business Mix NPL / Total Assets 3.1 2.7 2.6 2.5 Net Int. Inc / Opg Inc. 88.1 88.6 88.5 88.3 Loan Loss Reserve Coverage 28.0 36.0 42.8 47.4 Non-Int. Inc / Opg inc. 11.9 11.4 11.5 11.7 Provision Charge-Off Rate 0.4 0.5 0.5 0.5 Fee Inc / Opg Income 6.1 7.0 7.1 7.2 Capital Strength Oth Non-Int Inc/Opg Inc 5.8 4.4 4.4 4.5 Total CAR 16.0 16.3 15.7 15.1 Profitability Tier-1 CAR 14.9 15.0 14.4 13.8 ROAE Pre Ex. 14.3 14.8 15.1 15.2 Growth ROAE 14.3 14.8 15.1 15.2 Total Net Loans 23 17 18 18 ROA Pre Ex. 1.3 1.3 1.3 1.2 Customer Deposits 19 18 18 18 ROA 1.3 1.3 1.3 1.2 Quarterly / Interim Income Statement (Rpbn) Rolling forward PBV band

FY Dec 2Q2013 3Q2013 4Q2013 1Q2014

Average

+1 stdev

+2 stdev

-1 stdev

-2 stdev

0.0

0.5

1.0

1.5

2.0

2.5

09 10 11 12 13 14

(x) Net Interest Income 1,355 1,509 1,505 1,439 Non-Interest Income 148 158 332 216 Operating Income 1,502 1,667 1,837 1,655 Operating Expenses (942) (984) (1,011) (945) Pre-Provision Profit 560 683 826 710 Provisions (98) (174) (116) (244) Associates 0 0 0 0 Exceptionals 0 0 0 0 Pretax Profit 461 520 705 458 Taxation (121) (136) (200) (117) Minority Interests 0 0 0 0 Net Profit 339 384 505 341


Page 26


Bloomberg: BTPN IJ | Reuters: BTPN.JK

BUY Rp4,090 JCI : 4,893.91 Price Target : 12-Month Rp 5,900 (Prev Rp 5,500) Potential Catalyst: Strong growth in micro business ADBS vs Consensus: Above consensus Analyst LIM Sue Lin +603 2604 3969 [email protected] Indonesian Research Team +62221 3003 4900

Price Relative

87

107

127

147

167

187

207

227

247

267

1,207.1

2,207.1

3,207.1

4,207.1

5,207.1

6,207.1

May-10 May-11 May-12 May-13 May-14

Relative IndexRp

Bank Tabungan Pensiunan Nasional (LHS)

Relative JCI INDEX (RHS) Forecasts and Valuation FY Dec (Rp bn) 2013A 2014F 2015F 2016F


Earnings Rev (%): - - - Consensus EPS (Rp): 390 473 544 Other Broker Recs: B: 5 S: 4 H: 6 ICB Industry : Financials ICB Sector: Banks Principal Business: BTPN specializes in pension loans and currently on a strong growth mode for micro loans and loans to the productive poor. Funding profile largely hinges on time deposits and bonds (wholesale funding). Source of all data: Company, AllianceDBS, DBS Vickers, Bloomberg Finance L.P

At A Glance Issued Capital (m shrs) 5,840 Mkt. Cap (Rpbn/US$m) 23,887 / 2,046 Major Shareholders TPG Nusantara (%) 59.7 Sumitomo Mitsui Financial Group (%) 24.3 Free Float (%) 40.3 Avg. Daily Vol.(‘000) 368

Industry Focus

Bank Tabungan Pensiunan Nasional

Focusing on micro

Focusing on micro and low-end Syariah loans

No impact despite ownership change

Expect NIM pressure

Maintain BUY; raised TP to 5,900

Micro and low-end Syariah financing. BTPN’s loan portfolio consists of 69% pension, 23% micro and 3% TUR, with the rest being joint financing with BFIN. Pension market is saturated and thus, BTPN plans to increase TUR to 8-10% of total loans in the next 4-5 years. The bank will also revamp its collection system in the future by incorporating mobile banking payments as well as collection agents for its customers. Operations unaffected by ownership change. Despite SMBC increasing its ownership in BTPN to up to 40%, there will be no changes in BTPN’s operations and strategy. However, SMBC may be a future option for funding. The only change to BTPN is that it is now ineligible for the 5-ppt tax break and will now be taxed at 30%. Expect NIM to be pressured down to 11.5-12% in 2014 due to expected increase in cost of funds by 250-275bps. NPL is also expected to rise by a maximum of 250bps due to macro conditions in early 2014. Meanwhile, loan growth is expected to level down to 15-17%. Maintain BUY; raised TP to Rp5,900. We are rolling over our valuation base to FY15 BV, hence raising our TP to Rp5,900. Our TP is based on the Gordon Growth Model (21% ROE, 10% growth and 15% cost of equity), implying 2.2x FY14 BV. BTPN is a fairly illiquid stock, but we believe its unique business proposition and prospects are positive. Its unchanged strategy and operations is in line with our expectations.

Industry Focus

Bank Tabungan Pensiunan Nasional

Page 27



Net Interest Income 7,048 7,898 9,004 10,329 Cash/Bank Balance 5,432 9,011 13,358 17,815 Non-Interest Income 400 491 576 719 Government Securities 7,434 7,434 7,434 7,434 Operating Income 7,449 8,389 9,580 11,049 Inter Bank Assets 4,999 5,499 6,049 6,654 Operating Expenses (3,980) (4,501) (5,092) (5,780) Total Net Loans & Advs. 46,223 53,862 62,828 73,489 Pre-provision Profit 3,469 3,888 4,488 5,268 Investment 2,913 3,188 3,491 3,824 Provisions (591) (656) (767) (897) Associates 0 0 0 0 Associates 0 0 0 0 Fixed Assets 755 520 274 15 Exceptionals 0 0 0 0 Goodwill 0 0 0 0 Pre-tax Profit 2,869 3,222 3,709 4,358 Other Assets 1,908 1,836 1,872 1,854 Taxation (738) (805) (927) (1,089) Total Assets 69,665 81,351 95,307 111,086 Minority Interests 0 0 0 0 Customer Deposits 52,406 61,399 71,957 84,610 Preference Dividend 0 0 0 0 Inter Bank Deposits 16 11 14 12 Net Profit 2,131 2,416 2,782 3,268 Debts/Borrowings 6,450 7,023 7,651 8,337 Net Profit bef Except 2,131 2,416 2,782 3,268 Others 885 580 566 573 Minorities 0 0 0 0 Shareholders' Funds 9,908 12,338 15,120 17,554 Total Liab& S/H’s Funds 69,665 81,351 95,307 111,086 Profitability & Efficiency Ratios (%) Financial Stability Measures (%)



FY Dec 2Q2013 3Q2013 4Q2013 1Q2014

Average

+1 stdev

+2 stdev

-1 stdev

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

08 09 10 11 12 13 14

PBV (x)

Net Interest Income 1,777 1,834 1,773 1,734 Non-Interest Income 104 110 125 143 Operating Income 1,882 1,944 1,897 1,876 Operating Expenses (996) (1,024) (1,087) (1,033) Pre-Provision Profit 886 920 810 843 Provisions (125) (148) (185) (172) Associates 0 0 0 0 Exceptionals 0 0 0 0 Pretax Profit 760 767 623 668 Taxation (155) (157) (279) (174) Minority Interests 0 0 0 0 Net Profit 605 610 344 494 Source: Company, AllianceDBS, DBS Vickers

Page 28


Bloomberg: PNBN IJ | Reuters: PNBN.JK

BUY Rp870 JCI : 4,893.91 Price Target : 12-Month Rp 1,100 (Prev Rp 960) Potential Catalyst: M&A ADBS vs Consensus: Above consensus Analyst LIM Sue Lin +603 2604 3969 [email protected] Indonesian Research Team +6221 3003 4900 [email protected]

Price Relative

29

49

69

89

109

129

149

169

189

209

486.0

586.0

686.0

786.0

886.0

986.0

1,086.0

1,186.0

1,286.0

1,386.0


Relative IndexRp

Panin Bank (LHS) Relative JCI INDEX (RHS) Forecasts and Valuation FY Dec (Rp bn) 2013A 2014F 2015F 2016F

Pre-prov. Profit 3,742 4,499 5,406 6,350Net Profit 2,260 2,496 3,031 3,576Net Pft (Pre Ex.) 2,260 2,496 3,031 3,576EPS (Rp) 94 104 126 149 EPS Pre Ex. (Rp) 94 104 126 149 EPS Gth (%) 7 10 21 18 EPS Gth Pre Ex (%) 7 10 21 18 Diluted EPS (Rp) 94 104 126 149 PE Pre Ex. (X) 9.3 8.4 6.9 5.9 Net DPS (Rp) 0 0 0 0 Div Yield (%) 0.0 0.0 0.0 0.0 ROAE Pre Ex. (%) 12.9 12.7 13.5 13.9 ROAE (%) 12.9 12.7 13.5 13.9 ROA (%) 1.6 1.6 1.7 1.8 BV Per Share (Rp) 770 867 992 1,141 P/Book Value (x) 1.1 1.0 0.9 0.8

Earnings Rev (%): (5) (4) nm Consensus EPS (Rp): 96 119 138 Other Broker Recs: B: 4 S: 1 H: 1 ICB Industry : Financials ICB Sector: Banks Principal Business: Panin Bank (PNBN) stay true to their motto " Always for You" with focusing to stay close to their growing niche market in order to provide timely banking solution. Source of all data: Company, AllianceDBS, DBS Vickers, Bloomberg Finance L.P

At A Glance Issued Capital (m shrs) 24,088 Mkt. Cap (Rpbn/US$m) 20,956 / 1,795 Major Shareholders Panin Financial Tbk (%) 46.0 ANZ Banking Group LTD (%) 38.8 Free Float (%) 15.2 Avg. Daily Vol.(‘000) 5,844

Industry Focus

Panin Bank

Possible changes ahead

NIM increase driven by loan repricing

Flat outlook for 2014

High possibility of M&A

Maintain BUY; raised TP to Rp1,100

NIM increase due to loan repricing in the SME loan segment by up to 75bps. Average SME loan yields are 11.5-12.5%. NIM remained strong at 4.3% in 1Q14. SME loans in the trading industry make up most of PNBN’s loan portfolio. PNBN also has an advantage of being the “Chinese bank” as it targets the niche market of Indonesians with Chinese descent. Earnings in 1Q14 were boosted by strong bond price movements. Flat outlook for 2014. PNBN expects a maximum of 12% loan growth, while NIM is expected to be maintained between 3.9-4.2% and LDR at 85-89%. Provisions are expected to be the same while NPL will slightly increase by about 50bps this year due to tight macro conditions. The bank plans to open 40-50 branches this year. High probability of change in shareholding. The months-long speculation of ANZ selling their stake to Mizuho could be a re-rating catalyst for PNBN. This has a high possibility of happening as Mizuho maintains a close relationship with Dai-Ichi, which already has a joint venture with Panin Life, PNBN’s sister company. There were no updates as at 1Q14. Maintain BUY; raised TP to Rp1,100. Our TP is derived from the Gordon Growth Model and assumes 14% ROE, 9% growth and 13.6% cost of equity, implying 1.1x FY14 BV. PNBN’s current valuation remains undemanding at 1.0x BV vs peers’ (simple) average of 1.9x. Its thin liquidity remains an overhang but confirmation of an M&A story could re-rate the stock.

Industry Focus

Panin Bank

Page 29



Net Interest Income 5,878 6,775 7,708 8,657 Cash/Bank Balance 19,462 24,845 27,525 30,832 Non-Interest Income 1,337 1,562 1,960 2,569 Government Securities 13,189 11,279 11,873 12,500 Operating Income 7,215 8,337 9,668 11,226 Inter Bank Assets 7,912 9,098 10,463 12,032 Operating Expenses (3,472) (3,838) (4,261) (4,876) Total Net Loans & Advs. 103,072 115,006 131,854 151,215 Pre-provision Profit 3,742 4,499 5,406 6,350 Investment 6,137 6,358 6,590 6,834 Provisions (539) (939) (1,080) (1,242) Associates 0 0 0 0 Associates 0 0 0 0 Fixed Assets 2,441 2,529 2,613 2,691 Exceptionals 0 0 0 0 Goodwill 0 0 0 0 Pre-tax Profit 3,252 3,615 4,389 5,178 Other Assets 11,843 13,661 15,135 16,767 Taxation (798) (904) (1,097) (1,295) Total Assets 164,056 182,776 206,054 232,870 Minority Interests (195) (215) (261) (308) Customer Deposits 120,257 136,100 154,619 175,689 Preference Dividend 0 0 0 0 Inter Bank Deposits 4,876 5,120 5,376 5,644 Net Profit 2,260 2,496 3,031 3,576 Debts/Borrowings 12,618 13,027 13,887 15,305 Net Profit bef Except 2,260 2,496 3,031 3,576 Others 6,347 6,045 6,395 6,571

Minorities 1,408 1,623 1,884 2,192 Shareholders' Funds 18,550 20,862 23,893 27,469 Total Liab& S/H’s Funds 164,056 182,776 206,054 232,870

Profitability & Efficiency Ratios (%) Financial Stability Measures (%)


Margins, Costs & Efficiency Balance Sheet Structure Yld. On Earnings Assets 9.10 8.87 8.84 8.79 Loan-to-Deposit Ratio 87.2 86.3 87.3 88.4 Avg Cost Of Funds 5.11 5.20 5.21 5.23 Net Loans / Total Assets 62.8 62.9 64.0 64.9 Spread 3.98 3.68 3.63 3.56 Investment / Total Assets 3.7 3.5 3.2 2.9 Net Interest Margin 4.19 4.14 4.15 4.10 Cust . Dep./Int. Bear. Liab. 85.7 86.6 87.2 87.3 Cost-to-Income Ratio 48.1 46.0 44.1 43.4 Interbank Dep / Int. Bear. 3.5 3.3 3.0 2.8 Employees ( Year End) 7,547 8,297 9,047 9,797 Asset Quality Effective Tax Rate 24.5 25.0 25.0 25.0 NPL / Total Gross Loans 2.1 2.1 2.0 2.0 Business Mix NPL / Total Assets 1.3 1.3 1.3 1.3 Net Int. Inc / Opg Inc. 81.5 81.3 79.7 77.1 Loan Loss Reserve Coverage 80.0 97.5 117.3 130.7 Non-Int. Inc / Opg inc. 18.5 18.7 20.3 22.9 Provision Charge-Off Rate 0.5 0.8 0.8 0.8 Fee Inc / Opg Income 0.8 1.6 3.2 3.1 Capital Strength Oth Non-Int Inc/Opg Inc 17.7 17.1 17.1 19.8 Total CAR 16.3 16.0 15.0 14.3 Profitability Tier-1 CAR 13.3 13.1 12.5 12.0 ROAE Pre Ex. 12.9 12.7 13.5 13.9 Growth ROAE 12.9 12.7 13.5 13.9 Total Net Loans 12 12 15 15 ROA Pre Ex. 1.6 1.6 1.7 1.8 Customer Deposits 17 13 14 14 ROA 1.6 1.6 1.7 1.8 Quarterly / Interim Income Statement (Rpbn) Rolling forward PB band

FY Dec 2Q2013 3Q2013 4Q2013 1Q2014

AverageAverage

+1 stdev+1 stdev

+2 stdev+2 stdev

-1 stdev-1 stdev

-2stdev

0.0

0.5

1.0

1.5

2.0

2.5

03 04 05 06 07 08 09 10 11 12 13 14

PBV (x) Net Interest Income 1,492 1,558 1,577 1,475 Non-Interest Income 266 379 705 389 Operating Income 1,758 1,937 2,283 1,864 Operating Expenses (860) (992) (1,249) (842) Pre-Provision Profit 898 944 1,033 1,023 Provisions (84) (123) (348) (118) Associates 0 0 0 0 Exceptionals 0 0 0 0 Pretax Profit 835 861 702 951 Taxation (202) (216) (249) (227) Minority Interests (53) (51) 75 (48) Net Profit 580 595 528 675


Industry Focus

Indonesian Banks

Page 30

INDONESIAN MULTIFINANCE: STOCK PROFILES

Page 31


Bloomberg: ADMF IJ | Reuters: ADMF.JK

NOT RATED Rp11,575 JCI : 4,893.91 Price Target : 12-months Rp N/A Potential Catalyst: N/A ADBS vs Consensus: N/A Analyst LIM Sue Lin +603 2604 3969 [email protected] Indonesian Research Team +62221 3003 4900

Price Relative

44

64

84

104

124

144

164

184

204

6,750.0

7,750.0

8,750.0

9,750.0

10,750.0

11,750.0

12,750.0

13,750.0

14,750.0

15,750.0


Relative IndexRp

Adira Dinamika Multi Finance (LHS) Relative JCI INDEX (RHS) Forecasts and Valuation FY Dec (Rp bn) 2010A 2011A 2012A 2013A

Pre-prov. Profit 2,125 2,553 2,617 3,453 Net Profit 1,468 1,569 1,391 1,599 Net Pft (Pre Ex.) 1,468 1,569 1,391 1,599 EPS (Rp) 1,468 1,569 1,391 1,599 EPS Pre Ex. (Rp) 1,468 1,569 1,391 1,599 EPS Gth (%) 21 7 (11) 15 EPS Gth Pre Ex (%) 21 7 (11) 15 Diluted EPS (Rp) 1,468 1,569 1,391 1,599 PE Pre Ex. (X) 7.9 7.4 8.3 7.2 Net DPS (Rp) 242 954 792 709 Div Yield (%) 2.1 8.2 6.8 6.1 ROAE Pre Ex. (%) 45.5 38.2 29.4 28.9 ROAE (%) 45.5 38.2 29.4 28.9 ROA (%) 47.3 45.5 35.1 26.8 BV Per Share (Rp) 3,795 4,421 5,036 6,022 P/Book Value (x) 3.1 2.6 2.3 1.9

ICB Industry : Financials ICB Sector: Financial Services Principal Business: Adira Finance (ADMF) focuses in providing consumer financing for new and used cars and motorcycles.


At A Glance Issued Capital (m shrs) 1,0001,000 Mkt. Cap (Rpbn/US$m) 9,600 /851 Major Shareholders Bank Danamon (%) 95.095.0 Free Float (%) 5.05.0 Avg. Daily Vol.(‘000) 32,384

Industry Focus

Adira Dinamika Multi Finance

Focus on lucrative used vehicles

Stable growth; maintaining asset quality

Tapping into other sources of funding

Used vehicle focus

Receivables experience stable growth, expanding by 3% in 1Q14. Its portfolio of receivables remains 60% 2W and 40% 4W. Used vehicles account for 33% of all financing. NPL slightly improved from 1.4% to 1.3% in FY13 as ADMF dedicates 33% of total employees solely for collection. Tapping into other sources of funding. The portion of joint financing with its parent company, Danamon, decreased from 49% to 59% of total financing. This is in line with the ADMF’s strategy to lower its cost of funding by bank loans or by its continuous bond series worth Rp4tr. Used vehicle focus going forward. Going forward, BDMN will focus on used vehicle financing as it enjoys higher margins (used vehicles 18-20% yield vs new vehicles 16-18%) to compensate for the higher risk and rates of depreciation. ADMF expects new financing to grow 8-10% and to pass on any increase in cost of funds to consumers like it did in the past (lending rates increased 150-200bps in FY13). NIM and gearing ratio are expected to remain flat.

Industry Focus

Adira Dinamika Multi Finance

Page 32


FY Dec 2010A 2011A 2012A 2013A FY Dec 2010A 2011A 2012A 2013A

Net Interest Income 1,984 2,490 3,015 3,492 Cash/Bank Balance 619 2,793 2,249 1,264 Non-Interest Income 1,778 2,281 2,545 2,902 Government Securities 0 0 0 0 Operating Income 3,762 4,756 5,532 6,286 Inter Bank Assets 0 0 0 0 Operating Expenses (1,637) (2,202) (2,914) (2,833) Total Net Loans & Advs. 6,544 13,241 22,389 28,505 Pre-provision Profit 2,125 2,553 2,617 3,453 Investment 0 0 0 0 Provisions (193) (456) (750) (1,278) Associates 0 0 0 0 Associates 0 0 0 0 Fixed Assets 191 263 290 283 Exceptionals 0 0 0 0 Goodwill 0 0 0 0 Pre-tax Profit 1,932 2,097 1,868 2,174 Other Assets 245 591 533 942 Taxation (464) (528) (477) (575) Total Assets 7,600 16,889 25,460 30,994 Minority Interests 0 0 0 0 Customer Deposits 0 0 0 0 Preference Dividend 0 0 0 0 Inter Bank Deposits 0 0 0 0 Net Profit 1,468 1,569 1,391 1,599 Debts/Borrowings 2,585 10,762 18,087 22,235 Net Profit bef Except 1,468 1,569 1,391 1,599 Others 1,220 1,706 2,337 2,737 Minorities 0 0 0 0 Shareholders' Funds 3,795 4,421 5,036 6,022 Total Liab& S/H’s Funds 7,600 16,889 25,460 30,994 Profitability & Efficiency Ratios (%) Financial Stability Measures (%)


Margins, Costs & Efficiency Balance Sheet Structure Yld. On Earnings Assets 114.95 161.44 190.72 111.03 Loan-to-Deposit Ratio 260.7 126.9 127.8 132.3 Avg Cost Of Funds 9.75 48.68 136.61 95.81 Net Loans / Total Assets 86.1 78.4 87.9 92.0 Spread 105.20 112.76 54.11 15.21 Investment / Total Assets 0.0 0.0 0.0 0.0 Net Interest Margin 107.62 133.60 137.57 76.71 Cust . Dep./Int. Bear. Liab. 0.0 0.0 0.0 0.0 Cost-to-Income Ratio 43.5 46.3 52.7 45.1 Interbank Dep / Int. Bear. 0.0 0.0 0.0 0.0 Employees ( Year End) 4,335 4,347 4,885 4,594 Asset Quality Effective Tax Rate 24.0 25.2 25.6 26.4 NPL / Total Gross Loans 7.3 4.8 3.4 2.7 Business Mix NPL / Total Assets 6.4 3.9 3.1 2.5 Net Int. Inc / Opg Inc. 52.7 52.3 54.5 55.6 Loan Loss Reserve Coverage 39.6 69.9 94.4 162.8 Non-Int. Inc / Opg inc. 47.3 48.0 46.0 46.2 Provision Charge-Off Rate 2.9 3.3 3.2 4.3 Fee Inc / Opg Income 44.2 46.3 44.5 43.4 Capital Strength Oth Non-Int Inc/Opg Inc 3.1 1.6 1.5 2.8 Total CAR 0.0 0.0 0.0 0.0 Profitability Tier-1 CAR 0.0 0.0 0.0 0.0 ROAE Pre Ex. 45.5 38.2 29.4 28.9 Growth ROAE 45.5 38.2 29.4 28.9 Total Net Loans 155 102 69 27 ROA Pre Ex. 47.3 45.5 35.1 26.8 Customer Deposits N/A N/A N/A N/A ROA 47.3 45.5 35.1 26.8 Quarterly / Interim Income Statement (Rpbn)

FY Dec 2Q2013 3Q2013 4Q2013 1Q2014

Net Interest Income 1,733 2,612 3,492 961 Non-Interest Income 1,348 2,122 2,902 651 Operating Income 3,081 4,735 6,394 1,611 Operating Expenses (1,430) (2,133) (2,833) (753) Pre-Provision Profit 1,651 2,602 3,561 858 Provisions (636) (949) (1,278) (311) Associates 0 0 0 0 Exceptionals 9 10 11 8 Pretax Profit 1,024 1,664 2,293 555 Taxation (257) (417) (575) (136) Minority Interests 0 0 0 0 Net Profit 759 1,237 1,707 411 Source: Company, AllianceDBS, DBS Vickers

Page 33


Bloomberg: BFIN IJ | Reuters: BFIN.JK

BUY Rp2,500 JCI : 4,973.06 Price Target : 12-months Rp 3,100 (Prev Rp 2,800) Potential Catalyst: Recovery in leasing business, M&A ADBS vs Consensus: Below consensus



Price Relative

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B F I F in a n c e In d ( L H S ) R e la t iv e J C I IN D E X ( R H S ) Forecasts and Valuation FY Dec (Rp bn) 2013A 2014F 2015F 2016F

Pre-prov. Profit 775 818 923 985Net Profit 509 562 648 690Net Pft (Pre Ex.) 509 562 648 690EPS (Rp) 334 370 426 454 EPS Pre Ex. (Rp) 334 370 426 454 EPS Gth (%) 4 11 15 6 EPS Gth Pre Ex (%) 4 11 15 6 Diluted EPS (Rp) 334 370 426 454 PE Pre Ex. (X) 7.5 6.8 5.9 5.5 Net DPS (Rp) 0 141 162 173 Div Yield (%) 0.0 5.6 6.5 6.9 ROAE Pre Ex. (%) 16.3 15.7 16.4 15.8 ROAE (%) 16.3 15.7 16.4 15.8 ROA (%) 6.8 6.2 6.0 5.3 BV Per Share (Rp) 2,234 2,463 2,727 3,009 P/Book Value (x) 1.1 1.0 0.9 0.8

Earnings Rev (%): 1 (1) nm Consensus EPS (Rp): 384 446 496 Other Broker Recs: B: 3 S: 0 H: 0 ICB Industry : Financials ICB Sector: General Financial Principal Business: BFI Finance (BFIN) is a financing company focusing on consumer financing business, both dealer-generated and direct lending. The company is 44.95% owned by a consortium comprising TPG Capital, Northstar Equity Partners and Boy Garibaldi Thohir. Source of all data: Company, AllianceDBS, DBS Vickers, Bloomberg Finance L.P

At A Glance Issued Capital (m shrs) 1,527 Mkt. Cap (Rpbn/US$m) 3,817 / 329 Major Shareholders Trinugraha Capital & Co (%) 44.0 The NT TST Co S A Equinox (%) 8.0 Credit Suisse (%) 14.0 Free Float (%) 48.0 Avg. Daily Vol.(‘000) 258

Industry Focus

BFI Finance

Slower growth ahead

Taxes increase due to government regulation

Used 4W financing focus; growth to slow down

Maintain BUY; raised TP to Rp3,100

Not eligible for tax grants. As the government does not allow bearer shares to be recognised as part of the free-float, BFIN did not pass the 40% free-float minimum threshold and thus its tax has been increased by 5ppts to 25%. BFIN is currently lobbying the government for an exemption and is confident of pushing its tax rates back down to 20%. Used 4W financing focus. BFIN does not want to compete with Astra or other 4W dealers who also have financing companies to finance new cars and thus, it focuses on direct/dealer used 4W financing. It does not have much exposure to the leasing business (only 15% of total receivables). As at 1Q14, leasing declined (-11% y-o-y) and consumer loans increased (+7% y-o-y), in line with management’s strategy to refocus on the safer consumer segment. Its cost of funds is expected to increase and consumer financing will slow down this year, especially in 1H14. NPL is expected to increase mainly due to the leasing segment. The company has issued bonds worth Rp500bn this year and is planning to further increase funding in 2H14. Maintain BUY; raised TP to Rp3,100. We are rolling over our valuation base to FY15 BV, hence raising our TP to Rp3,100. Our TP is based on the Gordon Growth Model assumption of: 16% ROE, 10% growth and 15% cost of equity. We believe BFIN is heading for a challenging year ahead but over the longer term, its business model remains unique. Management has hinted at its interest in potential M&As with Japanese companies following the SMBC-BTPN deal.

Industry Focus

BFI Finance

Page 34



Net Interest Income 1,102 1,291 1,505 1,737 Cash/Bank Balance 225 126 468 755 Non-Interest Income 365 350 412 481 Government Securities 0 0 0 0 Operating Income 1,467 1,641 1,917 2,219 Inter Bank Assets 0 0 0 0 Operating Expenses (693) (824) (994) (1,234) Total Net Loans & Advs. 7,239 8,861 10,497 12,487 Pre-provision Profit 775 818 923 985 Investment 0 0 0 0 Provisions (107) (115) (113) (122) Associates 0 0 0 0 Associates 0 0 0 0 Fixed Assets 414 441 445 448 Exceptionals 0 0 0 0 Goodwill 0 0 0 0 Pre-tax Profit 667 703 810 863 Other Assets 415 415 415 415 Taxation (159) (141) (162) (173) Total Assets 8,293 9,844 11,826 14,105 Minority Interests 0 0 0 0 Customer Deposits 0 0 0 0 Preference Dividend 0 0 0 0 Inter Bank Deposits 0 0 0 0 Net Profit 509 562 648 690 Debts/Borrowings 4,626 5,888 7,468 9,319 Net Profit bef Except 509 562 648 690 Others 270 210 210 210 Minorities 0 0 0 0 Shareholders' Funds 3,397 3,746 4,148 4,575 Total Liab& S/H’s Funds 8,293 9,844 11,826 14,105 Profitability & Efficiency Ratios (%) Financial Stability Measures (%)


Margins, Costs & Efficiency Balance Sheet Structure Yld. On Earnings Assets 18.52 19.76 19.80 19.50 Loan-to-Deposit Ratio 158.8 152.7 142.4 135.4 Avg Cost Of Funds 10.38 11.40 10.93 10.92 Net Loans / Total Assets 87.3 90.0 88.8 88.5 Spread 8.15 8.36 8.88 8.58 Investment / Total Assets 0.0 0.0 0.0 0.0 Net Interest Margin 13.38 13.50 13.34 12.77 Cust . Dep./Int. Bear. Liab. 0.0 0.0 0.0 0.0 Cost-to-Income Ratio 47.2 50.2 51.9 55.6 Interbank Dep / Int. Bear. 0.0 0.0 0.0 0.0 Employees ( Year End) 5,916 6,332 6,592 6,852 Asset Quality Effective Tax Rate 23.8 20.0 20.0 20.0 NPL / Total Gross Loans 1.8 1.7 1.4 1.3 Business Mix NPL / Total Assets 1.6 1.5 1.2 1.2 Net Int. Inc / Opg Inc. 75.1 78.7 78.5 78.3 Loan Loss Reserve Coverage 80.0 87.8 93.4 79.8 Non-Int. Inc / Opg inc. 24.9 21.3 21.5 21.7 Provision Charge-Off Rate 1.5 1.3 1.1 1.0 Fee Inc / Opg Income 22.8 19.7 20.1 20.6 Capital Strength Oth Non-Int Inc/Opg Inc 2.1 1.6 1.4 1.1 Total CAR 0.0 0.0 0.0 0.0 Profitability Tier-1 CAR 0.0 0.0 0.0 0.0 ROAE Pre Ex. 16.3 15.7 16.4 15.8 Growth ROAE 16.3 15.7 16.4 15.8 Total Net Loans 22 22 18 19 ROA Pre Ex. 6.8 6.2 6.0 5.3 Customer Deposits N/A N/A N/A N/A ROA 6.8 6.2 6.0 5.3 Quarterly / Interim Income Statement (Rpbn) Rolling forward PB band

FY Dec 2Q2013 3Q2013 4Q2013 1Q2014

Average

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(x) Net Interest Income 268 286 287 313 Non-Interest Income 99 96 101 105 Operating Income 367 382 388 418 Operating Expenses (180) (183) (177) (203) Pre-Provision Profit 187 199 211 216 Provisions (25) (31) (28) (42) Associates 0 0 0 0 Exceptionals 0 0 0 0 Pretax Profit 162 169 183 173 Taxation (32) (33) (62) (43) Minority Interests 0 0 0 0 Net Profit 129 136 121 130 Source: Company, AllianceDBS, DBS Vickers

Page 35


Bloomberg: CFIN IJ | Reuters: CFIN.JK

HOLD Rp418 JCI : 4,973.06 Price Target : 12-months Rp 490 (Prev Rp 430) Potential Catalyst: Recovery of leasing business ADBS vs Consensus: N/A Analyst LIM Sue Lin +603 2711 0971 [email protected] Indonesian Research Team +6221 3003 4900

Price Relative

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C l ip a n F in a n c e ( L H S ) R e la t iv e J C I IN D E X ( R H S ) Forecasts and Valuation FY Dec (Rp bn) 2013F 2014F 2015F 2016F

Pre-prov. Profit 575 648 755 856Net Profit 390 416 506 570Net Pft (Pre Ex.) 390 416 506 570EPS (Rp) 103 110 134 151 EPS Pre Ex. (Rp) 103 110 134 151 EPS Gth (%) 13 7 22 12 EPS Gth Pre Ex (%) 13 7 22 12 Diluted EPS (Rp) 103 110 134 151 PE Pre Ex. (X) 4.0 3.8 3.1 2.8 Net DPS (Rp) 18 22 27 30 Div Yield (%) 4.3 5.3 6.4 7.2 ROAE Pre Ex. (%) 15.0 14.2 15.3 15.3 ROAE (%) 15.0 14.2 15.3 15.3 ROA (%) 7.1 6.5 7.0 7.0 BV Per Share (Rp) 732 821 928 1,049 P/Book Value (x) 0.6 0.5 0.5 0.4

Earnings Rev (%): - - - Consensus EPS (Rp): 110 134 151 Other Broker Recs: B: 1 S: 0 H: 1 ICB Industry : Financials ICB Sector: General Financial Principal Business: Clipan Finance (CFIN) provides consumer financing, leasing and factoring services. The multi-finance company was established in 1982 and is a part of the Panin Group. It is currently 54.4% owned by Panin Bank. Source of all data: Company, AllianceDBS, DBS Vickers, Bloomberg Finance L.P

At A Glance Issued Capital (m shrs) 3,775 Mkt. Cap (Rpbn/US$m) 1,578 / 136 Major Shareholders Bank Pan Indonesia TBK (%) 54.4 Mackenzie Financial Corporation

13.8

Free Float (%) 31.9 Avg. Daily Vol.(‘000) 649

Industry Focus

Clipan Finance

Unique factoring business

Loan growth to be driven by factoring

Room to issue more debt for funding

Maintain HOLD; raised TP to Rp490

Loan growth driven by factoring. Leasing will definitely slow down in 2014 with commodity prices remaining low. Consumer financing business will also face heavy competition in the used 4W section (which is 90% of consumer financing) due to the emergence of LCGC. Factoring grew (+58% y-o-y) in 1Q14 and is expected to grow rapidly (around 25-35%) this year due to the limited competition in the segment. Management has also stated that there are no NPLs in factoring. Room to issue more debt. Equity remains the major source of funding (1Q14: 47% of total funding) and thus, there is still room to further grow through debt as gearing remains low at 1.12x. With OJK being the governing body for banks and multifinance companies, we can expect more regulatory changes in terms of standardisation of NPL classifications and equity requirements ahead. Maintain HOLD, raised TP to Rp490. We are rolling over our valuation base to FY15 BV, hence raising our TP to Rp430. Our TP is based on the Gordon Growth Model (14.5% ROE, 12% growth, 16.8% cost of equity). While its cost-to-income ratio and gearing are better than BFIN’s, CFIN carries a higher risk, given its larger exposure to leasing (1Q14: 17% of total receivables), which is susceptible to commodity price movements. Note that CFIN is a 54% subsidiary of Bank Panin (PNBN).

Industry Focus

Clipan Finance

Page 36


FY Dec 2013F 2014F 2015F 2016F FY Dec 2013F 2014F 2015F 2016F

Net Interest Income 578 634 736 834 Cash/Bank Balance 96 121 133 63 Non-Interest Income 126 149 167 185 Government Securities 51 0 0 0 Operating Income 704 783 903 1,019 Inter Bank Assets 0 0 0 0 Operating Expenses (129) (135) (148) (164) Total Net Loans & Advs. 5,824 6,522 7,410 8,432 Pre-provision Profit 575 648 755 856 Investment 0 0 0 0 Provisions (61) (100) (88) (106) Associates 0 0 0 0 Associates 0 0 0 0 Fixed Assets 42 49 54 58 Exceptionals 0 0 0 0 Goodwill 0 0 0 0 Pre-tax Profit 514 548 666 750 Other Assets 61 61 61 61 Taxation (124) (131) (160) (180) Total Assets 6,074 6,754 7,659 8,615 Minority Interests 0 0 0 0 Customer Deposits 0 0 0 0 Preference Dividend 0 0 0 0 Inter Bank Deposits 0 0 0 0 Net Profit 390 416 506 570 Debts/Borrowings 3,146 3,517 4,017 4,517 Net Profit bef Except 390 416 506 570 Others 163 139 139 139 Minorities 0 0 0 0 Shareholders' Funds 2,765 3,098 3,503 3,959 Total Liab& S/H’s Funds 6,074 6,754 7,659 8,615 Profitability & Efficiency Ratios (%) Financial Stability Measures (%)

FY Dec 2013F 2014F 2015F 2016F FY Dec 2013F 2014F 2015F 2016F

Margins, Costs & Efficiency Balance Sheet Structure Yld. On Earnings Assets 15.73 16.37 16.57 16.63 Loan-to-Deposit Ratio 186.3 188.0 187.5 190.3 Avg Cost Of Funds 9.99 12.20 12.16 12.12 Net Loans / Total Assets 95.9 96.6 96.8 97.9 Spread 5.74 4.16 4.41 4.51 Investment / Total Assets 0.0 0.0 0.0 0.0 Net Interest Margin 10.70 9.97 10.21 10.26 Cust . Dep./Int. Bear. Liab. 0.0 0.0 0.0 0.0 Cost-to-Income Ratio 18.4 17.2 16.4 16.1 Interbank Dep / Int. Bear. 0.0 0.0 0.0 0.0 Employees ( Year End) 1,008 1,228 1,448 1,668 Asset Quality Effective Tax Rate 24.1 24.0 24.0 24.0 NPL / Total Gross Loans 1.1 2.0 1.3 1.3 Business Mix NPL / Total Assets 1.1 2.0 1.3 1.3 Net Int. Inc / Opg Inc. 82.1 81.0 81.5 81.8 Loan Loss Reserve Coverage 59.1 67.3 123.4 145.4 Non-Int. Inc / Opg inc. 17.9 19.0 18.5 18.2 Provision Charge-Off Rate 1.0 1.5 1.2 1.2 Fee Inc / Opg Income 10.6 12.4 12.8 13.1 Capital Strength Oth Non-Int Inc/Opg Inc 7.3 6.6 5.7 5.0 Total CAR 0.0 0.0 0.0 0.0 Profitability Tier-1 CAR 0.0 0.0 0.0 0.0 ROAE Pre Ex. 15.0 14.2 15.3 15.3 Growth ROAE 15.0 14.2 15.3 15.3 Total Net Loans 29 12 14 14 ROA Pre Ex. 7.1 6.5 7.0 7.0 Customer Deposits N/A N/A N/A N/A ROA 7.1 6.5 7.0 7.0 Quarterly / Interim Income Statement (Rpbn) Rolling forward P/BV band

FY Dec 2Q2013 3Q2013 4Q2013 1Q2014

Average

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Net Interest Income 142 152 158 159 Non-Interest Income 33 33 31 25 Operating Income 175 185 189 184 Operating Expenses (33) (32) (40) (34) Pre-Provision Profit 142 153 150 150 Provisions (10) (17) (31) (20) Associates 0 0 0 0 Exceptionals 0 0 0 0 Pretax Profit 132 137 119 130 Taxation (32) (31) (32) (32) Minority Interests 0 0 0 0 Net Profit 100 106 87 98 Source: Company, AllianceDBS , DBS Vickers

Page 37


Bloomberg: MFIN IJ | Reuters: MFIN.JK

NOT RATED Rp800 JCI : 4,893.91 Potential Catalyst: - Analyst LIM Sue Lin +603 2604 3969 [email protected] Indonesian Research Team +6221 3983 2668

Price Relative

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Relative IndexRp

Mandala Multifinance (LHS) Relative JCI INDEX (RHS) Forecasts and Valuation FY Dec (Rp bn) 2010A 2011A 2012A 2013A

Pre-prov. Profit 210 296 315 382Net Profit 133 180 218 259Net Pft (Pre Ex.) 133 180 218 259EPS (Rp) 100 136 165 196 EPS Pre Ex. (Rp) 100 136 165 196 EPS Gth (%) 23 36 21 19 EPS Gth Pre Ex (%) 23 36 21 19 Diluted EPS (Rp) 100 136 165 196 PE Pre Ex. (X) 8.0 5.9 4.9 4.1 Net DPS (Rp) 24 30 41 17 Div Yield (%) 3.1 3.8 5.1 2.1 ROAE Pre Ex. (%) 25.1 27.6 27.0 25.7 ROAE (%) 25.1 27.6 27.0 25.7 ROA (%) 5.1 5.2 5.6 6.5 BV Per Share (Rp) 441 547 671 849 P/Book Value (x) 1.8 1.5 1.2 0.9

ICB Industry : Financials ICB Sector: Financial Services Principal Business: Mandala Finance (MFIN) focuses in providing consumer financing for new and used motorcycles.


At A Glance Issued Capital (m shrs) 1,3251,325 Mkt. Cap (Rpbn/US$m) 994 / 88 Major Shareholders PT Jayamandiri Gemasejati (%) 70.470.0 Alex Hendrawan (%) 5.15.0 Free Float (%) 24.525.0 Avg. Daily Vol.(‘000) 218,117

Industry Focus

Mandala Multifinance

Resilient 2W

Stable growth and asset quality

More funding through bond issuance

Focusing beyond Java to avoid competition

Stable growth and asset quality. Total new bookings of motorcycles grew 3% to Rp4.2tr in FY13 despite minimum DP regulations and tight macro and this reflects the very strong and stable demand for 2W. The majority of sales is still driven by Yamaha brand (50% of total motorcycles financed) as it maintains strong relationships with Yamaha dealers. The average yield for new motorcycles is 26% and for used ones is 30%, whereas cost of funds is at 12%. NPL remains very low at 0.4% at the end of FY13 as MFIN maintains its cautious screening and aggressive collection process. More funding through bond issuance. MFIN is currently 20% funded through equity and 80% through debt, with bank loans accounting for most of its debts. MFIN has a Rp1.5tr continual bond offering facility approved and it will issue around Rp300-500bn in 1H14 to fund financing and outlet expansions. Management says they will time the bond issuance better to ensure high demand, especially since its bond issuance last year was undersubscribed. It has no further plans to increase funding through equity. Focusing beyond Java. The majority of receivables currently come from outside of Java (Sulawesi and Sumatera) and it will continue to focus beyond Java in order to avoid competition. It plans to open an additional 18 outlets this year.

Industry Focus

Mandala Multifinance

Page 38



Net Interest Income 594 804 914 1,081 Cash/Bank Balance 74 77 97 124 Non-Interest Income 10 2 14 29 Government Securities 0 0 0 0 Operating Income 604 806 928 1,109 Inter Bank Assets 0 0 0 0 Operating Expenses (393) (510) (612) (728) Total Net Loans & Advs. 2,858 3,497 3,745 3,587 Pre-provision Profit 210 296 315 382 Investment 0 0 0 0 Provisions (33) (55) (24) (36) Associates 0 0 0 0 Associates 0 0 0 0 Fixed Assets 134 142 133 134 Exceptionals 0 0 0 0 Goodwill 0 0 0 0 Pre-tax Profit 177 241 291 346 Other Assets 64 67 88 120 Taxation (44) (61) (73) (87) Total Assets 3,129 3,782 4,063 3,966 Minority Interests 0 0 0 0 Customer Deposits 0 0 0 0 Preference Dividend 0 0 0 0 Inter Bank Deposits 0 0 0 0 Net Profit 133 180 218 259 Debts/Borrowings 2,444 2,973 3,008 2,731 Net Profit bef Except 133 180 218 259 Others 101 85 166 109 Minorities 0 0 0 0 Shareholders' Funds 584 725 888 1,126 Total Liab& S/H’s Funds 3,129 3,782 4,063 3,966 Profitability & Efficiency Ratios (%) Financial Stability Measures (%)


Margins, Costs & Efficiency Balance Sheet Structure Yld. On Earnings Assets 24.44 25.89 25.42 26.33 Loan-to-Deposit Ratio 118.2 118.7 125.5 132.6 Avg Cost Of Funds 12.65 13.45 12.18 11.05 Net Loans / Total Assets 91.3 92.5 92.2 90.4 Spread 11.79 12.44 13.24 15.28 Investment / Total Assets 0.0 0.0 0.0 0.0 Net Interest Margin 17.20 17.82 18.18 20.36 Cust . Dep./Int. Bear. Liab. 0.0 0.0 0.0 0.0 Cost-to-Income Ratio 65.2 63.3 66.0 65.6 Interbank Dep / Int. Bear. 0.0 0.0 0.0 0.0 Employees ( Year End) 4,335 4,347 4,885 4,594 Asset Quality Effective Tax Rate 25.0 25.1 25.2 25.1 NPL / Total Gross Loans 0.9 1.0 0.9 1.0 Business Mix NPL / Total Assets 0.9 0.9 0.9 0.9 Net Int. Inc / Opg Inc. 98.4 99.8 98.5 97.4 Loan Loss Reserve Coverage 137.8 115.2 109.1 104.7 Non-Int. Inc / Opg inc. 1.6 0.2 1.5 2.6 Provision Charge-Off Rate 1.2 1.6 0.6 1.0 Fee Inc / Opg Income 0.8 0.1 1.4 2.4 Capital Strength Oth Non-Int Inc/Opg Inc 0.7 0.1 0.1 0.2 Total CAR 0.0 0.0 0.0 0.0 Profitability Tier-1 CAR 0.0 0.0 0.0 0.0 ROAE Pre Ex. 25.1 27.6 27.0 25.7 Growth ROAE 25.1 27.6 27.0 25.7 Total Net Loans 59 22 7 (4) ROA Pre Ex. 5.1 5.2 5.6 6.5 Customer Deposits N/A N/A N/A N/A ROA 5.1 5.2 5.6 6.5 Quarterly / Interim Income Statement (Rpbn)

FY Dec 2Q2013 3Q2013 4Q2013 1Q2014

Net Interest Income 518 794 1,081 274 Non-Interest Income 5 19 29 39 Operating Income 522 813 1,109 313 Operating Expenses (323) (542) (728) (199) Pre-Provision Profit 199 271 382 113 Provisions (21) (31) (36) (17) Associates 0 0 0 0 Exceptionals 0 0 0 0 Pretax Profit 178 239 346 96 Taxation (45) (60) (87) (24) Minority Interests 0 0 0 0 Net Profit 133 179 259 72 Source: Company, AllianceDBS, DBS Vickers

Industry Focus

Indonesian Banks

Page 15

DBSV recommendations are based an Absolute Total Return* Rating system, defined as follows:

STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)

BUY (>15% total return over the next 12 months for small caps, >10% for large caps)

HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)

FULLY VALUED (negative total return i.e. > -10% over the next 12 months)

SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

Share price appreciation + dividends

GENERAL DISCLOSURE/DISCLAIMER This report is prepared by AllianceDBS Research Sdn Bhd (“ADBSR”) (formerly known as HwangDBS Vickers Research Sdn Bhd), a subsidiary of Alliance Investment Bank Berhad (“AIBB”) and an associate of DBS Vickers Securities Holdings Pte Ltd (“DBSVH”). This report is solely intended for the clients of DBS Bank Ltd and DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations and affiliates (collectively, the “DBS Vickers Group”) only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of ADBSR. The research set out in this report is based on information obtained from sources believed to be reliable and ADBSR, its holding company AIBB, their respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “Alliance Bank Group”) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The Alliance Bank Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The Alliance Bank Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The Alliance Bank Group may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other banking services for these companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the Alliance Bank Group (and/or any persons associated with the aforesaid entities), that: (a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein. Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. ANALYST CERTIFICATION The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of the date the report is published, the analyst and his/her spouse and/or relatives who are financially dependent on the analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities). COMPANY-SPECIFIC / REGULATORY DISCLOSURES

1. DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”), their subsidiaries and/or other affiliates do not have a proprietary position in the securities recommended in this report as of 30 May 2014 PT. DBS Vickers Securities Indonesia ("DBSVI") has a proprietary position in Bank Negara Indonesia, Bank Rakyat Indonesia, Bank Tabungan Negara, BFI Finance, Bank Mandiri, NISP Bank and Bank CIMB as of 30 May 2014.

2. DBS Bank Ltd., DBSVS, DBSVUSA, their subsidiaries and/or other affiliates may beneficially own a total of 1% of any class of

Industry Focus

Indonesian Banks

Page 16

common equity securities of the company mentioned as of 3 Apr 2014.

3.

Compensation for investment banking services: DBS Bank Ltd., DBSVS, DBSVUSA, their subsidiaries and/or other affiliates may have received compensation, within the past 12 months, and within the next 3 months may receive or intends to seek compensation for investment banking services from the company mentioned.

DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

RESTRICTIONS ON DISTRIBUTION General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or

located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

Australia This report is not for distribution into Australia.

Hong Kong This report is being distributed in Hong Kong by DBS Vickers (Hong Kong) Limited which is licensed and regulated by the Hong Kong Securities and Futures Commission.

Indonesia This report is being distributed in Indonesia by PT DBS Vickers Securities Indonesia.

Malaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR") (formerly known as HwangDBS Vickers Research Sdn Bhd). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR

Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.

Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd. Research reports distributed are only intended for institutional clients only and no other person may act upon it.

United Kingdom

This report is being distributed in the UK by DBS Vickers Securities (UK) Ltd, who is an authorised person in the meaning of the Financial Services and Markets Act and is regulated by The Financial Conduct Authority. Research distributed in the UK is intended only for institutional clients.

Dubai

This research report is being distributed in The Dubai International Financial Centre (“DIFC”) by DBS Bank Ltd., (DIFC Branch) having its office at PO Box 506538, 3rd Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it.

United States Neither this report nor any copy hereof may be taken or distributed into the United States or to any U.S. person except in compliance with any applicable U.S. laws and regulations. It is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate.

Other jurisdictions

In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

AllianceDBS Research Sdn Bhd (128540 U)

(formerly known as HwangDBS Vickers Research Sdn Bhd) 19th Floor, Menara Multi-Purpose, Capital Square,

8 Jalan Munshi Abdullah 50100 Kuala Lumpur, Malaysia.

Tel.: +603 2604 3333 Fax: +603 2604 3921 email : [email protected]

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