SECURITIES

PT. Bank Mandiri Tbk (BMRI) RESEARCH REPORT

BUY Equity Banking

12-Month Price Target : Rp 8,000/shr

BMRI vs JCI Keep marching on

3100
JCI Index
7000 Maintain BUY on Mandiri and upgrade our target price
BMRI IJ Equity
6500
2950 We maintain BUY on BMRI and upgrade our target price to
6000
2800
Rp8000/share. Our valuation implies 23% of sustainable ROE and
5500
14.7% cost of equity. The reason for the increase of the target price
2650 5000

4500
is the change of the valuation base from 2010 to 2011. The bank’s
2500
4000
performance in second quarter of 2010 with its 22% ROAE (an in-
2350
3500
crease from 19% ROAE in 2009) highlighted our conviction that the
2200 3000 bank will reach its target to become on of the most profitable bank in
Aug-09 Sep-09 Nov-09 Dec-09 Feb-10 Mar-10 May-10 Jun-10 Aug-10
Indonesia with 25% targeted ROE of 25% in 2014. We have not yet
Source : Bloomberg factored in the possibility of bad debt recoveries that the bank could
obtain from Garuda Indonesia (Rp960 billion) and Domba Mas
Current price (08/06/2010) : 6,000
(Rp1.6 trillion). Our estimates of BMRI implies 2011’s P/B and P/E of
52 Wk high (07/15/2010) : 6,300 2.8x and 11.8x, respectively.
52 Wk low (08/18/2009) : 3,700
Shares outstanding (mn) : 20,981.44 The second quarter 2010 results
Market cap (Rpbn) : 125,888.60 BMRI booked significant 37.8% net income growth to Rp4 trillion in
Bloomberg code : BMRI IJ the first half of 2010, inline with our expectation of Rp8.9 trillion
Source : Bloomberg FY10E net income estimate, as we believe BMRI could book higher
earning in the second half of this year from possible major bad asset
recoveries and the probability of higher NIM if BI rate is hiked in the
Ratios 2008 2009 2010E 2011E 2012E fourth quarter. Net interest income in the first half of the year rose
NIM 5.3% 4.9% 5.3% 5.6% 5.6% 8.2% to Rp9.4 trillion in the back of 20% growth of loan outstanding
Effective tax rate 34.1% 33.5% 32.0% 32.0% 32.0% loan but lower realized NIM of 5.2% (compared to 5.4% NIM a year
earlier).
ROAE 17.8% 21.8% 23.8% 24.9% 26.8%

ROAA 1.6% 1.9% 2.2% 2.3% 2.5%

Return on Risk Weighted
Capital infusion at last
3.1% 3.6% 4.1% 4.2% 4.5%
assets (loan risk) The bank’s management has announced that BMRI will issue 11-
Cost efficiency 47.0% 45.0% 41.3% 39.0% 37.1%
11.3% or 2.2 million-2.4 million of new shares in the fourth quarter of
NPL-gross 5.3% 3.1% 4.0% 4.0% 4.0% 2010 or first quarter of 2011. The targeted capital infusion from the
200.6 150.0 150.0 150.0
Loan loss coverage 127.1%
% % % % rights issue is Rp8-10 trillion, thus translating to Rp3,500-
LDR 60.4% 61.7% 65.0% 70.0% 70.0% 4,200/shares of the new shares price. Although we have not factored
Equity to Assets 8.5% 8.9% 9.2% 9.3% 9.3% it yet in our financial model, the rights issue could increase BMRI
CAR 15.7% 15.0% 19.5% 13.0% 11.8%
FY10E CAR to maximum of 19.5%, higher than our current FY10E
CAR estimate of 14.3%.
Dividend pay-out 94.0% 46.6% 50.0% 50.0% 50.0%

P/B 4.1 3.6 3.1 2.8 2.4

Fig1. BMRI second quarter highlights
P/E 23.7 17.6 14.1 11.8 9.6
Rp billion Q2-10 Q2-09 % chg.
Source : Company & Ciptadana Estimates
Net Interest Income 9,369 8,660 8.2
Operating profits 5,404 4,385 23.2
Pre-tax profits 5,483 4,500 21.8
Syaiful Adrian
Phone : (62-21) 255 74 919 Net income 4,034.0 2,926.0 37.9
Email : adriansyaiful@ciptadana.com eps (Rp/share) 192.3 139.9 37.5

PT. CIPTADANA SECURITIES , expressly disclaim any and all liability for representations or warranties expressed or implied, contained herein or omissions therefrom or for any loss howsoever arising from any use of
this document or its contents or otherwise arising in connection therewith. Opinions expressed in this report are our present views and are subject to change without notice.
 SECURITIES
Fig2. Income statement 2008 – 2012E (Rp million)
Income Statement (Rp million) 2008 2009 2010E 2011E 2012E
Interest Income 27,336,237 32,598,964 34,088,951 38,975,262 44,211,206
Interest expense (12,051,637) (15,821,849) (14,429,520) (15,784,236) (18,049,481)
Net Interest Income 15,284,600 16,777,115 19,659,432 23,191,026 26,161,725
Fee based income 3,423,247 4,311,235 6,035,729 8,450,021 11,830,029
Other operational Income 1,229,760 1,173,128 1,295,491 1,433,528 1,589,456
Operational Income 19,937,607 22,261,478 26,990,651 33,074,574 39,581,210
Provision expenses and others (2,647,404) (1,817,133) (3,100,865) (4,939,107) (6,184,012)
Operational expenses (9,379,761) (10,009,867) (11,135,560) (12,909,815) (14,669,199)
Operating profits 7,910,442 10,434,478 12,754,227 15,225,652 18,727,998
Non-operating income 158,118 389,596 506,475 658,417 855,942
Pre-tax profits 8,068,560 10,824,074 13,260,702 15,884,069 19,583,941
Income taxes (2,753,244) (3,625,586) (4,243,425) (5,082,902) (6,266,861)
Minority interest (2,495) (43,024) (64,536) (96,804) (145,206)
Net income 5,312,821 7,155,464 8,952,741 10,704,363 13,171,874
eps (Rp/share) 253 341 427 510 628
Source : Company & Ciptadana Estimates

Fig3. Balance Sheet 2008 – 2012E (Rp million)

Balance Sheet (Rp million) 2008 2009 2010E 2011E 2012E
Cash 8,388,974 8,867,881 10,655,777 13,180,079 13,822,302
Current accounts with BI 13,354,289 16,055,871 21,090,325 25,466,568 32,540,614
Marketable Securities 24,624,847 18,153,392 31,635,488 36,380,811 41,837,933
Government Bonds 88,259,039 89,132,940 87,876,355 86,909,715 86,000,195
Loans 174,498,100 197,126,229 228,478,522 282,961,862 325,406,142
Provision for loan losses (11,860,312) (12,435,525) (13,708,711) (16,977,712) (19,524,369)
Fixed assets 4,603,560 4,963,306 5,037,756 5,113,322 5,190,022
Other Assets 56,570,181 72,752,510 63,001,384 59,653,824 78,075,647
Total Assets 358,438,678 394,616,604 434,066,895 492,688,468 563,348,485
Deposits from Customer 289,112,052 319,550,381 351,505,419 404,231,232 464,865,917
Other liabilities 38,784,688 39,767,960 42,251,126 42,497,005 45,629,828
Total Liabilities 327,896,740 359,318,341 393,756,545 446,728,236 510,495,745
Equity 30,513,869 35,108,769 40,101,907 45,730,944 52,600,523
Minority interest 28,069 189,494 208,443 229,288 252,217
Total Liabilities & Equity 358,438,678 394,616,604 434,066,895 492,688,468 563,348,484
BVPS (Rp/share) 1,455 1,674 1,912 2,181 2,508
Source : Company & Ciptadana Estimates

PT. Bank Mandiri Tbk (BMRI) Aug09, 2010

 SECURITIES

Fig4. Ratios 2008 – 2012E

Ratios 2008 2009 2010E 2011E 2012E
NIM 5.3% 4.9% 5.3% 5.6% 5.6%
Effective tax rate 34.1% 33.5% 32.0% 32.0% 32.0%
ROAE 17.8% 21.8% 23.8% 24.9% 26.8%
ROAA 1.6% 1.9% 2.2% 2.3% 2.5%
Return on Risk Weighted assets (loan risk) 3.1% 3.6% 4.1% 4.2% 4.5%
Cost efficiency 47.0% 45.0% 41.3% 39.0% 37.1%
NPL-gross 5.3% 3.1% 4.0% 4.0% 4.0%
Loan loss coverage 127.1% 200.6% 150.0% 150.0% 150.0%
LDR 60.4% 61.7% 65.0% 70.0% 70.0%
Equity to Assets 8.5% 8.9% 9.2% 9.3% 9.3%
CAR 15.7% 15.0% 19.5% 13.0% 11.8%
Dividend pay-out 94.0% 46.6% 50.0% 50.0% 50.0%
P/B 3.8 3.3 2.9 2.5 2.2
P/E 21.7 16.1 12.9 10.8 8.8
Source : Company & Ciptadana Estimates

Fig5. Dupont analysis 2008 – 2012E

Du Pont analysis 2008 2009 2010E 2011E 2012E
Net interest Income / assets 4.3% 4.3% 4.5% 4.7% 4.6%
Non interest income / assets 1.3% 1.4% 1.7% 2.0% 2.4%
Provision charge / assets 0.7% 0.5% 0.7% 1.0% 1.1%
Operating expenses / assets 2.6% 2.5% 2.6% 2.6% 2.6%
Non operating income / assets 0.0% 0.1% 0.1% 0.1% 0.2%
Tax / assets 0.8% 0.9% 1.0% 1.0% 1.1%
Minority interest / assets 0.0% 0.0% 0.0% 0.0% 0.0%
Return on Assets 1.5% 1.8% 2.1% 2.2% 2.3%
Assets / Equity (x) 11.7 11.2 10.8 10.8 10.7
Return on Equity 17.4% 20.4% 22.3% 23.4% 25.0%
Source : Company & Ciptadana Estimates

PT. Bank Mandiri Tbk (BMRI) Aug09, 2010

 SECURITIES
EQUITY RESEARCH

Analyst Technical Analyst

Syaiful Adrian
Strategy, Banking, Resources
Phone : (62-21) 255 74 919
Email : adriansyaiful@ciptadana.com
Analyst
Sonny John
Telecommunication, Infrastructure, Property
Phone : (62-21) 255 74 739
Email : johnsonny@ciptadana.com
Analyst
Fadil Kencana
Consumer, Plantations
Phone : (62-21) 255 74 820
Email : kencanafadil@ciptadana.com
Trevor Gasman
Phone : (62-21) 255 74 820
Email : gasmantrevor@ciptadana.com
Research Assistant
Sumarni
Phone : (62-21) 255 74 920
Email : sumarni@ciptadana.com
Research Assistant
Silviana Sumardjono
Phone : (62-21) 255 74 740
Email : sumardjonosilviana@ciptadana.com

EQUITY SALES

Head of Sales
John Herry Teja
Phone : (62-21) 255 74 808
Email : tejajohn@ciptadana.com

PURI - Kencana Bandung

Chandra Herotionjaya Gavin Ishak
Phone : (62-21) 5835 6025 Phone : (62-22) 732 2288
Email : HerotionjayaChandra@ciptadana.com Email : ishakgavin@ciptadana.com

Lindeteves Surabaya
Wiwi Wijaya Imelda Soetikno
Phone : (62-21) 622 00360 Phone : (62-31) 534 3938
Email : wijayawiwi@ciptadana.com Email : soetiknoimelda@ciptadana.com

Pluit Semarang
Ferry Ishak Lusiana Permatasari
Phone : (62-21) 666 96 688 Phone : (62-24) 354 8989
Email : ishakferry@ciptadana.com Email : permatasarilusiana@ciptadana.com

Bogor Medan
Daud Dirgahayu Juliawaty
Phone : (62-251) 353 325 Phone : (62-61) 4555 600
Email : dirgahayudaud@ciptadana.com Email : juliawaty@ciptadana.com

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 SECURITIES

HEAD OFFICE - JAKARTA

PT CIPTADANA SECURITIES
Plaza ASIA (d/h. ABDA)
Office Park unit 2
Jl. Jend. Sudirman kav. 59
Jakarta 12190
Phone : (62-21) 255 74 800
Fax : (62-21) 255 74 900
Email : research@ciptadana.com
Website : http://www.ciptadana.com

JAKARTA - Lindeteves Trade Center SEMARANG

1st Floor Blok B1/1 Jl. Gajah Mada No. 107
Jl. Hayam Wuruk No.127 Semarang 50136
Jakarta 11180 Phone : (62-24) 352 1199
Phone : (62-21) 6220 0360 Fax : (62-24) 356 5599
Fax : (62-21) 6231 0960
BANDUNG
JAKARTA - PLUIT Wisma Lippo Bandung 3rd Floor
Jl. Pluit Raya No. 7 Jl. Jend. Gatot Subroto No.2
Jakarta 14450 Bandung 40262
Phone : (62-21) 6669 6688 Phone : (62-22) 732 2288
Fax : (62-21) 6669 0770 Fax : (62-22) 732 2287

JAKARTA - Puri Kencana BOGOR

Perkantoran Puri Niaga III Jl. Salak No.20
Jl. Puri Kencana Blok M8 No.1H-1, Kembangan Bantarjati, Bogor Tengah
Jakarta 11610 Bogor 16151
Phone : (62-21) 5835 6025 Phone : (62-251) 836 2255
Fax : (62-21) 5835 6026 Fax : (62-251) 837 0054

SURABAYA MEDAN
Wisma Dharmala Surabaya Jl. Cut Nyak Dien No.14
Ground Floor Suite 5 & 6 Medan 20152
Jl. Panglima Sudirman 101-103 Phone : (62-61) 4555 600
Surabaya 60271 Fax : (62-61) 4556 400
Phone : (62-31) 534 3938
Fax : (62-31) 534 3886

DISCLAIMER
This document is not intended to be an offer, or a solicitation of an offer, to buy or sell relevant securities (i.e. securities men-
tioned herein or of the same issuer and options, warrants or rights to or interest in any such securities). The information and
opinions contained in this document have been compiled from or arrived at in good faith from sources believed to be reliable. No
representation or warranty, expressed or implied, is made by CIPTADANA SECURITIES or any other member of the Ciptadana
Capital, including any other member of the Ciptadana Group of Companies from whom this document may be received, as to the
accuracy or completeness of the information contained herein. All opinions and estimates in this report constitute our judgment
as of this date and there can be no assurance that future results or events will be consistent with any such opinions, forecasts or
estimates. The information in this document is subject to change without notice; its accuracy is not guaranteed; and it may be
incomplete or condensed.
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