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Regional Industry Focus

Multi-finance Companies
DBS Group Research . Equity

Alternative lenders
 Multi-finance companies are high-yielding
businesses despite higher cost of funds than
banks as they cannot take deposits; higher risk as
they are less regulated than banks
 Potential headwinds from impending fuel price
hike and imposition of minimum down payment
for 2W, but long-term growth prospects for 4W
remain robust

28 Mar 2012

JCI :

4,079.4

Analyst
LIM Sue Lin +603 2711 0971
suelin@hwangdbsvickers.com.my
Indonesian Research Team +6221 3983 2668
research@id.dbsvickers.com

Peer Comparables: Multi finance companies

 Valuations at a fraction of banks’, given high ROE,
attractive NIM and low NPLs; liquidity an issue
High returns come with higher risks. Multi-finance
business, especially consumer financing, generate higher
yields than conventional bank loans. At end Dec11, multifinance companies’ ROE averaged 31.1% with 8.7% NIM,
while NPL ratios were low at 1.2%. However, these
companies are not allowed to collect deposits, hence, they
rely either on bank borrowings or bond issuances, and also
joint financing and channelling agreements with banks for
funding. Therefore, their cost of funds is higher than
banks’, at 9-12%. These companies are also less tightly
regulated than banks, and have different NPL classification
and write-off policies.

ADMF

Market
cap
(US$m)

Price
(Rp/s)

PE (x)
FY11F FY12F

PBV (x)
FY11F FY12F

ROE (%)
FY11F FY12F

1,320

12,150

7.7x

NA

2.7x

NA

38.5%

BFIN

392

4,750

7.2x

5.5x

1.3x

1.0x

19.7% 19.3%

CFIN

209

510

6.9x

6.0x

0.9x

0.8x

15.3% 13.4%

MFIN

99

690

4.7x

4.0x

NA

NA

29.0% 27.0%

WOMF

58

265

88.3x

NA

1.2x

NA

1.2%

Weighted average

7.1x

5.4x

2.1x

0.8x

31.1% 18.6%

6.6x

5.2x

1.5x

0.9x

25.6% 21.2%

Closing prices as at 26 Mar 2012
* Weighted average PE excludes WOMF
^ Refers to 2-year EPS CAGR for CY11-13

Source: Bloomberg, Companies, DBS Vickers

Multi-finance companies: Total gross financing (2011)

Valuations at discount to banks. Multi-finance
companies are currently trading at 2.1x FY11 P/BV and
7.1x FY11 PE vs the banks at 3.2x FY11 P/BV and 13.9x
FY11 PE. The companies mentioned in this report are not
officially under our coverage, but the profiles and updates
will provide a more detailed understanding of the key
multi-finance companies that are operating in Indonesia.
Note that most of these companies are largely held by
banks or tightly held by foreign shareholders (e.g. BFIN).
As such, trading liquidity may be low.

Source: Companies, DBS Vickers

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

n/a

Simple average

Policy headwinds ahead. The MoF has imposed
minimum 20% downpayment for 2W and 25% for 4W,
effective 15 June 2012 onwards. Current average
downpayment is 12-15% for 2W and 20% for 4W.
Coupled with the impending fuel price hike, AISI and
Gaikindo expect new 2W and 4W unit sales to moderate
in the near term. But we believe 4W sales will remain
robust over the longer term, supported by a growing
middle class, urbanisation, and rising GDP per capita in
Indonesia. Separately, the formation of OJK in 2013 could
see more new regulations and supervisory changes.

“In Singapore, this research report or research analyses may only be distributed
to Institutional Investors, Expert Investors or Accredited Investors as defined in the
Securities and Futures Act, Chapter 289 of Singapore.”

NA

60.0

52.2

50.0
40.0
30.0

23.2

21.7

20.0

11.9

10.0

7.1

5.5

4.6

Mandiri
Tunas
F inance*

BFIN

CF IN

0.0
ADMF

BCA
Finance*

Astra
Seday a
Finance*

WOMF

*Non-listed companies
Total asset for Astra Sedaya Finance and CFIN are as of 3Q11

New minimum down payment regulation
Vehicles

Banks

Multi-finance
companies

2W

25%

20%

4W Productive (Private Use)

30%

25%

4W Non-productive (Commercial Use)

20%

20%

Source: BI, MoF, DBS Vickers

“Recipients of this report, received from DBS Vickers Research (Singapore) Pte Ltd
(“DBSVR”), are to contact DBSVR at +65 6398 7954 in respect of any matters arising
from or in connection with this report.”

Industry Focus
Multi-finance Companies

Analysts

Table of Contents

LIM Sue Lin +603 2711 0971
suelin@hwangdbsvickers.com.my

Overview

3

Indonesian Research Team +6221 3983 2668

Major players in the industry

5

Industry landscape

7

Growth drivers

8

Industry concerns

9

research@id.dbsvickers.com

Page 2

Regulatory environment

11

Industry trends

12

Multi-finance companies – A comparison

14

Valuation

15

Stock Profiles

16

Adira Dinamika Multi Finance

17

BFI Finance

24

Clipan Finance

31

WOM Finance

38

Industry Focus
Multi-finance Companies

Growth of financing activities

Overview
Finance companies, or typically known in Indonesia as multifinance companies, are licensed to offer a range of services,
including leasing, consumer financing, credit card financing
and factoring. But unlike banks, they are not allowed to
accept deposits, and are governed by Bapepam-LK, the
regulatory arm of the Minister of Finance (MoF). These
companies target the financing needs of the lower income
households.

130.0%

80.0%

Factoring, 70.5%
Leasing, 44.1%

30.0%

Total, 31.6%
Consumer
Financing, 26.7%

-20.0%

-70.0%
2003

2004

Total

There are 195 financing companies in operation as at Dec
2011. Over the past 10 years, several had their licences
revoked due to non-compliance with regulations, the most
common being inadequate capital. Prior to the Asian Financial
Crisis, there were over 212 multi-finance companies
nationwide. They typically provide financing for consumption
needs (vehicle financing), leasing, factoring and credit cards.
Currently, the majority of multi-finance companies focus on
consumer financing (2W and 4W, new and used) and leasing.

2005

2006

Leasing

2007

2008

Factoring

2009

2010

2011

Credit Cards

Consumer Financing

Source: Bapepam-LK, DBS Vickers

Amount of financing per segment (Rp bn)
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000

Multi-finance companies: Financing activities (2011)

20,000
2003

Leasing
31%

Consumer
F inancing
67%

Factoring, 2%

Source: Bapepam-LK, DBS Vickers

Leasing is main growth driver. Although multi-finance
companies focus on consumer financing, the current industry
growth driver is leasing, which grew 44% y-o-y at end
December 2011. Factoring is growing much faster, but its
base is small. Consumer financing remains the most attractive
in terms of lending yields. Although there is a trade off
between risk and reward, the ticket size is much smaller than
leasing, but the risk of default is higher because of the
customer profile. Credit card business has shrunk significantly
since August 2011 after GE Finance was acquired by Bank
Permata (BNLI). Prior to that, credit cards comprised less than
1% to total financing by multi-finance companies. The credit
card business is largely undertaken by commercial banks.

2005

Leasing

Factoring

2007
Credit Cards

2009

2011

Consumer Financing

Source: Bapepam-LK, DBS Vickers

Funded mainly by bank borrowings. Financing activities are
mostly funded by bank borrowings, which amount to
Rp186.7tr, or 86% of total funding. Bonds account for only
Rp31.3tr or 14% of total funding as of January 2012. Our
checks indicate that multi-finance companies may take
advantage of the current low interest rate environment to
issue more bonds to fund growth.
Multi-finance companies: Funding composition (Jan-12)

Bonds
14.4%

Subordinated
Loans
0.1%
Borrowing
85.5%

Source: Bapepam-LK, DBS Vickers

Page 3

Industry Focus
Multi-finance Companies

Joint-financing and channelling. Other sources of funding for
multi-finance companies are joint-financing or channelling
agreement with banks. Under joint-financing, both the multi finance company and bank ‘jointly’ contribute funds to the
arrangement. The proportion of contribution by each party
differs between agreements, and risks and returns are shared
in the same proportion. Under channelling, full funding is
originated from the bank. The bank bears all the risks, while
multi-finance companies receive a fee for managing the
financing contracts for banks. As of January 2012, joint financing agreements reached Rp83.5tr, while channelling
reached Rp15.3tr. It is a win-win situation for both parties;
banks have access to a higher yielding asset, and financing
companies receive funding to grow their asset base. Under
MoF regulations, at least 40% of the assets in the balance
sheet of financing companies have to be allocated for
financing activities.

companies sharing the risk of delinquent loans, banks can
expect better quality credit than if these companies merely
acted as an agent under the channelling scheme.
Joint-finance and channeling (Total) by multi-finance
companies
90

83.5

80
67.2

70
60

49.9

50
40
30
20

12.9

10
7.8

6.5

2006

2007

0

9.0

9.1

2008

2009

Channeling

Preference for joint-financing option. Joint-financing is more
rampant than channelling, growing at 24.3% y-o-y at end
2011 against 7.0% for the latter. It seems banks prefer jointfinancing to channelling, because with multi-finance

47.1

39.2

14.3

15.3

2010

2011

J oint Financing

Source: Bapepam-LK, DBS Vickers

Joint Financing activities by multi-finance companies
Financing Company

WOMF
ADMF

BFIN

CFIN
BCA Finance*
Mandiri Tunas Finance*

Astra Sedaya Finance*

Counterpart

BMRI
BBRI
BNII
BDMN
Bank Syariah Mandiri (BSM)
BBRI
BNGA
Bank DKI
Bank Mutiara
BMRI
BTPN
Bank UIB
PNBN
BBCA
BBNI
BBKP
BMRI
BNLI
Sahabat Finansial Bersama
BNGA
BNII
Bank Commonwealth

* Non listed companies
Source: Companies; DBS Vickers

Page 4

Total Facility

Revolving

Recourse

JF Proportion

Rp500bn
Rp500bn
Rp8.0tr
n/a
Rp150bn
Rp150bn
Rp50bn
Rp100bn
Rp100bn
Rp245bn
Rp1.0tr
Rp8.5bn
Rp600bn
<Rp5bn per contract
Rp400bn
Rp75bn
Rp4.5tr
Rp4.45tr
Rp4.0tr
Rp2.0tr
Rp1.0tr
Rp500bn

n/a
n/a
n/a
n/a
N
N
Y
N
N
Y
Y
n/a
n/a
Y
n/a
Y
Y
n/a
n/a
n/a
n/a
n/a

Y
n/a
N
n/a
N
N
N
N
N
N
N
n/a
N
N
n/a
N
N
N
N
N
N
N

5:95
10:90
1:99
1:99
Channeling
Channeling
1:99
5:95
Channeling
5:95
10:90
n/a
Channeling
5:95
n/a
Channeling
5:95
5:95
5:95
5:95
5:95
5:95

0 1.0 - 1.00 5.0 Multi-finance companies: NPL per segment (Jan-12) 2007 Source: Bapepam-LK. credit cards NPL was hovering *Non-listed companies Total asset for Astra Sedaya Finance and CFIN are as of 3Q11 Source: Companies. DBS Vickers 18.00 2. And subordinated loans cannot be more than 50% of total capital. it is normal for a finance company to have very low NPL ratio. Currently.86 5. Although there are conservative finance companies.00 1. there is very low activity and consequently low NPL.0% 1.0% S Source: BPS.Industry Focus Multi-finance Companies Gearing ratio regulated by MoF.4 16.2% 4. hence. Moreover.00% 0. Industry gearing ratio was about 8. NPL classification – Unlike BI.0 16.00 1.3 6. Source: Bapepam-LK. DBS Vickers at 3-4%.9% 2. Hence.00% Leasing F actoring Credit Cards Consumer Financing Blended Note: Prior to GE Finance acquisition. Bapepam and MoF have not set any guidance for NPL classification.21% 3. Blended NPL spiked to 2.00 2. Gaikindo Write-offs are typical in managing asset quality.39 1.0 12.5% 8.00 2.1% 1.0 8.50% 10.2x at end 2011. DBS Vickers Page 5 .5 2.00% 4. 2006 3.9 18. none of the players are focusing on Credit Cards.4% 1.32% ADMF BFIN CFIN WOMF BCA F inance* Mandiri Tunas F inance* 0.1 4. they have to adhere to BI’s NPL classification guide.0% 5.25 2. Multi-finance companies: Blended NPL Multi-finance companies: Gearing ratio FY11 3.59% Astra Seday a Finance* 0. Multi-finance companies: Total assets (2011) 20.5% 1.5% BFIN CF IN BCA F inance ADMF MTF WOMF ASF Industry 0.51 1.7% Blended NPL 8. but there are distinguishing factors for each.7 1. the write-off policy varies from 180 to 270 days for automatic write-off.00% 0.85 4.00% 2008 2009 2010 2011 Major players in the industry There are several multi-finance companies in Indonesia.43 3.18 1.0 2.50% 1.0 2.0% 7. Under the MoF/ Bapepam-LK regulation. most consider financing overdue by 90 days as bad debt. gearing ratio cannot exceed 10x the value of capital plus subordinated loans. The difference between banks and multi-finance companies is that it is typical for the latter to write-off bad debts regularly. DBS Vickers.50% 5.00 0.00 2. implying there is still room for multi-finance companies to borrow to finance loan expansion.00 2.61 6.81% 14.0 2. but has since improved significantly.0% 9.7% during the crisis in 2008.0 1.9 3. Big players’ gearing ratios are relatively low because they generally opt for joint-financing or channelling from banks. But since most large finance companies have joint-ventures or channelling agreements with banks.

49% 0. they contributed 0. while ADMF concentrates more on commercial vehicles. DBS Vickers Adira Dinamika Finance (ADMF) – Funding growth through joint-financing with parent. while ASF and BCA Finance appear to be preferred for 4W financing.0 ADMF BCA F inance* Astra Sedaya F inance* WOMF Mandiri Tunas F inance* *Non-listed companies Gross Financing for Astra Sedaya Finance and CFIN are as of 3Q11 Source: Companies. 0. and contribute c. Mandiri Tunas Finance (MTF) and Federal Page 6 FIF and ASF are members of the Astra International Group (ASII). Current 2W vs 4W buyers’ profile 60% 75% 40% 25% 4W 2W Cash Auto financing Source: AISI. ADMF focuses on dealer-generated new and used 2W and 4W financing.30%) and less risky than for used 2W. there is always higher risk attached to the attractive returns.0% 25. Gaikindo. Bank Danamon (BDMN). ASII. only 10% of new bookings are used 2W.1 10. In consumer financing. respectively.5% of this portfolio. 40. 23. In 2011. Note that MTF. 28% of cars produced by ASII is financed through ASF. such as Astra Sedaya Finance (ASF).0 5. Almost 50% of its new loans is generated from new 2W.0% 2006 2007 ADMF 2008 WOMF 2009 2010 FIF* MTF* 2011 *Non-listed companies Market share assumes only 75% new 2W purchased on credit Source: Companies.7% of the respective banks’ net income. especially Honda. although ticket size is smaller at Rp12. and only extends factoring products to customers referred by Panin Bank (PNBN).0% ADMF. Other players (not listed). IMAS Multi-finance companies: Market share of new 2W financing 30. Its portfolio has equal weightings of consumer financing and leasing.0% 15. 22.19% FIF*. BFIN will improve its network to accommodate a larger proportion of direct financing. DBS Vickers . 9.20% to the Group’s total income. due to asset quality issues. This segment is yielding the highest return for the company. In order to improve asset yield and reduce dealer dependency. BCA Finance. AISI.5 4.Industry Focus Multi-finance Companies Multi-finance companies: Total gross financing (2011) 60. CFIN focuses on used 4W.0 52.Unlike its peers. Now.0% MTF*.9 7. On average.36% 20. ASF and BCA Finance focus on passenger cars in their 4W business.0% WOMF. whereby new 4W only comprises c. 40% of 4W and 25% of 2W are purchased in cash. Last year.2 50. BFI Finance (BFIN) – Largest segment in BFIN’s portfolio is dealer generated used 4W (31% of portfolio). consumer financing and factoring. Tunas and BCA Finance are subsidiaries of BMRI and BBCA.0 International Finance (FIF). There are other big players in the industry that are not listed.6 BF IN CF IN 0. BCA Finance and MTF concentrate on consumer financing for 4W.60% 5.2 21. while Tunas also dabbles in 2W financing.2m per unit. ADMF and FIF dominate in new 2W financing.7 20. compared to about 30% before.0 11. Clipan Finance (CFIN) . yield is relatively high (c. However. WOMF reined in its used 2W financing business. FIF concentrates on financing for 2W. CFIN offers a wider range of financing products: leasing. ASF.0 30.0 23.0% 10.5% and c. WOM Finance (WOMF) – WOMF focuses on new and used 2W financing. at 23-25% for 4W and 41-42% for 2W.

5% 5.0% 30.0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F Source: CEIC. As of 2011. driven by private consumption. 6.68% 1.5% Industry landscape 6. 15.0% 150.1% 30.000 - ADMF .9% 25. Banks offer the product called KKB which typically refers to 4W financing.68% 2.0% 5.6m people in 2011.0% 5.0% 275.5% 6.0% 250. with 53% of the population being categorically poor.2% 2006 BFIN 2007 ADMF 2008 ASF* 2009 MTF* 2010 BCA Finance* 1997 Indonesia Population (LHS) MTF*. while 2W penetration is significantly higher at 27 motorcycles per 100 people. 26. 28.0% 10.0% 0% 5% 10% 15% 20% 25% 30% 35% Car ownership ratio BCA F inance*.1% 6.0% 0. According to the World Bank.0 20. But there is a rapid shift towards middle-income – defined as people whose daily expenditure is between US$2 and US$20.0% ASF*. Banks do not usually dabble in 2W financing because of deemed high risks.0 0.000 5.1% Source: BPS.0 40. for the last 20 years.0 25. DBS Vickers Competition from Kredit Kendaraan Bermotor (KKB). DBS Vickers.1% 4. 58% of the population will fall into the middle class category (vs . GDP growth had been strong in the past few years.0% 3. DBS Vickers Multi-finance companies: Market share of 4W financing (2011) GDP per capita US$ CFIN and ADMF excluded as market share numbers are negligible Malaysia.52% 4. The Indonesian population is estimated at 240. 11.5% 3. AISI. The jump is more apparent in urban areas than rural areas.0% 6. A growing middle-class population will spur demand for vehicles. 11.0% 1987 10.0% 125.0 15.3% 6. 26.0% 175. growing an average of 1.0 35. 2.8% 5.a. 4. 32.000 6. 6.0% 225. 28.22% China. And consumption power has risen along with this.1.3% of Indonesians lived below the poverty line as at 2010. Gaikindo.46% in 2010).7% 5.000 Indonesia. 1.0% ADMF.a.0% 20.0% 4.0 15.8% Source: Companies. However. 4.17% 8. Gaikindo 2011 Auto penetration in developing countries *Non-listed companies 9.0% BFIN.2% Thailand.6% 4. But the banks focus is different from multi-finance companies’. DBS Vickers.5% p.5% Population growing at c.000 7.0% 200.5% 6. By 2015F. 6.000 Market share assumes only 60% new 4W purchased on credit Source: Companies. 4W penetration is 4 cars per 100 people.0% 4. Gaikindo ASF*.9% MTF *. while banks target the middle/affluent class who purchase passenger vehicles.000 3.5% p. DBS Vickers. The latter tend to prefer to finance commercial vehicle fleets. vehicle penetration is still considerably low compared to developed countries. 1. Indonesia’s GDP growth trends 7.000 BF IN.000 India.0% BCA Finance*.Industry Focus Multi-finance Companies Multi-finance companies: Market share of new 4W financing Indonesia: Vehicle penetration 35.0% 1992 2002 2007 4W Penetration (RHS) 2012F 2W Penetration (RHS) Source: BPS. Page 7 .0% 5.1% 5. 13.

000 4.000 2W Sales 10.000.200. Trends in other emerging markets indicate that private car purchases start to see explosive growth when GDP per capita exceeds US$3.000 0% 800. DBS Vickers Indonesian auto industry – still resilient. DBS Vickers.000 0 2006 2007 YR 93-94 YR 92-93 YR 04-05 16 YR 73-74 12 YR 06-07 8 4 China Korea Brazil Malay sia Russia J apan Thailand Source: CEIC. And given the impending cut in fuel subsidy.000 600.000 12.000 1.7 vehicles per 100 people. Our auto analyst believes that we should watch for a switch to 4W from 2W. we could be seeing double digit growth ahead.000.Industry Focus Multi-finance Companies Indonesia: Population based on average expenditure 100% 90% 80% 70% 60% 50% 40% Watch out for a switch to 4W from 2W.000.000 400. It expanded at 10. DBS Vickers 12.000.000.a. with Indonesia’s average household consisting of 4 people.000 2.000 4W Sales 1.000 80% 1. CEIC Growth Drivers Indonesia: 2W Sales 2005 YR 87-88 24 20 This shift to middle class category is reflected in 2W sales.0% CAGR 1.000 600. 8.4% CAGR from 2006 to 2011. Our auto analyst believes that going into 2012. In 2010.400. this implies that every household already owns a motorcycle.000. there is still ample room for growth. Coupled with a low interest rate environment. With Indonesia having reached that threshold at the end of 2010.000.000 2009 2010 2011 2012F 2013F 2014F 2015F 2007 2008 4W Sales Source: Gaikindo DBS Vickers 2009 2010 2011 2012F 2013F 4W Sales Growth YoY (%) . Our house views that the market is already saturated. 2W penetration was 27%. especially with 4W penetration still low in Indonesia at less than 4.000 20% 10% % 28 0% Poor 1999 2005 Lower Middle 2009 Middle 2010 Upper Middle 2015F Affluent Source: Asian Development Bank. there may be risks: industry growth may be hampered by a global economic slowdown and slow recovery from the Thai floods.000 YR 08-09 2008 2009 2010 2011 2012F 2013F 2014F 2015F Source: AISI. and is expected to grow by 5% p.000 -40% - -60% 2006 0 2005 2006 2007 2008 Source: Gaikindo. DBS Vickers Page 8 -20% 200.000 premised on a bullish economy. 30% Auto growth trends after GDP per capita >US$3. going forward.000 12.000 400.000.6% CAGR 6. demand will slow down in 2012F before normalising in 2013F. Indonesia is expected to register another year of solid growth. 4W sales are expected to reach 974.000 60% 40% 800.000 20% 1.000 200. However.600.200. Indonesia: 4W sales and growth Indonesia: 4W Sales 1.000.

Bank Indonesia (BI) has been reducing its policy rate over the years to a record low. Going forward. which lead them to be crowded most of the time. The existing public transport.000 -10% -20% 2006 2007 2008 2W Sales 2009 2010 2011 2012F 2013F 2W Sales Growth YoY (%) Source: AISI. Routes are not properly planned. In 2012. although affordable. 60% on the third year and 80% on the fifth year Source: Bisnis Indonesia 8 Jul-11 Jan-11 Jul-10 Jan-10 Jul-09 Jan-09 Jul-08 Jan-08 Jul-07 Jan-07 Jul-06 4 Jan-06 6 Jul-05 Government “Low Cost Green Car” project. LCGC: Car specifications  <1.5% (2W sales) CAGR over 20112013F to 9. and record low interest rates are supporting the growth of the 2W market. rapidly growing purchasing power. 0% 2.200cc cars respectively  Comply with Euro 2 emission standard  <Rp100m on the road price  >US$50m capex to build manufacturing plants  40% local content on the first year. to get around the city. Four Japanese car manufacturers have pledged US$1. Indonesia: 2W sales and growth 10.8% of total government expenditure to improve infrastructure and public transport. the government is committing Rp55.000 Record low interest rates. after cutting the rate by 75bps last year. The objective is to strengthen domestic development of automotive production systems and components.000cc and 1. This makes owning a car or motorcycle a necessity.200 cc engine capacity  Minimum fuel consumption 22km/l and 20km/l for 1.000. DBS Vickers Policy rate and lending rate trends % 18 Rp Lending rate (%) 16 BI rate (%) 14 12 10 The government is offering tax incentives to car manufacturers involved in the LCGC project. and is effective 15 June 2012.000 units of LCGC. This is also an initiative to migrate existing 2W users to affordable 4W. The objective of the regulation is to improve auto loans asset quality and control disbursements to an industry that has been growing rapidly in the past few years. We expect BI rate to remain flat for the rest of the year.000. MoF and BI jointly proposed to increase minimum down payment for auto financing to 20%-30%.2m unit. This regulation was passed earlier in the month. This is more rampant in urban area than rural areas.000. applicable to banks and financing companies. and there are insufficient buses and trains. Taking advantage of low inflation in Indonesia.8bn annually to produce 500.Industry Focus Multi-finance Companies 2W growth supported by affordable financing.75% to absorb the effect of fuel subsidy cuts. DBS Vickers Industry Concerns BI and MoF want to raise down payment to 20%-30%.000 20% 6.000.000 10% 4. By then. Under-investment in public transport. DBS Vickers Page 9 . is not reliable. including exemption of import duties for LCGC components that cannot be produced locally and lowering luxury tax charges to 5% from 10% previously. BI is keeping its policy rate at 5.6tr or 5. We expect a slowdown in 2013F as the market becomes saturated.000. Source: BI. CEIC. we expect 2W penetration to reach 31 per 100 people. our auto analyst remains confident of 7. The Indonesian government is introducing environmental-friendly affordable cars to the community through its Low Cost Green Car (LCGC) project. MoF. Lack of investment in public transport. New minimum down payment regulation Vehicles Banks Financing Companies 2W 25% 20% 4W Productive (Private Use) 30% 25% 4W Non-productive 20% 20% (Commercial Use) Source: BI.000 – 1.000 40% 30% 8.

Amid the softer global macro environment. Empirical evidence from 2005 and 2008 suggest that the average consumer can absorb a 30% increase in fuel price with no impact on vehicle sales.400 to Rp4. On average. only 25% of 2W purchases are settled in cash. is that spare parts of the repossessed collateral had been swapped with inferior or broken parts. It is common for them to send an employee to visit the residence of a potential borrower and to interview other members of the household and neighbours. And most companies adopt an automatic write-off policy after a certain period. On average. But with 7080% of vehicles in Indonesia being purchased on credit. AISI Page 10 10 Cars May-06 Sep-06 Cars 10 0 0 Jan-08 May-08 Sep-08 Jan-09 Source: DBS Vickers. Consumer financing are small ticket items and usually involve several employees from origination to approval and disbursement. Concerns over fraud. it is normally more difficult for those who live in rental houses or rooms to obtain credit to purchase vehicles. the industry will be affected significantly if the regulation is implemented.Industry Focus Multi-finance Companies New regulations could hurt industry sales. . Vehicle sales (2008) 700 70 600 60 500 50 400 40 300 30 33% increase from Rp4.500 Motorcycles 0 0 Jan-05 May-05 Sep-05 Jan-06 Source: DBS Vickers. Debtors who are unable to repay their loans might choose to hide the collateral. Another element of fraud that is not uncommon in 2W. where 40% of unit sales are cash purchases. This is slightly higher than for 4W. Multi-finance companies try to avoid these situations by thoroughly screening potential borrowers. 88% in 4Q05 and another 33% in 2Q08. financial institutions are more cautious and prefer to hold liquid assets to avoid a liquidity crunch.810 to Rp2. Vehicle sales (2005) 600 60 500 50 400 40 30 300 200 33% increase from Rp1. slowing down loan disbursements could hamper auto industry growth.000. They are also more likely to slow down loan disbursements or select prime customers to maintain asset quality. Following volatile fuel prices.400 100 20 88% hike from Rp2. 75% of 2W and 60% of 4W are purchased on credit. AISI Softer global economy. The option would mean a 33% increase in fuel prices from Rp4. by 33% in 1Q05. Gaikindo. Gaikindo. The government had increased subsidised fuel price significantly previously. On the same note. Hence. The combination of these two practices raises concerns that there might be room for fraud.500 to Rp6. Impending fuel price hike. the government has finally decided to cut fuel subsidies.000 200 20 Motorcycles 100 The Indonesian Motorcycles Industry Association (AISI) projects its 2012 forecast for 2W sales could drop by 30-45% if down payments are increased to 30%. to satisfy the lenders that the borrower is a respectable member of the community. Our checks with multi finance companies indicate that the average down payment currently is 12-15% for 2W and 15-20% for 4W.500/litre to Rp6. while the rest is bought on credit. AISI and the Indonesian Association of Automotive Industries (Gaikindo) have recommended to cap minimum down payment at 1020% to ensure that the industry continues to grow.

DBS Vickers Only maximum gearing ratio is specified Not regulated Can raise funds only through bank loans.010/2008 No 30/PMK. and insurance companies. WOMF had encountered this problem when it was rapidly expanding into the used 2W market. Once this supervisory body is in place.84/PMK. guided by the banks’ judgement of prospect. The MoF and Bapepam LK regulate multi-finance companies in Indonesia. using Page 11 . Based on the draft. DBS Vickers Banks Multi-finance Companies Banks are obliged to put a minimum capital reserve in BI and there is ceiling and floor for LDR Minimum capital adequacy ratio is specified Specific provision and NPL recognition criteria Deposit taking. KYC principals on non-bank financial institutions No. Currently. BI is also adamant in regulating non-bank financial institutions that provide refinancing to customers. non-bank financial institutions are subject to more moderate regulations because they are not deposit-taking institutions. Banks under BI guidance have five asset quality classifications. However. The MoF is currently drafting a revision to this regulation and expects it to be published within the year. This can be mitigated by strong internal controls. and through bonds.012/2006 Description of finance companies’ activities Guidelines on establishing a finance company Initial capital is Rp100bn minimum for companies and Rp50bn minimum for cooperatives Foreign investors can own up to 85% of total capital A legal entity can own up to 50% of total capital Maximum gearing ratio is 10x Finance companies are not allowed to obtain deposits or issue promissory notes Subject to monthly reporting to MoF Finance companies are subject to routine checks at least once every 5 years. these companies claim there is low incidence internal fraud cases.  Refinancing or shadow banking. Its asset quality has improved following this effort. The MoF issues the regulations. employees of multi-finance companies that deal with 2W financing are normally trained to thoroughly check parts. and equity market. The objective of this new regulatory body is to align the views of BI and Bapepam-LK on the supervision of financial institutions. its loan disbursements for 2W purchases were significantly higher than the market value of the used 2Ws. The Financial Services Authority (OJK) will take over the supervision of banks from BI. Regulatory environment Reporting Activities Governed by MoF and Bapepam. both banks and non-banks. OJK will be led by nine commissioners.012/2006. we do not expect significant changes to the main points.166/PMK. because multi-finance companies are non-deposit taking. Banks vs Multi-finance companies Liquidity CAR NPL Funding Multi-finance companies are susceptible to internal fraud as well. there could be some regulatory changes for finance companies. and is taking the initiative to train employees who involved in used 2W financing. stock market and multi-finance companies from Bapepam-LK. finance companies have different NPL recognition and write-off policies from banks. It has since slowed down lending for used 2W. The main concerns of non-bank financial institutions over this new supervisory hierarchy are:  Non-performing loans. and as a result.84/PMK.010/2010 Source: Bapepam LK. bond issuance. There is no NPL guidance for non-bank financial institutions currently. can raise funds from interbank market and equity market. performance and repayment capacity of each debtor. two of which will be representatives of the central bank and the MoF. The main regulation guiding the establishment of a finance company is MoF Regulation no. consumer financing. Presently. The lender of last resort is also available for liquidity Subject to monthly reporting to BI Minimal limitations Not regulated Source: Bapepam LK.Industry Focus Multi-finance Companies Meanwhile. to be more in line with banks. These are generally less stringent than BI regulations for banks. Under the legislation. Bapepam regulations for multi-finance companies Regulation Explanation No. factoring and credit cards New regulatory body – OJK. while Bapepam-LK is tasked to enforce them. BI. Subject to monthly reporting to MoF Limited to leasing. A common practice for finance companies is to provide additional financing to a customer after the first loan has been paid off.

There is no NPL regulation for multi-finance companies. ADMF and BDMN have a 1:99 joint-finance agreement.3tr or 20. contributing Rp41. Multi-finance companies have acknowledged this trend. Banks provide the funds.0tr facility at 10:90 share with BTPN. a sister company. But based on the data from Badan Pusat Statistik (BPS).3% in 2000. this facility will be utilised more effectively to help fund BFIN’s growth. and only allow healthy finance companies to provide refinancing.75% for loans with 13-24 months tenure. BFIN’s strategy is to limit lending to customers within 20-25km radius from its branches. No regulation for NPL classification. and Page 12 10. The total facility is for Rp600bn with interest rate at 9. Competition is intensifying as banks and multi-finance companies realise that 2W and 4W businesses give better yields.5% for 1-3 years tenure. BMRI and BNII have joint-finance agreements with WOMF.25% for loans with 25-36 months tenure. a Rp8. the population outside Java and Bali has been growing rapidly.0 8.0 7. PNBN channels auto loans through CFIN. which allows the former access to low cost funds.4 *CFIN’s numbers refer to 3Q11 result. And given the current low interest rates. Banks channel loans though finance companies or are involved in a joint-financing scheme. Financing is a high-yield business and banks want a slice of the pie. Multi-finance companies may see improving NIMs going forward.8 7. 9. The agreement is reviewed annually. multifinance companies are also issuing corporate bonds to fund operations at lower financing costs.0 (9. and a special rate for used 4W of 6.2 NIM 11. Going forward. the proportion funded by banks have to comply . Synergy with insurance companies. with BDMN entitled to 10% of late payment penalty. However. As at December. A large share of Indonesia’s population live in Java and Bali.0 1. The agreement will expire by the end of the year.1bn of the facility had been used by BFIN. Risk and rewards are shared according to agreed terms. usually based on share of contribution of each party. The largest facility is given by BNII – major shareholder of WOMF -. More than 60% on BFIN’s income is generated by branches outside Jakarta and Bali. compared to 39.4% of its loan portfolio at end December 2011. The largest facility is a revolving Rp1. Hence. 40. borrowers who got to multi-finance companies are normally more concerned about the affordability of monthly repayments and a speedy approval process. In return. Areas that would be regulated include: limiting loanto-value at 60%. funding is still skewed towards bank borrowings. multi-finance companies are able to speed up their approval process.5 Source: Company. At the moment. Multi-finance companies: FY11 results CFIN* WOMF Avg Asset Yield 19. while finance companies provide the operational expertise.2 Cost of funds 10.0 Spread 9. BFIN has numerous joint-finance and channelling agreements with several banks. Competition eating into yields. ADMF is one of the key growth drivers in BDMN’s mass market segment.99% for new 4W loans with 1 year tenure. BBRI. BCA Finance recently offered a promotion rate of 3.1 12. We note that BCA Finance is a wholly-owned subsidiary of BBCA. unlike banks which have more stringent regulations. DBS Vickers Competing in approval process. Multi-finance companies which cost of funds is higher have limited scope to compete in pricing. led by declining cost of funds and better spreads. Vehicles financed by finance companies are typically bundled with insurance products. By 2010. normally a percentage of premium paid by the customer. Industry trends Spreading beyond Java.9% of the population resided outside Java and Bali. these finance companies receive rebates from the insurance companies.8 15. with facilities ranging from Rp150bn to Rp245bn. but we expect it to be renewed.0tr facility at 1:99 share of risk and reward.8 8. and are tapping into this market.Industry Focus Multi-finance Companies the vehicle bought with the first loan as collateral.25% for loans less than 12 months.0 9. rather than pricing. Finance companies that are not affiliated to banks normally fund growth with bonds issuance or bank borrowings. Leveraging off banks.0) 3. FY11 is not out yet BFIN ADMF 14. so that credit checks and approvals can be done within a day. only Rp142. But note that under joint financing. BDMN acquired a majority stake in ADMF after exercising its call option in 2004.0 23.

WOMF classifies loans that are 90 days past due as nonperforming. They are automatically written off when repayment is 210 days past due. CFIN sends a warning letter to borrowers whose repayment is 7 days. BFIN can repossess the collateral after the repayment is 30 days past due. The company has a policy to repossess the asset after the repayment is 60 days past due. it prefers to restructure rather than repossess if the customer has the potential to repay. it will issue repossession orders for loans over 60 days past due. but for its own portion. Loans more than 90 days past due are classified as non-performing. If the borrower acts in good faith and there is prospect of repayment. the policy is automatic write-off after 210 days.0bn in 2009) since implementing the stricter policy. Loans where repayments are 90 days past due are classified as non-performing. ADMF considers loans where repayments are 90 days past due as non-performing. 14 days and 30 days past due. Meanwhile. it normally deals with this a case by case basis. BFIN imposed a stricter write-off policy in 2011. Different companies have different regulations depending on how conservative the management is. BFIN has written off Rp30.7bn this year (much higher than Rp15. Page 13 . Its policy is to repossess the asset after repayment is 30 days past due. Financing over 30 days past due is considered non-performing. The repossessed vehicles are normally auctioned in batches. it is usually more lenient. and under company policy. it usually waits until 60 days if the borrower acts in good faith. Under its policy. last year they were only written off after 360 days. ASF classifies overdue loans into buckets based on days past due. If they are over 90 days past due. and loans over 180 days past due are written-off. those over 180 days past due are written-off. A bad debt is written-off after repayment is 270 days past due. but in practice. BFIN considers all loans that is 90 days past due as bad debt and makes 100% provision. Each has its own monitoring team. Loans over 150 days past due is written-off. For loans under joint-finance agreement with BNII.9bn in 2010 and Rp2. However.Industry Focus Multi-finance Companies with BI regulation for NPL classification. BCA Finance is very conservative in classifying NPLs.

Factoring Factoring . 653 1. DBS Vickers Page 14 .805 24.Used 4W 26% 66 1. there will not be a significant change in CFIN's business model.39 42.18 55.a. Purwadi Indra Martono Operational Director: Ir. payment rule and impending fuel price hike although numerical impact is still on review. because it targets the more high middle/affluent class.000 3.20% Mayban Offshore Corporate Services (Labuan) Sdn Bhd Sorak Financial Holdings Pte Ltd 42.Dealer.4 5.43 51. Eng Heng Nee Pholip.0 - 19. The policy is to send warning letter on 7th.0 Liquidity Borrowing 27% Borrowing 35% Borrowings 83% Bonds 57% Borrowing 100% Bonds 73% Bonds 17% MTN 8% 2.New 2W 15-17.6 46.3 14 0.4 2.8 2.6 . SE Operational Director: Ir.8 15.935 204 7.9 1. Av dp for: .583 12.000 3.400 1.43% 67.95 1. average dp is 20-30%.500 6. According to their policy. CFIN prefers second hand cars rather than new cars because the price is more stable.500 1.285.Business: Consumer Financing .4 24.Asset Mix: Leasing HETO. although WOMF prefers restructure rather than asset repossession if customer still in good faith and still have prospect. the targeted market differs from its MFC peers.261 5 3.84 - 16.5 5.000 400 2013 2014 Borrowing % of Total Liability Bonds % of Total Liability >2015 600 400 200 200 No maturity < 1 mth 1-3 mths 3-12 mths 1-3 yrs - - > 3 yrs Liability Maturity 800 800 2012 Liability Maturity 1. Lukman Abdullan President Director: Gita Puspa Kirana Dermawan Marketing Director: Suhendra.1 5.00% 31.200 1.4 69. Suwirho Josowidjojo Independent Commissioner: Veronika Lindawati.4 62.1 92.07% 6. 13% Financing Used Motorcycle Direct. Guntur Triyudianto Customer fill in application sheet -> Check if Segregation of duties between marketing and surveyor Potential client fill in application sheet -> Dealer Help Desk (DHD) customer is on blacklist -> Survey house and credit functions.7 7. Motorcycle (new) 90% Leasing 51% Franklin Templeton Investment Funds 9.0 8. C.35% Public 17.71% 45.1 18.2 7.02% 54.68% . Vera Eve Lim. Loan over 90 days past due is considered nonperforming.0% Morgan Stanley & Co Intl PLC Mellon Bank NA S/A 54. CFIN has the right to reposses asset.000 7.500 Asset Maturity 1.0% 95. Rajeev Kakar President Director: Stanley Atmadja 2W Financing Marketing Director: Marwoto Soebiakno 4W Financing Marketing Director: Hafid Hadeli Risk Management Director: Ho Lioeng Min Finance Director and Compliance: I Dewa Made Susila President Commissioner: Stephen Liestyo VP Commissioner: Robbyanto Budiman Commissioner: Garibaldi Thohir Independent Commissioner: I Nyoman Tjager.3 .0 8. direct financing (non-dealer generated) due to funded by joint financing and bonds issuance.56% Asia Financial (Indonesia) DBS Nominees Pte Ltd 5.3 90. After 30 days.Industry Focus Multi-finance Companies Multi-finance companies .8 Consumer Financing Used Car . 7% 3. The company is 2W.957 851 2.New 2W 15% .39 1. 8% Consumer Financing Used Car .Asset Mix: Motorcycle (used) 14% Leasing LCV. Av dp for: . For consumer financing.0% Public Public Willy Suwandi Dharma Governance Structure Approval Policy Management. for new cars. 19% 40.0% 4.33% 8.8 9.r.0 14. 22% Clipan Finance CFIN Note: data as of 3Q11.000 1.24% 1.5% . Consumer Financing.0 (9.200 1.61 1.600 1.09% 62.596 94.96% 26.400 1.316 2. the FY11 result is not out yet . performs checking if customer is on blacklist by batches -> checking -> input credit scoring and Potential customer fill in application form -> Marketing Surveyor checks to house and performs credit checking -> Credit recommendation into the system -> Report is officer enters the data into system -> Credit checking team Analyst (CA) reviews the report and issue a recommendation -> reviewed by credit analyst and marketing SPV -> in branch checks if customer is blacklisted -> surveyor Approved by credit commitee -> WOMF issues purchase order to Credit approval by branch manager or credit performs credit checking to the customer house or work dealer commitee -> credit agreement signing -> Loan place -> Credit analyst review the surveyor report and disbursed make a recommendation -> Credit analyst or branch manager approves the credit Going forward.8 482 23.000 2.0% 2.Business: Consumer Financing and Leasing .Dealer.95% Public 6. Parmanto Adhi Tjahjono All loan past due over 90 days is considered bad debt and 100% provision is provided for this category. BFIN can reposses collateral after 30 days past due.Business: Consumer Financing . Funding through borrowing and channeling agreementi with PNBN.000 1.Used 2W min 16% Customer fill in application sheet -> Credit Marketing Officer (CMO) check if customer is on blacklist -> CMO performs house survey and credit checking -> Report is reviewed by credit analyst -> Credit approval by branch manager or credit commitee -> credit agreement signing -> Loan disbursed Looking ahead.Used W 22% .Business: Leasing.24 2.82 7.37% Consumer Financing 36% Motorcycle (used) 10% Motorcycle (new) 53% The Northern Trust S/A AVFC Trinugraha Capital & Co SCA 59.800 Liability Maturity 2.0) 3. 31% Ownership Structure TPG Nusantara S.59 78. This market is usually targeted by banks.751 425 11.32% 99. Pande Radja Silalahi Commissioner: Muliadi Rahardja.1 1.9 5. system and strategy Financial Risk Asset Quality Down Payment Policy President Commissioner: Kusmayanto Kadiman Commissioners: Johanes Sutrisno (Independent). Moreover.8 9.5tr by 1H12.000 Asset Maturity Liability Maturity 2.Asset Mix: 13% Car (new) 22% Car (used) 11% Consumer Financing New Car .00% Wahana Makmur Sejati 5.A comparison Name Ticker BFI Finance BFIN Adira Dinamika Multi Finance ADMF Summary Total Asset Total Financing (ne Net Profit NIM (%) ROE (%) ROA (%) Gearing Ratio (x) Cost to Income Rat Business Risk Operating Environment WOM Finance WOMF 5.0% President Commissioner: Ho Hon Cheong Independent Commissioner: Djoko Sudyatmiko.Asset Mix: Consumer 16.0 7. we will see more aggressive strategy from on delaers guiding for a slowdown in expected bookings due to down WOMF to catch up on industry growth.l. Myrnie Zachraini Tamin President Director: Djaja Suryanto Sutandar Finance Director: Albertus Alex Hermanto Marketing Director: Simon Tan Kian Bing Human Capital Director: Martha Bambang Risk Management Director: Ir.18 8.056 3. Richard Andrew Deitz.8 35. Loans under joint financing with BNII has a 180 days automatic write off policy.2 Collection policy includes a phone reminder and visit within 90 days past due.600 1. Loan 90 days past due is considered non-performing. Alfonso Napitupulu (Independent).43 23.0 1. focusing on increasing portion of The company expect new bookings achieved Rp35tr After slowing down used 2W bookings to 10% of total bookings.241 1.61 88.907 3.46 Profitability Ave Asset Yield (%) Av Cost of Funds (%)\ Spread (%) NIM (%) Gearing Ratio Liability/ Equity Source: Companies. Loans over 210 days past due are automatically written off. average dp already above 20%. NPL (Rp bn) NPL Ratio (%) Coverage Ratio (%) Financing over 90 days is considered dilinquent whereby write off is done after the loan is 210 past due.0 11. ADMF will WOMF have ramped up their policy and procedure regarding used higher margin opportunities and less dependency issue bonds amounting Rp3. BFIN had just reviewed their write off policy and automatically write off loan above 270 days (previously: 360 days).5 1.0 10.0 12.5 1.000 3.305 4.0 1.76% 10.96% 44. Going forward. BFIN is heavy on leasing and commercial vehicle financing. In practice usually repossed after 60 days past due.000 500 1.000 600 1. 14th and 30th days past due.889 13. Emmy Yuhassarie (Independent) President Director: Francis Lay Sioe Ho Marketing and Credit Director: Yan Peter Wangkar Financial and Operational Director: Cornellius Henry Kho 15.2 0.New 4W 21% .000 5.800 < 3 mths 3-12 mths 1-5 yrs <1 mth > 5 yrs 1-3 mths 3-12 mths 1-5 yrs > 5 yrs 2.000 - Asset Maturity Asset Maturity 4.Direct. President Commissioner: Mu'min Ali Gunawan Commissioner: Roosniati Salihin.4 12. Heavy on leasing and used 4W financing.

3x 13.6x 1.6x 3.7x 88.1x 12.1x 6.4x 2.0% 0. At end Dec11.4% 9.5% 2.0% 2.6% 18.700 Buy 23.3x 1. We believe this is partly due to the size of the companies and also the limited liquidity of the stock.3x 2.0% 1.2%.3x 0.7x 7.4x 2.6x 20.7% 15.2% 14. Valuation Trade at a discount to banks.0% n/a 0.500 8.0x 1.0% 2.4x 1.3x 11. Multi-finance companies except for ADMF trade at a significant discount to the banks.5x 6.2x PBV (x) FY12F Net div (%) FY11F FY12F 38.750 510 690 265 Weighted average Simple average PE (x) FY12F FY11F 7.9x NA 1.3% 2.8x 10.2x NA 1.8x 0.3x 2.4% 27.1x FY11 PE.m.7x 23.9 8.0x NA 7.9% 3. as stated in the report above.7% NIM.0x 2.750 7.8% 3.1 1.7% 3.3x 3.1% 13.4x 5.3x 19.5x 14.1x FY11 P/BV and 7.150 4.3x NA 5.7x 11.950 4.5% Simple average 16.146 1.3% 29.0x 20.029 3.6x 5.4x 10.9x ROE (%) * Weighted average PE excludes WOMF ^ Refers to 2-year EPS CAGR for CY11-13 Source: Bloomberg.200 Buy 13.5x 0.3x 15.9% Simple average (ex BBCA) 15.4x 2. On average. Companies.m n.6x 29.161 3.2 4.5x 17.2x 2.0% Weighted average 17.8x 4.450 4. multi-finance companies’ ROE averaged 31.6% 2.4% Weighted average (ex BBCA) 14.0% 2.1x 1.2x 21.9x 4.5x 2.500 Buy 14.7x 2.0% NA 0.8% Buy (B). n.Industry Focus Multi-finance Companies factors justify the valuation discount.3x 22. multi-finance companies are less tightly regulated than the banks. DBS Vickers Page 15 .2% n.4x 3. DBS Vickers Peer Comparables: Banks Market cap Price Target Price (US$m) (Rp/s) (Rp/s) Bank Central Asia 21.5x 12.6% 21.7x 25.168 6. multifinance companies are currently trading at 2.320 392 209 99 58 12.0x 4. Companies.0x 0.2x 18. Also. All these High risk. especially consumer financing.000 8.8x 4.190 1.7x 10.0% 3.7x 16.3x 8.8 Bank Mandiri Bank Negara Indonesia Bank Rakyat Indonesia Bank Tabungan Negara Bank Tabungan Pensiunan Nasional 17.2x 6.6 1.3% 2.1% 9.9x 11.4% 2.0x 24. high return.2x 11.1x 22.5x 13. FY12F FY11F 2.500 Buy 11.5% 19. Hold (H).9% 1.7x 3.1% 25.1% with 8. have different NPL classification and write-off policies and carry higher cost of funds as they are not allowed to take deposits.2% NA 19.7x 1.2% 0.4x 4.8x 12.m. generate higher yields than conventional bank loans.5x 2.5 4.5x 10.2 Bank Danamon 4.7x 1.1x 3.2x 12.7x 12. Peer Comparables: Multi finance companies ADMF BFIN CFIN MFIN WOMF Market cap (US$m) Price (Rp/s) FY11F 1.3% 3.200 Buy 15.5x 1.500 4.7x Banking Group Rating PE (x) FY10F FY11F CAGR FY12F ^ (%) P/BV (x) FY10F ROE (%) Net div (%) FY11F FY12F FY12F FY12F 5.2% NA NA 31.9x 12.2x 12.8x NA NA 2.3% 13.800 Hold 13.8x 2.2x 2.151 6. Fully Valued (FV) ^ Refers to 2-year EPS CAGR for CY10-12 Source: Bloomberg.649 4.6x 11.8x 20.8x 9.3x 3.1% 0. while NPL ratios were low at 1.750 8.1x 1.m n.5x 15.0% 0.500 Buy 23. Multi-finance business.

Industry Focus Multi-finance Companies Stock Profiles Page 16 .

com Refer to important disclosures at the end of this report ed: SGC / sa: MA Growth driven by auto loans. With 195 competitors in the industry in 2011. The largest expense item is staff cost. Costto-income ratio is maintained at 60.3 25. Previously.0 13.0 25. 2008A 2009A 2010A 2011A 1.8 1.6 2. BDMN channels lending through ADMF and cross-sells other products to ADMF’s customers.795 3.0 8.468 8. ADMF specialises in financing motorcycles and cars.com  But keep an eye on operating costs and thinning margins Price Relative 4. both new and used.500 4.000 12.583 7. are to contact DBSVR at +65 6533 9688 in respect of any matters arising from or in connection with this report.000 14.1 510 4. (%) ROAE (%) ROA (%) BV Per Share (Rp) P/Book Value (x) Synergies with BDMN.212 18.2 25.568 1.468 1.7 3. Key risks: rising operating costs and thinning margins.020 1.0 25. At A Glance Issued Capital (m shrs) Mkt.020 1.000 6. valued at Rp15. it also extended loans to the electronics sector.Industry Focus Adira Dinamika Multi Finance Bloomberg: ADMF IJ | Reuters: ADMF.0 25.000 500 - 2008 2009 Relative JCI Index (LHS) 2010 2011 2012 Adira Dinamika Multi Finance (RHS) Financials and Valuation FY Dec (Rp bn) Pre-prov. but that business unit has been taken over by affiliate PT Adira Quantum Multifinance. (X) Net DPS (Rp) Div Yield (%) ROAE Pre Ex.com.079. Bank Danamon (BDMN) is now major shareholder of Adira Dinamika Multi Finance (ADMF) after exercising its call options over the years. It has 95% stake in the company. Cap (Rpbn/US$m) Major Shareholders Bank Danamon (%) Free Float (%) Avg. BDMN Analyst LIM Sue Lin +603 2711 0971 suelin@hwangdbsvickers. competition has heated up and is squeezing margins and causing asset quality to deteriorate.0 25.020 12. It is 95% owned by BDMN.500 12.000 2.468 1.583 1.0 280 2.8 N/A B: N/A N/A S: N/A N/A H: N/A Consensus EPS (Rp): Other Broker Recs: ICB Industry : Finance ICB Sector: Multifinance Principal Business: Adira Dinamika Multi Finance (ADMF) is a finance company that focuses on financing new and used 2W and 4W.” www.) EPS (Rp) EPS Pre Ex.212 1.JK NOT RATED Rp12.0 14. received from DBS Vickers Research (Singapore) Pte Ltd (“DBSVR”).020 82.250/1.583 7.8 25. Profit Net Profit Net Pft (Pre Ex.0 17.468 1.212 1.8 18.0 25.250 JCI : 4.3 1.000 2.500 16.000 1.1 1.000 1.2 2.3 242 2.583 1.dbsvickers.2 2.000 3.(‘000) 1.000 4.691 1.3 82.445 1.0 4.950 6.5tr for 1.212 10. (Rp) EPS Gth (%) EPS Gth Pre Ex (%) Diluted EPS (Rp) PE Pre Ex.dbsvickers.38 Driven by auto loans Potential Catalyst: -  Funding supported by major shareholder.000 10.652 4.468 21.9 7.0 1.805 .421 2.3 1. DBS Vickers. Bloomberg Page 17 “Recipients of this report.583 1.1 21.7 954 7. Daily Vol.000 2. The largest share of new financing last year was to new motorcycles.2% in 2010.0 5.125 1.my  Resilient growth of auto industry is driving sustainable new bookings Indonesia Research Team +62 21 3983 2668 research@id.0 7.334 95. with industry growth resilient at 9% for 2W and 17% for 4W in 2011. But growth had been mainly driven by strong auto sales.9 1. There is also cross-selling of Adira Insurance products.500 8.212 1.26m units.020 1.000 3. Source of all data: Company.

BDMN. That year. It was a part of the Triputra Group. the expansion also resulted in higher headcount. Going forward. Aggressively expanding network. The total amount of bond issuance approved is Rp6. Adira Dinamika Multi Finance (ADMF) was established as a multi-finance company in the 1990 by Raphael Adi Rachmat. ADMF considers an asset nonperforming when repayment is 90 days past due. and geographically. We see this as a balanced trade-off between risk and satisfactory reward. It also extended loans for electronic appliances. especially for used 2W. respectively.272 Employees Source: Company. it is skewed towards motorcycles. It writes off loans that are more than 210 days overdue. Consumer Financing Portfolio Avg. ADMF has 16% and 7% market shares of new motorcycles and cars. auto parts manufacturing.5tr for 1. and adopting more prudent risk management. 2W financing offers higher yields and larger volumes. Ticket Size (Rp m) Avg. ADMF had 653 service points spread out geographically. ADMF specialises in financing new and used motorcycles and cars. in which BDMN has 90% stake. Business model focuses on financing new and used 2W. Growth Strategies Access to funding remains a competitive strength. DBS Vickers Income driven by consumer financing. ADMF has adopted more conservative provisions for loan losses following the implementation of a new accounting practice. which is positively correlated with the numbers on new bookings. But growth has been driven mainly by the strong auto sales.5%. especially outside Java.880 new employees in the year.392 28. Cross-selling opportunities within the group. with the remaining Rp3. This is in line with its strategy to penetrate deeper into several regions nationwide. valued at Rp15. Although the company offers financing for both used and new motorcycle and cars. The company is diversified in terms of auto segment and brands. including a motorcycle dealership. After ADMF went public. as well as bond issues. ADMF hired 3. As of 2011. The second larger contribution is administration income. ADMF has been expanded its network aggressively.5tr worth of bonds with 24-60 months tenure and priced at 7.26m units.00%. Despite the large number of multi-finance companies in Indonesia. One of the reasons is the support of major shareholder. The company tries to maintain asset quality by increasing intensity of collection. Rate (%) 4W (new) 141-143 41 21 13-16 4W (used) 91-93 35 26 15-20 2W (new) 11-12 29 15 27-31 2W (used) 7-9 25 22 31-36 Source: Company Although smaller in ticket size. However. and auto parts retail. ADMF remains one of the strongest. Funding sources. ADMF also bundles its finance products with insurance products by Adira Insurance.75-9. 50% of income was generated from outside Java. NPLs spiked in 2010 and 2011 after a jump in new bookings. with 57% located outside Java. It recently issued Rp2. Linda Rachmat and Yus Winata. Network Expansion 2010 2011 Branch 121 139 Representative Office/Service Point 306 365 Kiosk 103 126 Dealer Outlets 20 23 TOTAL 550 653 24.Industry Focus Adira Dinamika Multi Finance Company Background Strong synergy with BDMN. Avg. The bank channels lending through ADMF and cross-sells other products to ADMF’s customers. NPL ratio should be maintained at below 1. Bank Danamon (BDMN) has since become major shareholder with 95% stake after exercising its call options over the years. a conglomerate with many businesses. but that business unit has been taken over by an affiliate company.5tr to Page 18 . Tenor Deposit (mth) (%) Avg. This is supported by strong auto sales and ADMF’s position as one of the strongest auto financier in the market. improving its approval process. Since 2010. ADMF’s financing activities are funded by borrowing from financial institutions. No material asset quality issues. The largest share of new financing last year was to new motorcycles.0tr. PT Adira Quantum Multifinance. And AMDF has been in the business long enough to be able to manage the related risks. And we can see coverage ratio has been trending up since 2010. doubling the number of service point over four years. which growth resilient at 9% for 2W and 17% for 4W respectively in 2011.

43% 67. but bookings will recover in 2013F.0% 6.5tr worth of bonds by 1H12. funded by joint-finance and bonds.0% 95. There are no consensus estimates for ADMF.0% 90.0% Willy Suwandi Dharma Source: Company. we may see a slowdown in new bookings this year. Given ADMF’s exposure to the 2W market. MoF recently imposed a maximum down payment for auto financing effective Jun 2012.37% Asia Financial (Indonesia) 99. The company employed an additional 3. This gives ADMF plenty of room to borrow and issue bonds to fund growth. to rein in auto sales growth.0% . Valuation ADMF trades at 7. although the impact is still being assessed. but margins will be squeezed by competition. Maximum down payment regulation. DBS Vickers Page 19 10. ADMF will issue Rp3. Consequently. We expect cost of funds to trend down in this low interest rate environment.20% 26. The largest expense item is staff cost.Industry Focus Adira Dinamika Multi Finance be issued within 1H12. higher than its peers given its higher ROE and market positioning within the industry. The 2W market is more sensitive because buyers have lower purchasing power. With 192 competitors by end 2010.2% in 2011.7x FY11 BV.7x FY11 PE and 2. Strong competition. It is guiding for slower bookings due to the new down payment rules and impending fuel price hike. cost-to-income ratio shot up to 60. Prospect Key Risks Operating expenses. The company expects new bookings to reach Rp35tr in 2012.0% 1. The company also has a joint-finance facility with BDMN at 1:99 share. ADMF is expecting a dramatic slowdown. Gearing ratio is well below the maximum 10x imposed by Bapepam. Shareholding Structure Franklin Templeton Investment Funds Public 5. strong competition in the industry had resulted in thinning margins and dwindling asset quality.880 people in 2011 to man its growing network.

0% 2006 2007 2008 2009 Operating Expense (Rp bn) 2010 2011 CIR (%) Net Profit and ROE (%) 3.200 1.0% 10.50 - 2006 20.000 70.5% 0.0% 1.2% 45.0% 500 2011 12.22% 2007 2008 Total Debt (Rp bn) 2009 2010 Gearing Ratio 2011 35.74% 700 4.1% 2009 NPL(Rp bn) Net Interest Income 2.34 0.73% 14.66% 2007 0.81% 12.7% 45.0% 12.0% 20.0% 800 600 20.9% 12.000 NIM (%) Gearing Ratio 8.65% 4.0% 67.60% Asset Quality Measures Contribution of Income per Segment (Dec-11) Bali and Nusa Tenggara Sulawesi 6% 10% 5.7% 1.0% 400 10.8% 2.0% 500 West Java 11% 2.000 1.0% 40.000 2.5% - East Java 12% 3.2% 58.000 66.68 0.500 13.5% 600 3.0% 2.000 1.0% 60.500 10.5% 3.0% 30.0% 17.50 1.0% 1.500 58.000 6.6% 20.0% 1.5% 20.0% 2007 2008 2009 2010 Consumer Financing Income (Rp bn) 50.87% 200 0.0% 80.500 14.4% 1.000 2010 2011 NPL (%) Cost to Income 3.0% 3.0% 38. DBS Vickers Page 20 .43 2.000 5.600 2.5% 400 300 0.500 2006 1.000 0.8% 40.0% 200 - 0.57 1.0% 100 Sumatera 23% 2011 Market Share 2W 4.7% 1.22% 2.000 1.10 4.43 60.00 1.0% 50.17% 800 Greater Jakarta 15% Kalimantan 12% 6.98% 3.0% 2.400 50.0% 52.000 30.4% 2.8% 15.0% Car (used) 11% 8.0% - 0.58% 13.0% Motorcycle (new) 53% 2006 Market Share 4W 2010 4.43% 2008 2009 15.0% 500 - 0.00 10.66% 16.0% 2006 2007 2008 2009 Net Profit (Rp bn) 2010 ROE (%) Source: Company data.95% 1.0% Motorcycle (used) 14% Car (new) 22% 15.000 2.18% 13.0% 2006 2007 2008 25.25% Central Java 11% 0.0% 8.3% 51.Industry Focus Adira Dinamika Multi Finance Market Share (4W&2W) Lending Composition (Dec 2010) 20.24% 1.7% 3.0% 60.800 1.00 0.50 2.

897 (1.6 57.5 19.119 1.3 28.934) (26) 1. Costs & Efficiency (%) Spread 14.0 28.0 2011 Loan gth +/.4 5% 500 - 0% 2007 2008 2009 2010 Net Interest Income 2011 NIM .4 14.212 1.379 (1.049 3.1.0 33.6 17.5 38.3 38.9 Cost-to-Income Ratio 65.6 - 56.945 (2.1% Int Yield +/.932 (464) 1.636) (47) 801 (241) 560 560 2.5 7.4 13.5 9.3 65.7 52.0 - 70.727 758 2.0 Source: Company.8 (23.2 19.331 1.5 ROA Pre Ex.0 7.167 3.0 45.658 (446) 1. Inc / Opg Inc.583 1.485 (1.4 52.3 19.736) (456) 2.3 64.9 20.9 33.2 Net Interest Margin 13.4 20.2 18.500 25% 3.778 1.000 15% 1.6 66.500 2.304 (2.1 9.4 64.254) (33) 1.778 3.6 17.9 14.5 45.212 2. 69.4 45.468 3.1 26.468 1. Inc / Opg inc.000 35.7) 21.500 10% 1.9 Business Mix (%) Net Int.6 69.0 28.4 28.4 29.8 15.000 20% 2.4 Net Profit Gth 20.5 Fee Inc / Opg Income Oth Non-Int Inc/Opg Inc Profitability (%) ROAE Pre Ex. 30.Industry Focus Adira Dinamika Multi Finance Key Assumptions FY Dec Consumer Financing Gth Portion Financed by BDMN Yld.0 12.0 82.0 8.3 7.0 ROA 17.008 2.6 Margins.11.419 (399) 1.1% Net Profit +/. Margins Trend 3.5 ROAE 52.020 1.1 42.583 Growth (%) Net Interest Income Gth 22.0 31.9% Net Profit +/. On Earnings Assets Avg Cost Of Funds Sensitivity Analysis 2007A 2008A 2009A 2010A 2011A 17.7 32.0 12. 17.020 2.1 60.6 - 54.2 55.7 20.7 28.295 5.4 45.8 51.3 19.4 9. DBS Vickers Page 21 Operating expenses to increase along with network expansion and new staff hire.772) (193) 1. 52.7 57.3 52.1% Portion financed by BDMN is trending down Income Statement (Rp bn) FY Dec Consumer Financing I Other Income Total Income Operating Expense Provision Pre-Tax Profit Tax Extraordinary Income Minorty Interest Net Profit Net Profit bef Except 2007A 2008A 2009A 2010A 2011A 1.112 (528) 1.5 Non-Int.3 - 64.7 43.

5 (5.5 3.6) (28.0 20.0 600 500 400 300 200 100 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 Qty Net Profit Net Profit Gth 4Q11 result is weak on the back of higher operating expenses and provision.094 (483) (99) 512 (127) 384 384 667 475 1.0 0.8) 14.0 -30.141 (573) (51) 517 (129) 388 388 728 527 1.0 -20.1 38. Source: Company.0 40.0 -40.427 (783) (179) 465 (116) 3 352 352 8.0 -10.1) 50.Industry Focus Adira Dinamika Multi Finance Quarterly / Interim Income Statement (Rp bn) FY Dec Financing Income Other Income Total Income Operating Expense Provision Pre-Tax Profit Tax Extraordinary Income Minorty Interest Net Profit Net Profit bef Except Growth (%) Net Interest Income Gth Net Profit Gth 4Q10A 1Q11A Quarterly Net Profit & Growth 2Q11A 3Q11A 4Q11A 579 515 1.2 (8.1 0.480 (733) (89) 657 (165) (3) 490 490 784 643 1.255 (646) (137) 472 (118) 354 354 830 650 1.1 15.8 9.0 30. DBS Vickers Page 22 .0 10.

000 0.8 45. Liab.5 0.0 2.000 10% 2007 Liabilities Measure Gearing Ratio Laibility/Equity Source: Company.562 1 75 21 145 44 996 4. Total Debt & Gearing Ratio 12.1 34.00 0.0 57.200 37 260 435 1.0 - Balance Sheet Structure Financing/ Total Asset Debt/Total Liability Borrowings/ Int.000 2.0 1.74 20.5 8.2 1.7 40.652 4.00 1.3 66. Asset Quality NPL / Total Gross Loans NPL / Total Assets Loan Loss Reserve Coverage Provision Coverage Ratio 0% - 57.7 0.50 3.68 1.000 1.302 96 749 225 299 273 1.000 3.82 2007 2008 2009 2010 Total Debt 2011 Gearing Ratio NPL Ratio has improved sharply since 2007.34 0.9 38.6 13. Bonds/ Int.0 1.25 3.805 62 745 899 4.000 40% 30.50 2.50 2007 2008 2009 2010 NPL (%) Page 23 2011 .4 40.2 5.4 39. Bear.821 82 19 155 46 995 3.0 6.600 2.302 474 1.43 2.1 7.7 62.000 1.00 3.4 63.95 5.43 0.000 50% 40.2 0.592 225 677 51 354 370 2. DBS Vickers 2008 2009 Gross Financing 2010 2011 Gross Financing Gth ADMF has been aggressively issuing bonds to reduce dependence on BDMN to fund growth.63 0.000 30% 20.6 78.6 3.905 69 22 151 25 752 3.889 Financial Stability Measures (%) FY Dec 2007A 2008A 2009A 2010A 2011A 60.4 86. Financing (net) Investment Securities Prepaid Expenses Other Receivables Fixed Assets Intangible Asset Other Assets Total Assets 376 1.5 5.4 1.795 7.87 5.950 3.0 10.793 13.Industry Focus Adira Dinamika Multi Finance Gross Consumer Financing & Gth Balance Sheet (Rp bn) FY Dec 2007A 2008A 2009A 2010A 2011A Cash & Cash Eqv.50 1.00 2.535 53 618 548 3.600 2.544 1 136 31 191 35 43 7.241 1 234 123 263 29 205 16.000 20% 10.225 3.24 6.7 23. Liab.8 50.592 487 2.8 7.5 13. Bear.330 50 2.00 2.5 4.000 60% 50.421 16. NPL / Total Gross Loans 4.3 7.8 13.6 21.330 619 6.9 69.7 23.84 0.889 Fund Borrowing Bonds Taxes Payable Accrued expenses Other Liabilities Shareholders' Funds Total Liab& S/H’s Funds 146 1.70 0.000 2.10 1.957 7.2 20.6 59.6 6.

6 758 6 67 1.000 1.26 784 577 577 758 758 12.my Indonesia Research Team +62 21 3983 2668 research@id.0 250. BFIN is committed to expanding its distribution network outside Java and Bali.500 2. Daily Vol. which are eating into NIMs. This is an effort to venture into higher yielding assets and reduce dependence on dealer-generated bookings. (X) Net DPS (Rp) Div Yield (%) ROAE Pre Ex.000 500 - 2008 2009 2010 Relative JCI Index (LHS) 2011 2012 BFI Finance (RHS) Financials and Valuation FY Dec Rp bn) 2010A 2011A 2012F 2013F Pre-prov. Cap (Rpbn/US$m) Major Shareholders Trinugraha Capital (%) Northen Trust S/A AVFC (%) Free Float (%) Avg. Currently. However.079.000 2.52 698 512 512 674 674 20.1 3. finance companies have to fork out higher acquisition costs and have better relationships with the dealers. 5. more than 60% of BFIN’s income is generated from branches outside Java and Bali.5 18. Based on data from BPS.com Price Relative 4.500 4.000 3. BFI Finance (BFIN)’s unique characteristic is its focus on direct financing.8 8.0 3.4 20. are to contact DBSVR at +65 6533 9688 in respect of any matters arising from or in connection with this report.250 .38 Potential Catalyst: Analyst LIM Sue Lin +603 2711 0971 suelin@hwangdbsvickers.000 4.6 4.1 20.000 1.” www.06 B: 1 666 S: N/A 866 H: N/A Consensus EPS (Rp): Other Broker Recs: ICB Industry : Finance ICB Sector: Multifinance Principal Business: BFIN provides financial services such as leasing. At A Glance Issued Capital (m shrs) Mkt. the population outside Java and Bali has been growing more rapidly.dbsvickers.8 20.000  Increasing share of high yielding assets. (%) ROAE (%) ROA (%) BV Per Share (Rp) P/Book Value (x) 463 362 362 476 476 20.450 1.500 8.2 19.Industry Focus BFI Finance Bloomberg: ADMF IJ | Reuters: ADMF. Bloomberg Page 24 “Recipients of this report.com.000 2.000 3. consumer financing and factoring. There are 192 multifinance companies in Indonesia who also have to compete with banks for a slice of the pie.000 7.8 9.4 2. which translate into larger business potential for BFIN.8 19. In order to gain market share.553 1. Competition squeezing margins.com Refer to important disclosures at the end of this report ed: SGC / sa: MA Focus on regions outside Java and Bali. Source of all data: Company.000 1.1 476 10 78 1.4 674 7 56 1.500 6.5 6.6 12.5 559 8 19.725 JCI : 4.dbsvickers.6 7.7 20.592/391 45.6 19.4 18.(‘000) 760 3.) EPS (Rp) EPS Pre Ex. received from DBS Vickers Research (Singapore) Pte Ltd (“DBSVR”). Profit Net Profit Net Pft (Pre Ex.000 3. reducing reliance in dealer-generated bookings  Focus on expanding outside Java and Bali  Competition squeezing NIM in the long run Venturing into direct financing. (Rp) EPS Gth (%) EPS Gth Pre Ex (%) Diluted EPS (Rp) PE Pre Ex.751 1.JK Opportunities in direct financing NOT RATED Rp4.0 45.85 558 425 425 559 559 17.112 1.0 10. DBS Vickers.5 17. BFIN is mitigating this by increasing the share of direct financing in its loan portfolio and developing its network and channels to reduce dependence on dealers.

and we expect this strategic alliance to improve down the road. We also note that Boy Garibaldi Thohir is one of the Commissioners of WOM Finance (WOMF). BTPN. Hanover Leasing subsequently sold its stake to PT Bank Umum Nasional and Essompark Ltd of Hong Kong in 1986. a finance company that focuses on 2W. It also has joint-finance agreements with several banks. Dealers have the power to dictate rates. Furthermore. Focusing on growth outside Java and Bali. Key Risks Recently acquired by Trinugraha Capital & Co. BFIN has only used Rp142bn at end 2011. BFIN’s growth is sustainable. The average asset yield generated from this segment is significantly higher than dealer-generated financing due to additional risks. which will squeeze BFIN’s margins in the long run. Direct financing of used cars can generate average 23% yield. the company will utilise more of this facility. BFIN is looking at 20-25% growth in new bookings with emphasis on higher-yielding segments i. Average financing yield per segment Leasing Dealer generated – used car financing Dealer generated – new car financing Direct – used car financing Direct – motorcycle financing Blended 17-18% 18-20% 16-17% 23-25% 41-42% 21-24% Dependent on bank borrowings. BFIN’s main source of funding is still bank borrowings. Prospect Has not utilised financing facility from BTPN. The Rp1tr facility is non-recourse with 10:90 share. There are 192 multi-finance companies in Indonesia who also have to compete with banks for a slice of the pie.Industry Focus BFI Finance Company Background Over 20 years track record. BFIN then went public and was listed on the Jakarta and Surabaya Stock Exchanges in the same year. Its unique approach to compete is to expand and maintain its market shares outside Java and Bali. became a related company.75%. Expanding into direct financing will also reduce its dependence on dependency on dealer-generated financing. Despite keen competition. Going forward.95%) in BFIN in May 2011 for Rp1. Going forward. to fund growth in consumer financing. Going forward. Source: Company Page 25 . In 1990. BFIN’s business includes leasing. The company started out as a joint venture with Manufacturer Hanover Leasing Company in 1982. dealer-generated new and used 4W financing. at rates of 9. the company was licensed as a multi-finance company and renamed PT Bunas Finance Indonesia. But it plans to increase the share of bond funding by issuing Rp12tr within the next two years.44tr. BFIN is trying to mitigate this by increasing the share of direct financing in its loan portfolio. In order to gain market share. BTPN. One dealership usually accommodates sales persons from several finance companies. More than 60% of BFIN’s income is generated from branches outside Java and Bali. while used motorcycles can yield 41%. Dealers prefer either finance companies that pay high commission rates and offer fast approvals. A consortium comprising TPG Capital. including BTPN. Competition squeezing margins. as well as direct financing for new and used 4W. BFIN has a revolving joint-finance facility from its sister company. and prefer lower rates to encourage sales. financing companies have to fork out higher acquisition costs and have better relationships with dealers. direct financing and leasing of Light Commercial Vehicles (LCV).e.48-15. Dealer generated used cars generate 18% yield after dealer commissions (part of acquisition costs). dealers charge high commission rates. Currently. BFIN has a Rp1tr joint-finance agreement with BTPN. which will squeeze NIMs. This trend should continue along with BFIN’s efforts to expand its distribution network outside Java and Bali. we will see BFIN utilising more of this facility to grow its asset base. Northstar Equity Partners and Boy Garibaldi Thohir bought a controlling stake (44. Growth Strategies Concentrating on higher yielding assets. and develop a network and channels to reduce dependence on dealers. which is also owned by TPG Capital.

09% Public Source: Company. Trinugraha Capital & Co recently bought 45% stake in the company.68% 40.32% Page 26 9. Trinugraha Capital & Co SCA 44. Stock liquidity is thin.0x FY12 P/BV and 5. with free float at 45%. There is only 1 broker covering the stock with a Buy recommendation. with 250m average daily traded volume (3-month average).a. DBS Vickers The Northern Trust S/A AVFC .95% 59.l. BFIN trades at 1. BFIN’s shares are tightly held.Industry Focus BFI Finance Valuation Currently trading at below book value.r.5x FY12 PE based on consensus estimates. BFIN was owned by several shareholders with each owning less than 20%. Shareholding Structure TPG Nusantara S.96% 45. Prior to the acquisition.

0% 2006 2007 2008 2009 2010 Net Profit ROE (%) Source: Company data.20 - 700.40 0.0% 30.0% 2.Dealer. 7% 15.53 1.000.500.0% 200.4% 11.000.80 1.0% 2006 2007 2008 2009 Yield of earning asset 2010 2011 2012F Av cost of funds 2013F NIM Asset Quality Measures Contribution of Income per Segment (Dec-11) 80 Unallocated 14% (Rp bn) 2. 13% 20. 22% 25.1% 15.0% 5.5% 400.Dealer.0%18. Cost of Funds and NIM Lending Composition (Dec 2010) Consumer Financing Used Motorcycle Direct.00 400.0% Leasing HETO.00 NIM Operating Expense Gearing Ratio Cost to Income Net Profit and ROE (%) 6.Industry Focus BFI Finance Avg Earning Asset.18 0.0 1.00 5.43 0.0% 13.0% 10.60 1. 19% 0.00 0.0% - 55.000.200.1% 600. 31% Consumer Financing New Car .0% - 0.0% 16.40 1. DBS Vickers Page 27 .0% 500.8% 14.00 500.00 35.3% 12.000.0 1.0% 55.0 2007 NPL (Rp bn) Net Interest Margin 14.00 2009 2010 2011 2012F 2013F NPL(%) 1.0 2008 Cost to Income 14.00 50.90 3.0% 17.8% 0.000.0% 48.000.8% 1.47 5.80 0.5% 40 1.7%18.4% 13.00 4.000.0% 4.00 10.Direct.000.00 25.0% 2006 0.7% 800.60 0.0% Leasing LCV.0% 200.5% 53.0% 2006 2007 2008 2009 2010 2011 2012F 2013F 2006 2007 2008 2009 2010 2011 2012F 2013F Operating Income 60.8% 47.20 1.99 0.0% 60 50 Sulawesi 18% 1.47 1.0% 6. 8% Consumer Financing Used Car .000.0% 45.7% 49.00 - 0.00 15.0% 1.2% 8.0 2.00 58.00 13.1% 10.0% 10.0% 600.0% 20.5% 10 Sumatera 21% - Kalimantan 14% 2.00 19.6%17.00 40.0% 16.0% 30 20 0.0% 300.0 2006 2007 2008 2009 2010 2011 2012F 2013F Debt Gearing Ratio 1.00 1.0% Consumer Financing Used Car .28 1.5% 70 Java 33% 2.0% 10.0% 100.6% 18.3% 55.0% 42.

4 10.5 32.8 - 80.2 15.1 55.0 10.8 - 83.0 20.0 12.0 20.8 9.7 21.1 7. Inc / Opg Inc.5) 21. Income Statement (Rp bn) FY Dec 2009A 2010A 2011A 2012F 2013F Consumer Financing I 619 49 242 910 (443) (75) 392 (91) 301 301 661 70 192 922 (459) (0) 463 (101) 362 362 850 150 249 1.8 19. On Earnings Assets Avg Cost Of Funds 2009A 2010A 2011A 2012F 2013F (19.6 Fee Inc / Opg Income Oth Non-Int Inc/Opg Inc Profitability (%) ROAE Pre Ex.8 20.5 40.8 55.4 29.0 20.4 19. Margins Trend 700 16% 600 14% 500 12% 10% 400 8% 300 6% 200 4% 100 2% - 9.8 19.6 6.3 58.5 18.0 Margins.8 16.5 6.6 10.3 152.4 Non-Int.570 (872) (15) 683 (171) 512 512 1.0 20.317 248 303 1.8 ROAE 20.3 20.4 49.4 9.3 12.8 ROA Pre Ex.8 17.7 13.867 (1.8 8. 12. 20.6 ROA 12.9 120.5) (41.5 10.4 18.3 10. 73.1 36.8 10.8 Cost-to-Income Ratio 48.0 Leasing has been growing rapidly.6 Source: Company.5 10.8 20.0 19.2 - 20. Costs & Efficiency (%) Spread 11.6 19.248 (690) (29) 529 (104) 425 425 1.0 - 84. Inc / Opg inc.7 Business Mix (%) Net Int.0 11.7) Net Profit Gth 30.8 9.6 7.2 20.1 18.083) (15) 769 (192) 577 577 Leasing Income Other Income Total Income Operating Expense Provision Pre-Tax Profit Tax Extraordinary Income Minorty Interest Net Profit Net Profit bef Except Growth (%) Net Interest Income Gth (3.4 10.0 8.097 225 247 1.5 10.2 10.7 Net Interest Margin 14. DBS Vickers Page 28 Operating Expense increasing in line with network expansion and new staff hire.2 9.6 0% 2009 2010 2011 2012F Net Interest Income 2013F NIM .0 79. 26.3 20.Industry Focus BFI Finance Key Assumptions FY Dec Gross Consumer Financing Gth Gross Leasing Gth Yld.

4 (1.7 (0.Industry Focus BFI Finance Quarterly / Interim Income Statement (Rp bn) FY Dec 4Q10 1Q11 Quarterly Net Profit & Growth 2Q11 3Q11 4Q11 30% 25% 20% 15% 10% 5% 0% -5% -10% 140 120 Leasing Income Other Income Total Income Operating Expense Provision Pre-Tax Profit Tax Extraordinary Income Minorty Interest Net Profit Net Profit bef Except 182 22 51 255 (127) (0) 128 (25) 103 103 193 25 56 274 (148) 126 (25) 101 101 205 33 59 297 (166) (6) 125 (25) 101 101 220 41 61 321 (188) (9) 125 (24) 100 100 231 51 74 356 (188) (14) 153 (30) 123 123 Growth (%) Net Interest Income Gth Net Profit Gth (4. with high net profit growth q-o-q. DBS Vickers Page 29 .5 7.7 Consumer Financing Income 100 80 60 40 20 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 Qty Net Profit Net Profit Gth 4Q is always the strongest quarter.8) 9.5) 8.3 22.6 (0.6) 25. Source: Company.1) 8.

7 1.5 69.90 0.00 0.1 73.60 0.1 97.6 313.6 96.000 2.5 Leasing/ Total Asset Debt/Total Liability Borrowings/ Int.000 3.0 76.018.4 1.8 132. Bear.059.000 Cash and Cash E i l t Leasing (net) Consumer Financing ( t) Fixed Asset Derivative Receivables Deferred Tax Asset Other Assets Total Assets 166 167 1.400 1.807 145 6 6 61 3.2 92.18 1.345 220 44 5 68 7.5 1.366 5.195 4.1 20.56 Source: Company.852 7.666 204 40 4 75 5.1 7.5 76.272 23 71 63 3. Asset Quality NPL / Total Gross Loans 0.4 Gearing ratio is well below Bapepam’s cap. DBS Vickers 6.127 1.941 3.908 1.2 0.720 Financial Stability Measures (%) FY Dec 2009A 2010A 2011A 2012F 2013F Balance Sheet Structure Consumer Financing/ Total Asset 80.4 95.197 1.0 59.52 1.2 90. Liab.870 231 1.7 0.2 103.5 1. 0.8 82.5 Provision Coverage Ratio (1.870 2.24 1.20 1.085 3.313 5.40 0.58 NPL / Total Gross Loans 2012F Gross Leasing 2013F Gross Financing Gth 1.534 2.43 Laibility/Equity 0.60 1.2 78.305 1.5 424.000 1.000 800 600 400 200 - 150% 100% 50% 0% -50% -100% 2009 2010 2011 72.200 1.8 60.20 2009 2010 2011 2012F NPL (%) Page 30 2013F .Industry Focus BFI Finance Gross Consumer Financing & Gth Balance Sheet (Rp bn) FY Dec 2009A 2010A 2011A 2012F 2013F 50% 40% 30% 20% 10% 0% -10% -20% -30% 7.9 115.8 NPL / Total Assets 0.393 1.7 425.8 Loan Loss Reserve Coverage 1.720 Fund Borrowing Bonds Taxes Payable Accrued expenses Other Liabilities Shareholders' Funds Total Liab& S/H’s Funds 657 25 75 102 1.600 1.000 2009 2010 2011 2012F Gross Financing 2013F Gross Financing Gth Funding still dependent on borrowings Gross Leasing & Growth 200% 1.593 159 21 73 84 1.916 55 12 27 50 2.393 334 511 2.80 0.3 72.4 16.060 22 67 70 2.208 231 48 5 71 8.320 1.843 1.000 4.3 690.47 1.1 0.800 1.7 15.1 0.3) Liabilities Measure Gearing Ratio 0.99 1.5 13.384 8.40 1.316 482 21 64 56 2.53 1.305 3.197 3.000 5.

000 400 1. CFIN’s loan growth has been robust for the past five years. DBS Vickers.com.500 300 1. Yields are similar to consumer financing.5 402 1.my  Expect resilient year despite global economic headwinds Indonesia Research Team +62 21 3983 2668 research@id. bank borrowings.” www.4 7.0 12.38 Business as usual Potential Catalyst:  Top revenue contributor is leasing.000 600 2.Industry Focus Clipan Finance Bloomberg: BBCA IJ | Reuters: BBCA. Ticket size is this segment is significantly larger than in consumer financing.dbsvickers.1 8.3% in FY11.0 5 0. but seeking to increase bond issuance Analyst LIM Sue Lin +603 2711 0971 suelin@hwangdbsvickers. Source of all data: Company. (Rp) EPS Gth (%) EPS Gth Pre Ex (%) Diluted EPS (Rp) PE Pre Ex.5 497 1. Bloomberg Page 31 “Recipients of this report. and expects to issue more in 2012. (X) Net DPS (Rp) Div Yield (%) ROAE Pre Ex. Daily Vol. Expect loan growth to remain resilient. it issued Rp1tr worth of bonds at end 2011. (%) ROAE (%) ROA (%) BV Per Share (Rp) P/Book Value (x) 2008A 2009A 2010A 2011F* 122 75 75 28 28 (28.3 193 113 113 43 43 51. the largest source of funding is bank borrowings.82 45.0 445 1. Cap (Rpbn/US$m) Major Shareholders PT Panin Financial (%) Voltraint No 1103 Pty Ltd(%) Free Float (%) Avg.) EPS (Rp) EPS Pre Ex.9 10.Moving into 2012.5) 28 18. received from DBS Vickers Research (Singapore) Pte Ltd (“DBSVR”). It is expecting assets to grow by Rp5tr and net profit by c.com Refer to important disclosures at the end of this report ed: SGC / sa: MA Leasing contributes 50% of revenue. Currently.0 9.dbsvickers. Profit Net Profit Net Pft (Pre Ex. Funding not an issue yet.500 900 4. are to contact DBSVR at +65 6533 9688 in respect of any matters arising from or in connection with this report.0 14.9 4.500 500 2.1 57 9.1 43 11.000 200 500 100 - 2008 2009 2010 Relative JCI Index (LHS) 2011 2012 Clipan Finance (RHS) Financials and Valuation FY Dec (Rp bn) Pre-prov.079.65 8.1 12.5 561 0.1 33.500 700 3.1 7. The company has several funding sources: channeling with PNBN.642 1.(‘000) 2.5) (28.0 269 201 201 76 76 33. driven by leasing and consumer financing.7 15 0.1 10. followed by consumer financing  Funding growth with bank borrowings.925/210 44.000 800 3.6 76 6.com Price Relative 4.9 Consensus EPS (Rp): N/A N/A 409 Other Broker Recs: B: 1 S: 0 H: 0 *Based on DBSV estimates ICB Industry : Financials ICB Sector: Banks Principal Business: CFIN provides leasing and consumer financing services. It also expects more contribution from factoring unit in the year. averaging Rp500m. it expects to see the similar growth.JK NOT RATED Rp510 JCI : 4.68 38.9 9. and bond issuance.1 51.1 224 150 150 57 57 33. However.6 33. At A Glance Issued Capital (m shrs) Mkt.681 .4 14.

CFIN offers the following: consumer financing for new and used cars. Japanese vehicles have better resale values and see stronger used car demand. Looking ahead.25% for 25-36 months. It finances mainly non-sedan Japanese vehicles (c. which makes up 53. Key Risks NIM pressure due to competition. 9. which have excellent resale value in the secondary market. the company has a revolving facility of Rp600bn with PNBN that charges 9. CFIN prefers this option rather than joint-financing to grow its asset base.9bn of the facility. PT Clipan Finance Indonesia Tbk (CFIN) started out in 1982 as a joint-venture company between Credit Lyonnais of France and PT Bank Pan Indonesia (PNBN). it focuses on Greater Jakarta. PNBN channels loans through CFIN. it raised Rp1. CFIN wants to expand outside Java with plans to open 5-10 branches this year. The company plans to issue more bonds in 2012. In leasing.3tr of its funds were from PNBN and Bank Danamon (BDMN). lease financing. Gearing ratio is below 1x. Credit Lyonnais’ stake in CFIN was acquired by PNBN.8x FY12 P/BV and 6. There is only 1 broker that cover the stock with a Buy recommendation.Industry Focus Clipan Finance Company Profile Network Expansion Bank Pan Indonesia is major shareholder.4% of its total portfolio.25% for 12 months. But with cost of funds trending down. Its plan is to open a few main branches in large cities. we expect equal weighting between bank borrowings and bond issuance to finance growth. CFIN provides short term financing for corporate clients. Geographically. Rp2. Consumer financing: focus on Greater Jakarta. Like its peers in the industry. with effective annual interest rate of 10.0x FY12 PE based on consensus estimates. At end 3Q11. Factoring business started in 2007. In 1990. Trading volume for CFIN is rather limited with only 8m average daily traded volume (3-month average) Page 32 .75% for 13-24 months and 10. The company has a channeling agreement with PNBN.5tr from bonds and a right issue. As of 3Q11. its major shareholder. mainly to loans for used cars through dealers. In 2011. since consumer financing is a dealer generated business. Most of its factoring business is derived from referrals from PNBN. and factoring of short term bills or receivables of companies for domestic trade transactions. Caterpillar and Kobelco.85% of total portfolio). its portfolio comprises mainly the following brands: Hitachi. Yields are 2 to 3% higher than for consumer financing. CFIN became a listed company and in 1997. CFIN has also ventured into the higher-yielding business by providing direct financing for used cars. Typically a land or building is used as collateral. In line with its principal business. CFIN has used Rp107. charging them 16% annually. 2010 3Q11 Branch 18 18 Marketing Office 10 14 TOTAL 28 32 Employees 654 843 Source: Company Growth Strategies Diverse multi-finance business. This segment typically sees 20% repeat business. Most of its borrowing is from PNBN. and then try to penetrate the region with smaller branches in smaller cities. and another four branches and 189 employees in 2011.74%. CFIN tries to diversify its loan portfolio. CFIN believes it can maintain margins going ahead. and the average tenure is 18 months to 2 years. Its focus is consumer financing. Going forward. Valuation CFIN currently trades at 0. Moreover. Prospects Funded by borrowings. CFIN is starting to feel slight NIM pressure due to competition. In order to manage credit risk. at fixed rates and loan tenures of 1-4 years. Currently. New bookings grew in 2011 after it expanded it added five branches and 144 employees in 2010. dealer incentives or acquisition costs are also eating into margins. Komatsu. In expansion mode. allowing plenty of room for CFIN to take on more debt. The term of financing is more than 91 days and less than a year. which has since been its major shareholder.

07% 54.Industry Focus Clipan Finance Shareholder Structure Morgan Stanley & Co Intl PLC Mellon Bank NA S/A 8.56% 31. DBS Vickers Page 33 6.02% Public .35% Source: Company.

00 9.0% 10.5% 10.20 200 8.0% 2006 2010 NPL (%) Cost to Incomel 400.0% 2006 2007 2008 Yield of earning asset Contribution of Income per Segment (Sep-11) 2009 Av cost of funds 2010 NIM Asset Quality Measures 20.50 600 150.0% 14.30 400 0.0% 11.5% 12.2% 45.00 2007 Total Debt (RHS) 2008 2009 2010 Gearing Ratio (LHS) 14.0% 0.00 2.0% 50.0% 8.1% 33.0% 40.40 2006 35.60% 8.20% 18.0% 30.6% - 0.1% 11.0% 7.0% Consumer Financing.80% 12.00 10.00 0.0% 50.0% 50.0% 44.200 0. CFIN has yet to release its FY11 results.00 140.000 250. 52% 6.0% 4.5% 11.4% 9.0% 200.40% 6.0% 12.00 60.00 8.60 800 0.70 1.00 Factoring 13% 1.0% 350.0% 2006 NIM (%) 55.0% 100.0% 250.00 0.00 - 50.0% Leasing.Industry Focus Clipan Finance New Bookings Composition (2011) Asset Yield.1% 2009 2010 2007 2008 Operating Expense Cost to Income Net Profit and ROE (%) Gearing Ratio (Rp bn) (x) 1.0% 2.00 14.6% 11.0% 100.00 6. 33% 0.00 300.00% 16.00 0.00 13.00 20.00 0.0% 10.6% 0. DBS Vickers Page 34 .0% 150.0% 2006 2007 2008 Net Profit 2009 2010 ROE (%) *At the time of this report is published.00 100.00 120.00 6.00 40.00 0.80 0.00 2009 2007 2008 Interest Income 2009 2010 160.00 0.0% 4.00 Consumer Financing 36% 0.20% 2.00 80.00 1.0% 10.0% 9.0% 32.00 Leasing 51% 4.00% 2006 2007 2008 NPL (Rp bn) Net Interest Income 14.5% 40. Cost of Funds and NIM Factoring. Source: Company data.10 - 16. 15% 16.0% 2.0% 12.00 4.00 200.2% 0.

4 7.5 7.4 Page 35 2009 2010 Net Interest Income 18.8 70.6 48.4 (7.0 7.5 19.1 Net Interest Margin 9.1 4.6) 11.6 11.9 11.1 72. Inc / Opg inc.1 10.0 - 9.5 *) FY2011 Financial statement is not yet published Source: Company.1 Fee Inc / Opg Income Oth Non-Int Inc/Opg Inc Profitability (%) ROAE Pre Ex.0 37. 18.5 44.5 32.1 Cost-to-Income Ratio 50.5 4.9 21.5 8.1 10.9 (23.6 9.1 3.1 68.9 10.4 14.6 6.0 40. 81.6 (1.0 (2.3 7.9 4.1 27.1 - 80.4 33.Industry Focus Clipan Finance Key Assumptions FY Dec Gross Consumer Financing Gth Gross Leasing Gth Yld.1 8.5 1.6 Business Mix (%) Net Int.7) 11.5 10.1 12.9 33. On Earnings Assets Avg Cost Of Funds 2006A 2007A 2008A 2009A 2010A 36. Costs & Efficiency (%) Spread 14.7) 15.0 16.7 ROA Pre Ex.0 11.7) Net Profit Gth (5.9 9.6 51. 11. 6.3 116.5 14.0 12. Income Statement (Rp bn) FY Dec Consumer Financing Income Leasing Income Factroring Income Other Income Total Income Operating Expense Provision Pre-Tax Profit Tax Extraordinary Income Minorty Interest Net Profit Net Profit bef Except 2006A 2007A 2008A 2009A 2010A 49 77 28 154 (78) (7) 69 (19) 50 50 65 83 2 69 218 (96) (28) 94 (20) 75 75 76 151 28 68 323 (131) (34) 158 (45) 113 113 69 145 52 64 329 (106) (21) 202 (52) 150 150 137 158 44 64 403 (133) (4) 265 (64) 201 201 Margins Trend 250 1400% 1200% 200 1000% 150 800% 100 600% 400% 50 200% 0% 2007 Growth (%) Net Interest Income Gth (5.9 Non-Int. Inc / Opg Inc.1 1.4 123.3 Growth of consumer financing segment has been resilient.5 31.2 2.9) Margins.5 - 84.4 ROA 6.5 4.6 33.7 ROAE 11.1 7.0) 2.0 9. DBS Vickers 2008 2011 NIM .5 - 78.4 12.

8 3.4) 11.2 0% (50) -100% 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 -200% (100) -300% (150) -400% (200) -500% (250) -600% Qty Net Profit Net Profit Gth Booked strong profit in Q1 *) FY2011 Financial statement is not yet published Source: Company.4 26.0 (66.7 9.7 9. DBS Vickers Page 36 .0 21.5 297.Industry Focus Clipan Finance Quarterly / Interim Income Statement (Rp bn) FY Dec 3Q2010 4Q2010 Quarterly Net Profit & Growth 1Q2011 2Q2011 3Q2011 100 100% 50 Consumer Financing I Leasing Income Factoring Income Other Income Total Income Operating Expense Provision Pre-Tax Profit Tax Extraordinary Income Minorty Interest Net Profit Net Profit bef Except 37 42 8 13 99 (36) 3 66 (16) 50 50 52 38 14 9 113 (41) (7) 66 (16) 50 50 67 41 24 20 152 77 (6) 222 (22) 200 200 78 38 28 20 164 (72) (3) 89 (22) 67 67 91 42 28 19 180 (81) (7) 93 (23) 69 69 Growth (%) Net Interest Income Gth Net Profit Gth 25.1 0.

Industry Focus Clipan Finance Gross Consumer Financing& Gth Balance Sheet (Rp bn) FY Dec 2006A 2007A 2008A 2009A 2010A Factoring (net) Leased Asset Fixed Asset Short Term Investment Deferred Tax Asset Other Assets Total Assets 33 427 281 12 11 10 4 779 26 856 377 102 11 11 262 15 16 1.120 1.1 91.110 1.3 0.3 0.607 378 24 15 43 1.8 89.674 117 880 294 259 10 15 18 6 10 1.50 0.9 15.1 34. Liab.4 13.3 41.5 10.5 62.150 1.0 0. Bear.4 21.40 0.080 1.070 100% 50% 0% -50% -100% -150% 2007 Balance Sheet Structure Consumer Financing/ Total A t Leasing/ Total Asset Factoring/Total Asset Debt/Total Liability Borrowings/ Int.1 86.5 57.3 801.3 209.1 89.1 7. DBS Vickers 2010 Gross Financing 2011 Gross Financing Gth Gross Leasing & Growth 150% 1.607 31 866 494 270 9 13 74 2 11 1.6 0.7 0.4 0.062 1.7 73.8 93.1 18.140 1.5 51.3 54.9 48.090 30 12 82 1.771 1.7 81.3 35.3 0.10 2007 2008 2009 NPL (%) Page 37 2010 2011 .7 16.200 1.30 0.694 Cash and Cash Equivalents Leasing (net) Consumer Financing (net) Financial Stability Measures (%) FY Dec 2006A 2007A 2008A 2009A 2010A 1.3 25.771 26 927 1.108 567 11 18 15 2 20 2.5 22.9 0.0 0.9 0.1 54.694 Fund Borrowing Bonds Taxes Payable Accrued expenses Other Liabilities Shareholders' Funds Total Liab& S/H’s Funds 84 223 7 6 9 449 779 381 149 4 8 71 1.130 1. Asset Quality NPL / Total Gross Loans NPL / Total Assets Loan Loss Reserve Coverage Provision Charge-Off Rate Liability Measures 2009 2008 2009 2010 Gross Leasing 2011 Gross Leasing Gth NPL / Total Gross Loans 0.400 1.481 2.1 0.175 1.3 82.3 27.9 *) FY2011 Financial statement is not yet published Source: Company.9 15.7 301.0 5.60 0.600 1.3 82.1 6.8 0.3 36.312 1.3 778.000 800 600 400 200 - 150% 100% 50% 0% -50% -100% -150% 2007 2008 Gearing Ratio Laibility/Equity 36.0 0.8 0.20 0.090 1.100 1.3 91.674 395 6 14 18 1.2 619.2 0.

from an average of 15k units a month to 4k units.000 /57 62. are to contact DBSVR at +65 6533 9688 in respect of any matters arising from or in connection with this report.00 503. WOMF had been focusing on cleaning up its loan portfolio.0 (269) (1.000 700 3.0 17. Lack of expertise in used 2W financing and strong growth of 2W financing in 2010 caused its asset quality to deteriorate in 2011. Cost of funds is still high and averaging above its asset yields. Cap (Rpbn/US$m) Major Shareholders Bank Internasional Indonesia (%) PT Wahana Makmur Sejati (%) DBS Nominees (%) Free Float (%) Avg.com.my  Expect strong growth after slowdown this year Indonesia Research Team +62 21 3983 2668 research@id. Profit Net Profit Net Pft (Pre Ex. During the year. Asset quality might improve. (Rp) EPS Gth (%) EPS Gth Pre Ex (%) Diluted EPS (Rp) PE Pre Ex.0 25.00 17.7 255 96.6 301 0. Going forward. Bloomberg Page 38 “Recipients of this report. asset yield will be flat.500 400 2.2 69 3. At A Glance Issued Capital (m shrs) Mkt.dbsvickers. And with its car financing generated by auto dealers.000 200 500 100 0 2008 2009 2010 Relative JCI Index (LHS) 2011 2012 WOM Finance (RHS) Forecasts and Valuation FY Dec (Rp bn) Pre-prov. Source of all data: Company. received from DBS Vickers Research (Singapore) Pte Ltd (“DBSVR”).000 530.079. In 2011.a B: 0 n.a H: 0 ICB Industry : Financials ICB Sector: Banks Principal Business: WOMF concentrates in providing financing for new and secondhand motorcycles. Daily Vol.500 1.com Price Relative 4.500 600 3.00 21.851 . WOMF will further improve loan quality from point of origination.3 477 180.000 500 2. (X) Net DPS (Rp) Div Yield (%) ROAE Pre Ex.000 300 1.0 25. and is generating negative spreads.) EPS (Rp) EPS Pre Ex.2 127.38  Rising cost of funds pressuring NIM Potential Catalyst:  Asset quality is improving.(‘000) 2. WOMF expects new 2W loans to improve to industry growth rate.3) (107. And loans for 2W financing slowed down significantly.7 525 0. And due to tight competition.8 121 45.8 65.9 30 8. (%) ROAE (%) ROA (%) BV Per Share (Rp) P/Book Value (x) 2008A 2009A 2010A 2011A 314 21 21 10 10 (107.500 800 4.2 25.1) (96.0 25. it wrote of Rp161bn worth of bad debt.3) 10 25. DBS Vickers.” www. However. exposure in books due to 2010 legacy loans Analyst LIM Sue Lin +603 2711 0971 suelin@hwangdbsvickers.24 5. and will continue to train employees who are involved in used 2W financing.0 25.8 25.dbsvickers. asset yield is also squeezed by dealer commissions.0) Consensus EPS (Rp): Other Broker Recs: n.8 65. there is risk from the implementation of minimum down payment and impending increase in fuel price.6 140 52.Industry Focus WOM Finance Bloomberg: BBCA IJ | Reuters: BBCA.5 280 61 61 30 30 192.3 186 5 5 3 3 (96.1) 3 98.com Refer to important disclosures at the end of this report ed: SGC / sa: MA NIM squeezed by higher cost of funds. Going forward. and that was reflected in slower loan growth.JK No way but up NOT RATED Rp265 JCI : 4.9 192.4 207 1.9 285 138 138 69 69 127.a S: 0 n.0 23.8 17.0 18. Expect turnaround.

75 4 11-Nov-07 Bonds IIA 30-May-05 190 12. it wrote off Rp161bn worth of bad debt. although the magnitude is still being assessed by management. it was acquired by a consortium comprising Bank Internasional Indonesia (BNII). It does not plan to expand into car financing to avoid competing directly with its major shareholder.60 10. During the year. Indonesia’s auto industry saw strong growth in 2010. with new car sales growing 57% and motorcycles sales up 26%. After listing in 2004. Growth Strategies Focus on financing new and used motorcycles. Yamaha and Suzuki.200bps over the last two years to 10. Although gearing is still well below the 10x maximum set by Bapepam-LK and industry average of 8. And due to tight competition. Interest rate on borrowings has dropped by c. BNII. Cost of funds is still high and averaging above its asset yields.625 4 29-May-11 Bonds IVC 29-May-07 590 12. asset yield will be flat. International Finance Corporation (IFC) and DBS Nominees Pte Ltd.00 4. which was reflected in slower loan growth that year. In 2011.15 3 7-Jun-09 Bonds IIIC 24-May-06 160 15.5 29-Nov-11 MTN I 10-Aug-10 200 9. it broadened its market by offering financing for new and used motorcycles. The consortium currently holds 67% stake in the company. it is trending up. after recovering from negative growth in 2009.75 2 7-Jun-07 Bonds IIB 30-May-05 140 13. Key Risks Gearing has always been high.35 4 7-Jun-10 Bonds IVA 29-May-07 225 11. albeit smaller than 2009’s Rp221bn following the global financial crisis.00 4 9-Mar-14 9-Mar-13 9-Mar-15 Source: Bloomberg. from an average of 15k units a month to 4k units. Asset quality issue due to strong 2010 auto sales. Going forward. Lack of expertise in used 2W financing and strong growth of 2W bookings in 2010 caused its asset quality to deteriorate in 2011.90 4 7-Jun-09 Bonds IIIA 24-May-06 200 14.14x.2512. It expects negative impact from the implementation of minimum downpayment regulation.75 1 9-Mar-12 Bonds VB 4-Mar-11 Bonds VC 4-Mar-11 120 366 9. Corporate Bonds and MTN Issuance Issue Date Nominal value Coupon Rate (%) Tenure (years) Maturity (Rp Bn) Bonds IA 4-Nov-03 150 13.50 1.50 3 11-Nov-06 Bonds IB 4-Nov-03 150 13.25 3 7-Jun-08 Bonds IIC 30-May-05 170 13. Going forward. WOMF focused on cleaning up its loan portfolio. and is generating negative spreads. and continue to train employees who are involved in used 2W financing.Industry Focus WOM Finance Company Profile Started out as a financing new Honda motorcycles.30 2 3 Bonds VD 4-Mar-11 620 11. and specialised in providing financing for new Honda motorcycles.00%. In line with its principal business. WOMF provides financing for new and used motorcycles through dealers. WOMF will try to improve loan quality from the point of origination. And with its car financing generated by auto dealers. Gearing up after cleaning up books. Company NIM is squeezed. And loans for 2W financing slowed down significantly. PT Wahana Ottomitra Multiartha Tbn (WOMF) was established in 1982 as PT Jakarta Tokyo Leasing. Page 39 . Its funding is mainly from bond issuance and borrowings.25 3 29-May-10 Bonds IVB 29-May-07 185 11.85 2 7-Jun-08 Bonds IIIB 24-May-06 465 15. asset yield is also squeezed by dealer commissions.5 16-Feb-12 MTN II 30-Aug-10 150 9. mainly Honda.25 1 20-Sep-11 Bonds VA 4-Mar-11 294 8. In 2001. WOMF expects new 2W loans to improve to industry growth rate.

But it expects some 4W users to shift to 2W after the fuel price hike.33% DBS Nominees Pte Ltd 2.Industry Focus WOM Finance Prospects Concerns on new policies.96% 54.24% . and sales will slow down. WOMF’s free float is 21% while its trades at 503m average daily traded volume (3-month average). Its management is still assessing the impact.76% Wahana Makmur Sejati 17. Valuation WOMF trades at 1. Shareholding Structure Mayban Offshore Corporate Services (Labuan) Sdn Bhd Sorak Financial Holdings Pte Ltd 42.2x FY11 P/BV while its PE is meaningless after recording significantly depressed profits in FY11 of only Rp5bn as it was faced with asset quality issues. 70% of WOMF’s loan portfolio originates from Java and 25% from Sumatera. In the past year. 2W market demand will be more sensitive to this new policy. MoF recently issued a regulation on minimum down payment for 2W and 4W. And since WOMF focuses solely on 2W.00% Public Source: Company. DBS Vickers Page 40 5. so the forecast 33% increase in fuel price will not increase expenditure severely. because buyers have substantially lower purchasing power. There are no consensus estimates for WOMF. In terms of car brands. Typical 2W fuel consumption is only 25 litres a month. WOMF maintains equal weightings for Honda and Yamaha in its portfolio. Expanding outside Java. to be effective three months form now. Currently. Honda’s weighting had increased because the floods in Thailand disrupted the supply of Yamaha vehicles.00% 15. Going forward. it expects to increase the share of loans from outside Java. WOMF is less concerned about the increase in fuel price. it will feel the impact of slower bookings during the year.71% 62.

500 10.000 4.600 6.0% (350) -120.0% 1.00 2008 1.00 8.4% 17.0% 28.0% 0.0% 87.0% 93.3% 3.0% 20.6% 100 4.6% 3. Kalimantan and Sulawesi 21% 7.Industry Focus WOM Finance New Booking Composition (2011) Cost of Funds. Source: Company data.0% (100) 2.500 2009 Cost to Income 6.77 2. Asset Yield and NIM Motorcycle (new) 90% Motorcycle (used) 10% 36.0% -60.5% 5.0% 12.4% 140.0% 800 3.0% 32.0% -110.0% 4.0% 23. Bali.6% 14.3% 5.0% 14.0% 600 Sumatera 17% 8.0% 5.0% 2006 1.00 12.0% 60.4% 2006 0.00 150 (200) - (250) Total Debt (Rp bn) 2009 2010 2011 Gearing Ratio 2006 2007 2008 2009 2010 -20.8% 2006 17.4% 6.5% -100.5% 50 (50) 40.500 2007 Jabotabek 32% 6.0% 1.0% 20.80 5.0% 100 900 2011 Asset Quality Measures* West Java 10% Central Java 20% 18.0% 0.8% 18.0% 2006 2011 2007 2008 2009 2010 Operating Expense (Rp bn) NIM (%) Gearing Ratio 120.6% 5.000 4.0% 18.0% 400 2011 CIR (%) Net Profit and ROE (%) 14.0% 100.0% 97.0% 1.86 8. DBS Vickers Page 41 .0% 3.0% 400 6.61 3.0% 12.0% 200 East Java.7% -80.72 3.0% 16.0% (150) (300) 20.0% 500 1.0% Net Profit (Rp bn) ROE (%) *)NPL Data is only available up to 2010.0% 80.0% 2007 2008 NPL (Rp bn) 5.400 1.0% 200 1.2% 88.000 2006 2010 1.0% - Net Interest Income 800 2.0% 700 600 3.0% 14.2% 14.0% 700 9.00 2.0% - 40.200 5.00 6.0% 32.6% 200 100 2008 2009 2010 Consumer Financing Income (Rp bn) 132.0% 500 7.2% - 500 2007 7.0% 200 0.0% 21.0% -40.0% 300 4.00 - 30.6% 15.0% 600 2.3% 99.0% 8.0% 0.0% 24.000 300 1.36 3.0% 400 1.6% 2007 2008 Asset Yield Contribution of Income per Segment (Dec-11) 2009 2010 Cost of Funds NIM 10.3% 6.5% NPL (%) 1.000 12.

8 2.1) (2.8 3.4 2.9 36.0) ROA (6.191 (1.1) 6.3 80.2) ROA Pre Ex. Inc / Opg inc. (64.8 0.1 0.6) 5.492 (1.0) Source: Company.388 (1.1 - 45.8 63.023) (276) 38 (17) 21 21 636 751 1.Industry Focus WOM Finance Key Assumptions FY Dec Consumer Financing Gth Portion Financed by JF Yld.000 6% 800 5% 600 4% 400 3% 2% 200 (6.7 28.2 15.108) (187) 93 (32) 61 61 554 938 1.5 47.9 52.5 14.9) 127.2 34.9 (9.1 54.8 6.0) 3.6 Business Mix (%) Net Int. .3) (25. Income Statement (Rp bn) FY Dec Consumer Financing I Other Income Total Income Operating Expense Provision Pre-Tax Profit Tax Extraordinary Income Minorty Interest Net Profit Net Profit bef Except 2007A 2008A 2009A 2010A 2011A 917 273 1.3 18.0) 6.7 34.6 19.1) Margins.5) 192.2 17.2 1.0 Majority of financing is done by joint financing.2 62.653 (1.8 (6.4 6.8 7.7 (10.6 0.338 (1.8 21.4 (96. DBS Vickers Page 42 Margins Trend 7% 1.9 14.8 55.467) (170) 16 (10) 5 5 Growth (%) Net Interest Income Gth 3.0 Non-Int.7 3.0 14. Costs & Efficiency (%) Spread (7. 77.207) (91) 194 (56) 138 138 745 908 1.2) ROAE (64.0) Net Interest Margin 1.6 17.5 (3.7) 55. 23.9 54.9 (12.6 31.0 23. (6.1 - 37. On Earnings Assets Avg Cost Of Funds 2007A 2008A 2009A 2010A 2011A 15.8 - 45.091) (486) (386) 104 (282) (282) 854 483 1.4 12.6 Cost-to-Income Ratio 91.2 0. Inc / Opg Inc.0 Fee Inc / Opg Income Oth Non-Int Inc/Opg Inc Profitability (%) ROAE Pre Ex.4 79.9) (107.5 88.8 19.8 1.5 Net Profit Gth (410.9 - 7.1 1% - 0% 2007 2008 2009 Net Interest Income 2010 2011 NIM 2011 Result is weak due to cleaning up of books.4 34.6 76.

9 (183.Industry Focus WOM Finance Quarterly / Interim Income Statement (Rp bn) FY Dec Consumer Financing I Other Income Total Income Operating Expense Provision Pre-Tax Profit Tax Extraordinary Income Minorty Interest Net Profit Growth (%) Net Interest Income Gth Net Profit Gth 4Q2010 155 221 376 (331) (29) 16 (6) 10 (0.3) 1Q2011 177 203 381 (338) (36) 7 (3) 4 14.0) Quarterly Net Profit & Growth 2Q2011 181 221 402 (365) (39) (3) (1) (4) 1.0) (77.1 (56.0) (138.6 142. DBS Vickers Page 43 .2 50 200 150 40 100 30 50 0 20 -50 -100 10 -150 (10) 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 Qty Net Profit -200 -250 Net Profit Gth Contribution from ‘other income’ is larger than consumer financing income Source: Company.1) 4Q2011 210 245 455 (403) (45) 7 (3) 3 18.9) 3Q2011 177 239 416 (362) (50) 5 (3) 1 (2.

500 10.0 - 2013F 2007 2008 2009 2010 Total Debt Balance Sheet Structure Financing/ Total Asset Debt/Total Liability Borrowings/ Int.84 5.4 19.500 6.122 4 60 1.029 2.157 1 53 3 592 336 2.2 9.573 134 3.1 47.65 3.48 16.000 10% 6. Asset Quality NPL / Total Gross Loans NPL / Total Assets Loan Loss Reserve Coverage Provision Charge-Off Rate 90.090 80 34 68 3 54 2.7 83.1 4.45 4.000 40% 12.00 8.9 56.9 7.000 8.0 3.a Liabilities Measure Gearing Ratio Laibility/Equity 12.000 0% 4.a n. Liab.00 2.95 Source: Company.000 -20% 2007 2009 2010 Gross Financing 2011 Gross Financing Gth Consumer financing is balance sheet driver.0 2.8 6.000 30% 10.86 6.9 n.01 13.00 6. Bear.7 19.433 243 2.8 10.0 1.29 10.2 3.260 459 3.96 23.2 61.a n. Bonds/ Int.36 17. Liab.0 2.599 309 3.4 10.49 8.07 18.77 22.5 62.7 87.77 11.2 14.0 1.907 1.2 70.258 152 59 33 47 1 66 4.246 255 4.6 85.2 20.163 133 35 95 39 3.573 649 349 774 1 49 59 1.31 8.0 500 2009A 2010A 2011F 2012F 0.0 2. DBS Vickers 2008 2011 Gearing Ratio Gearing ratio in average is always high.7 24.433 431 1.000 12.500 14.a n.3 51.000 -10% 2.00 4.61 7.261 186 43 93 15 3.788 1 49 689 276 3.3 66.net Other Liabilities Shareholders' Funds Total Liab& S/H’s Funds 2007A 2008A 2009A 2010A 2011A 101 4.Industry Focus WOM Finance Gross Loan& Growth Balance Sheet (Rp bn) FY Dec Cash and Cash Equivalents Consumer Financing (net) Prepaid Expenses Other Receivables Fixed Assets (net) Deferred Tax Asset Derivative Receivable Other Assets Total Assets Fund Borrowing Medium Term Notes Bonds Taxes Payable Accrued expenses Deferred tax liabilities .7 24. NPL / Total Gross Loans 10. Bear.397 1 33 69 918 437 3.8 23.000 4.6 81.44 13.907 Financial Stability Measures (%) FY Dec 14.00 2007 2008 2009 NPL (%) Page 44 2010 .72 6.5 40. Total Debt & Gearing Ratio 3.599 851 200 1.000 20% 8.925 96 44 47 29 43 47 3.716 629 1.716 202 2.9 49.

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