SEKURITAS

COMPANY RESEARCH Wednesday, 28 September 2022

BUY Bank Amar Indonesia (AMAR)

Target Price Rp460 Potential New Segment from Cooperation with Investree
Current Price Rp228 AMAR could gain benefit from cooperation with its new investor,
Upside +102.1% Investree, main player in peer-to-peer lending. Investree has different
target market in SME loan segment. This should help AMAR which now is
enjoying growth in consumer digital loan segment. In 2016-2021 AMAR
Description
saw 95% CAGR in its digital loan product. We expect net profit to grow by
Sector Financial
17.4% CAGR in 2023-2027 supported by 27.7% CAGR in loan growth.
Subsector Bank Recommend BUY with target price of Rp460.
Shares Outstanding (bn) 13.8
Market Cap (Rp bn) 3,365.7 Positive Synergy with Investree should expand AMAR’s target market.
Shareholders Composition We view the decision of Investree to be one of AMAR shareholders
Tolaram Group 59.4% should create positive synergy between both parties. These two financial
institutions have similarity as they rely on digital platform in serving
Investree 18.4%
financial services to their customers. However, we see that both
Public 22.2%
companies have different target market. AMAR is currently making a
good progress by penetrating consumer and micro business loan segment
while Investree focuses on small and medium enterprise (SME) segment.

Enjoying significant increase in digital lending business. Though

popularity of the digital banking started in the last 2 years, AMAR actually
had initiated digital lending business long before. AMAR started digital
lending platform called Tunaiku in the beginning of 2015. From only 17
thousand customers in 2016, AMAR then saw 73% CAGR increase in
customer to 264 thousand in 2021. Along with the increase in its
customer number, AMAR also saw 95% CAGR of loan originated by
Tunaiku from only Rp73 billion in 2016 to Rp2.1 trillion in 2021.

Net profit to grow by 17.4% CAGR in 2023-2027. We expect AMAR’s net

profit to grow by 17.4% CAGR during the period of 2023-2027. In 2023
AMAR is expected to post net profit of Rp150.9 billion (vs 2022F loss of
Rp20.5b) driven by 49% yoy increase in net interest income. For 2023-
2027 we expect AMAR to post 32.2% CAGR in net interest income growth
supported by collaboration with Investree.

BUY recommendation with target price of Rp460. We recommend BUY

for AMAR with target price of Rp460. Our target price is based on gordon
growth model (GGRM) method, assuming cost of equity of 10.2% and
normalized growth of 9.7%.

Rp million 2021 2022F 2023F 2024F 2025F

Interest Income 702,234 827,559 1,156,718 1,595,728 2,121,253
Interest Expenses (220,007) (203,291) (227,022) (339,557) (546,351)
Net Interest Income 482,226 624,268 929,696 1,256,171 1,574,902
Pre-Provision Op. Profit 308,011 403,862 655,159 918,322 1,163,126
Net Profit 4,115 (20,485) 150,893 184,985 227,718
EPS (Rp) 1 (1) 8 10 12
Analyst BVPS (Rp) 133 157 165 174 186
P/E (x) 531 (216) 29 24 19
Raphon Prima
P/B (x) 2.0 1.5 1.4 1.3 1.2
raphon.prima@sfsekuritas.co.id
Analyst Net Interest Margin 11.8% 14.9% 17.8% 17.2% 15.5%
Raphon Prima ROE (%) 0.4% -0.7% 4.7% 5.5% 6.3%
Roy Passtan
raphon.prima@sfsekuritas.co.id ROA (%) 0.1% -0.4% 2.2% 2.0% 1.7%
roy.passtan@sfsekuritas.co.id Source: AMAR, SF Sekuritas

PT SURYA FAJAR SEKURITAS

Satrio Tower Building Lt. 9, Jalan Prof. Dr. Satrio Blok C4/5, Kuningan, DKI Jakarta 12950, Indonesia
Phone : 021-2788-3989 | www.sfsekuritas.co.id
 SEKURITAS

COMPANY RESEARCH

Investment Highlights
Positive Synergy with Investree should expand AMAR’s target market. We view the
decision of Investree to be one of AMAR shareholders should create positive synergy
between both parties. These two financial institutions have similarity as they rely on
digital platform in serving financial services to their customers. However, we see that
both companies have different target market. AMAR is currently making a good
progress by penetrating consumer and micro business loan segment while Investree
focuses on small and medium enterprise (SME) segment.

Tunaiku Active Customer

Source: AMAR

AMAR enjoys significant increase in digital lending business. Though popularity of

the digital banking started in the last 2 years, AMAR actually had initiated digital
lending business long before. AMAR started digital lending platform called Tunaiku in
the beginning of 2015. From only 17 thousand customers in 2016, AMAR then saw
73% CAGR increase in customer to 264 thousand in 2021. Along with the increase in
its customer number, AMAR also saw 95% CAGR of loan originated by Tunaiku from
only Rp73 billion in 2016 to Rp2.1 trillion in 2021. This indicates that AMAR is a
prominent player in digital lending business.

Loan Tunaiku (Rp billion)

Source: AMAR

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COMPANY RESEARCH

Collaboration with Investree will open the next phase in AMAR business. Currently
about 87% of AMAR total loan is contributed by retail segment. Meanwhile big
institution segment contributes 13% to total loan. In 2016-2107, big institution
dominated total loan portofolio. At that time, AMAR is still in the beginning phase of
building its digital loan Tunaiku. We expect collaboration with Investree will open the
next phase in AMAR business. AMAR now can penetrate small and medium enterprise
(SME) segment. This should help AMAR to maintain consistent strong loan growth
going forward.

AMAR loan by segment

Source: AMAR

Huge Opportunity in SME segment. AMAR’s penetration into small and medium
enterprise (SME) segment should give big potential growth as opportunity in this
segment is quite big. SME segment contributes 61% to total gross domestic product in
Indonesia. SME segment also contributes more than 96% of total enterprises and
employees. This means SME segment plays vital role in Indonesia economy. However,
the contribution of loan generated into SME segment is only less than 20% of total
loan in Indonesia. Moreover, financial inclusion rate in Indonesia is considered low at
only 51%. It means the population of unbanked is still high. However, the
improvement is very impressive. In about 10 years period, financial inclusion rate
jumped from 20% in 2011 into 51% in 2021.

Contribution of SME Segment in Indonesia Indonesia Financial Inclusion Rate

Source: Asian Development Bank Source: World Bank

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COMPANY RESEARCH

Financial Outlook
Net profit to grow by 17.4% CAGR in 2023-2027. We expect AMAR’s net profit to
grow by 17.4% CAGR during the period of 2023-2027. For 2022 it is expected AMAR to
post loss of Rp20.5 billion caused by high provision in 1Q22 and 2Q22 period.
However, in 2023 AMAR is expected to post net profit of Rp150.9 billion. This should
be driven by 49% yoy increase in net interest income. For 2023-2027 we expect AMAR
to post 32.2% CAGR in net interest income growth supported by collaboration with
Investree.

Net Profit (Rp billion) Net Interest Income (Rp billion)

Source: AMAR, SF Sekuritas Source: AMAR, SF Sekuritas

Loan to grow by 27.7% CAGR in 2023-2027. We expect steady loan growth to support
AMAR’s net interest income. We expect loan to grow 27.7% CAGR in 2023-2027
period. This is achievable considering that in 2017-2021 period AMAR saw 47.7%
CAGR loan growth. That was when AMAR penetrated consumer segment through
digital application named Tunaiku.
Loan (Rp billion) Deposit (Rp billion)

Source: AMAR, SF Sekuritas Source: AMAR, SF Sekuritas

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Valuation
BUY recommendation with target price of Rp460. We recommend BUY for AMAR
with target price of Rp460. Our target price is based on gordon growth model (GGRM)
method, assuming cost of equity of 10.2% and normalized growth of 9.7%. Our target
price of Rp460 implies 2023F 2.6x P/B.

Gordon Growth Model

2023F
Normalized ROE (a) 11.0%
Retention Ratio (b) 88%
Normalized Growth (c = axb) 9.7%

Risk-free rate (d) 7.0%

Risk premium (e) 4.0%
Beta (f) 0.8
Cost of Equity (g = d+(exf)) 10.2%

Fair Price to Book ((a-c):(g-c) 2.6x

2023F Book Value per Share 174
Fair Value 460
Source: SF Sekuritas
Still trading below historical –1SD from P/B average. Currently AMAR is trading at
2023F 1.5x P/B. This level is still below than 2-year historical –1 SD level of 1.7x.

P/B Band

Source: SF Sekuritas

Risk
• Funding competition amid rising interest rate environment. Competition to
secure funding amid rising interest rate condition should tighter. Banks are
offering higher saving rate to attract funding resulting into tighter competition.

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COMPANY RESEARCH

Peers Comparison
Digital Bank comparison
We select 6 major players in Indonesian bank focusing theie business in digital
services.
• Bank Jago Tbk (ARTO)
• Bank Neo Commerce Tbk (BBYB)
• Bank MNC Internasional Tbk (BABP)
• Bank Raya Indonesia Tbk (AGRO)
• Bank Allo Indonesia Tbk (BBHI)
• Bank Aladin Syariah Tbk (BANK)

Peers Comparison
Market Cap Total Asset Gross Loan ROE ROA P/E P/B
(Rp bn) (Rp bn) (Rp bn) 2020 2021 2020 2021 2020 2021 2020 2021
Bank Amar (AMAR) 3,366 5,803 2,917 0.80% 0.39% 0.21% 0.08% 186.2x 531.1x 1.5x 2.0x
Bank Jago (ARTO) 106,347 14,612 7,257 -19.81% 1.81% -10.83% 1.19% N/A 2577.2x 37.9x 26.9x
Bank Neo Commerce (BBYB) 10,531 14,363 7,042 1.54% -49.19% 0.35% -11.77% 110.4x N/A 1.8x 8.6x
Bank MNC Internasional (BABP) 3,860 14,767 9,681 0.67% 0.66% 0.09% 0.10% 122.0x 379.6x 0.8x 2.3x
Bank Raya Indonesia (AGRO) 15,809 13,193 9,527 0.71% -90.31% 0.11% -13.57% 708.9x N/A 5.2x 16.8x
Bank Allo Indonesia (BBHI) 67,364 9,773 6,714 11.44% 23.33% 1.45% 5.32% 47.9x 429.4x 5.1x 63.4x
Bank Aladin Syariah (BANK) 22,869 2,798 200 7.25% -14.37% 6.24% -8.38% N/A N/A N/A 29.0x
Median 15,809 13,193 7,042 0.8% 0.4% 0.2% 0.1% 122.0x 480.3x 3.4x 16.8x
Average 32,878 10,758 6,191 0.4% -18.2% -0.5% -3.9% 235.1x 979.3x 8.7x 21.3x
Source: Bloomberg, SF Sekuritas

AMAR’s P/B valuation is the lowest among peers

In 2021 AMAR was trading at 2.0x P/B valuation. This was the lowest compared to
other banks focusing on digital lending. On average, valuation of digital banks in 2021
reached 21.3x. Many banks were traded expensively in the middle of their corporate
action of right issue.

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COMPANY RESEARCH

Company Background
PT Bank Amar Indonesia Tbk. (hereinafter referred to as “Amar Bank” or “Bank”) was
established in 1991 in Surabaya under the name of PT Anglomas International Bank. In
2014, the Bank changed its name to PT Bank Amar Indonesia. January 9, 2020 has
become effective as PT Bank Amar Indonesia Tbk and has been listed on the Indonesia
Stock Exchange with the stock code "AMAR". The Bank positions itself as a digital bank
that focuses on the retail & micro sector. In terms of operations and business
approach there has been a digital transformation where technology is the main focus.
Organization Structure

Source: AMAR

Company Shareholders

Source: AMAR

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COMPANY RESEARCH

Products and Services. AMAR has two main business lines:

1. Conventional (Savings, Current Account, Time Deposit and Loans)
2. Digital (Senyumku and Tunaiku)

Conventional. Amar bank provides four service products for customer needs:
1. Savings. There are 3 savings products, namely, Aster, Amar Dana and Tamara.
Each products according to customer needs.
2. Current Account. Types of current accounts opened by individuals and
corporation. Individuals who have businesses such as shops, restaurants,
workshops, and/or stalls. Corporation with various sector.
3. Time Deposit. Time deposits are a product for placing funds for customers with
a certain period of time with higher interest rates compared to other deposit
products. with a period of 1 month, 3 months, 6 months, or 12 months.
4. Loans. Amar Bank has products for corporations in the form of loans.

Digital. There are two types of digital products provided by Bank Amar:
 Senyumku. Senyumku is a revolutionary banking application to help you carry
out financial activities such as saving, transacting, or managing finances more
safely, smartly, and simply. All done from one place, all from a smartphone. It
start operating in 2019.
 Tunaiku. Tunaiku is the first financial technology or FinTech in Indonesia that is
engaged in providing online loans without collateral. Supported by advanced
technology and data analytics, Tunaiku is able to serve very quickly (24 hours)
and with easy requirements. It started operating in 2014.

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COMPANY RESEARCH

Company Background
Investree is a financial technology company in Indonesia with a simple mission: as an
online marketplace that brings together people who have funding needs with people
who are willing to lend their funds. Not only do it increases lenders' earnings, we also
make loans more affordable and accessible for Borrowers. It vision is to continue to
grow with Borrowers, Lenders, and other stakeholders, realizing the big dream of
financial inclusion in Indonesia.

Investree’s Business Process

Source: IBOS
Source: Investree

Investree’s Advantages

Source: Investree

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COMPANY RESEARCH

Business Lines. Investree has two business lines:

1. Funding (Loan Funding, Government Bond Retail and Mutual Fund for Lender)
2. Loan (Buyer Financing, Working Capital Term Loan, Invoice Financing and
Online Seller Financing

Funding. Investree has two types of funding, namely:

 Conventional.
 Sharia Products. It is based on Sharia Principles, all financing activities are usury
-free and free from transactions that are prohibited by Islamic law.

Loan. There are four types of loans provided by Investree:

 Buyer Financing. It is a working capital loan product aimed at SME companies
who are wholesale buyers in large retail corporations.
 Working Capital Term Loan. It is a working capital loan product intended for
SMEs that have a unique business model, such as accepting payments via bank
transfer/digital payments, collaborating with Logistics Service Providers, using a
cashier system application (Point of Sales), and having contracts which is
running.
 Invoice Financing. It is a working capital loan aimed at developing SMEs that
have business relationships with large companies such as state owned
enterprises, public companies, multinationals, and government institutions.
 Online Seller Financing. It is a short-term loan for active online sellers in the e-
commerce marketplace in collaboration with Investree.
Source: Investree

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Financial Statement (Rp million)

Income Statement 2021 2022F 2023F 2024F Ratios 2021 2022F 2023F 2024F
Interest Income 702,234 827,559 1,156,718 1,595,728 Avg. Yield on Loan 30.5% 28.5% 30.6% 30.9%
Interest Expenses (220,007) (203,291) (227,022) (339,557)
Avg. Yield on earnings 29.4% 37.7% 68.0% 76.9%
Net Interest Income 482,226 624,268 929,696 1,256,171 assets
Non-Interest Income 202,244 212,522 223,330 234,697 Avg. Cost of Deposit 7.8% 7.7% 8.0% 8.0%
Total Income 684,470 836,790 1,153,026 1,490,869 Avg. Cost of Fund 5.3% 5.0% 6.9% 6.7%
Operating Expenses (376,459) (432,928) (497,867) (572,547) Net Interest Margin 11.8% 14.9% 17.8% 17.2%
Pre-Provision Operating 308,011 403,862 655,159 918,322 Cost/income 56.1% 52.8% 44.3% 39.5%
BOPO 99.8% 95.1% 86.4% 83.7%
Provision Expenses (300,968) (422,928) (459,676) (679,881)
Staff costs/income 25.2% 23.7% 19.8% 17.6%
Operating Profit 7,043 (19,067) 195,483 238,440
Non-Operating Income (6,228) (6,539) (6,866) (7,210) Total Loan 2,405,869 2,916,748 4,178,875 5,665,676
Loan Growth 40.2% 21.2% 43.3% 35.6%
Pre-tax Profit 815 (25,606) 188,617 231,231
Non-Performing Loan 156,287 145,837 208,944 283,284
Income Tax Expenses 3,300 5,121 (37,723) (46,246)
Gross NPL ratio 6.5% 5.0% 5.0% 5.0%
Net Profit 4,115 (20,485) 150,893 184,985
Loan loss coverage ratio 104.3% 241.8% 228.7% 248.7%
Credit Cost 12.2% 14.5% 11.0% 12.0%
Balance Sheet 2021 2022F 2023F 2024F Loan Loss Reserve/Gross 6.8% 12.1% 11.4% 12.4%
Curr. Acc. in Bank 76,592 86,598 126,162 238,539 Loans
Indonesia
Total Deposit 3,179,598 1,731,952 2,523,233 4,770,783
Placement in other 1,807,992 1,558,757 1,203,582 1,851,064
banks LDR 74.7% 167.4% 164.6% 117.8%
Securities 760,489 259,793 378,485 715,617 CASA 35.9% 5.8% 5.6% 15.2%
Net Loan 2,242,889 2,564,180 3,700,941 4,961,115 Return on Equity 0.4% -0.7% 4.7% 5.5%
Return on Asset 0.1% -0.4% 2.2% 2.0%
Total Assets 5,203,045 5,802,544 6,825,479 9,350,137
EPS 0.5 (1.1) 7.8 9.5
Customer Deposits 3,179,598 1,731,952 2,523,233 4,770,783
BVPS 132.7 157.0 164.8 174.4
Deposit from other 839,696 881,681 925,765 972,053 P/E 531.1x N/A 29.3x 23.8x
Banks
P/B 2.0x 1.5x 1.4x 1.3x
Total Liabilities 4,136,461 2,760,091 3,632,070 5,971,677
Capital Stock 803,510 1,937,593 1,937,593 1,973,593
Additional Paid-in 225,758 1,087,968 1,087,968 1,087,968

Total Equity 1,066,584 3,042,452 3,193,409 3,378,460

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 SEKURITAS
PT SURYA FAJAR SEKURITAS
Satrio Tower Building Lt. 9
Jalan Prof. Dr. Satrio Blok C4/5
Kuningan, DKI Jakarta 12950, Indonesia
Phone : 021-2788-3989 | www.sfsekuritas.co.id

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