BFI Finance analyst meeting key takeaways

BFI Finance (Not covered; Rp2,225) – analyst meeting key takeaways

BFI Finance conducted the meeting to discuss the FY12 results and outlook. Key takeaways are:

• Net profit 2012 increased 15% y-y to Rp490b on the back of 22% y-y increase in new booking and rising operating costs.

• Of the Rp7tr new booking in 2012 4-wheeler financing (new and used cars) accounted for 76%, leasing for heavy equipment 15% and 2-wheeler financing 9%. BFI is reducing its exposure on 2-wheeler financing to the bigger ticket items 4-wheeler financing (average Rp6m vs. Rp90m) and leasing for heavy equipments. BFI is also increasing its business into the higher yield financing (walk in customers and to light commercial vehicles) which accounted for 48% of total financing in 2012 vs. 46% in 2011.

• Of the Rp7.4tr outstanding productive assets (+34% y-y) in Dec12 4-wheeler financing accounted for 78%, heavy equipment leasing 16% and 2-wheeler financing 6%.

• Increasing exposure to 4-wheeler financing despite the lower cost of funds resulted in the declining NIM to 12.4% in 2012 from 14.3% in 2011.

• NPL level has been low at 1.05% in December 2012 compared to 1.20% in December 2011 and 1.26% in September 2012. However, given the new accounting standard for impairment the company’s provisioning charges increased 162% y-y in 2012. Operating expenses also increased substantially due business expansion as BFI opened 16 new offices.  As they did not pay any dividend in 2012, ROE declined to 18.8% from 19.8%.

• For 2013 the new owner, TPG Group, has set an ambitious expectation. The management is confident to record a 25-30% growth in new booking through opening of 30-50 new offices primarily outside Java. Net profit is expected to grow 10-15% as NIM is likely to decline slightly while operating costs increase due to further expansion. The counter is trading at 1.0x P/BV 2013 consensus.