Jakarta, CNBC Indonesia – The downward trend in the share price of PT Bank BRISyariah Tbk (BRIS) is finally over. After previously falling to touch the lower auto reject level (ARB) for 3 consecutive trading days, last Monday (26/10/20) BRIS shares managed to slightly increase by 3.31% to the price level of IDR 1,250 / share.
The drop in BRIS to its ARB level for 3 days in a row cannot be separated from the price cash offer (share purchase offer by the controller for the merger of a BUMN sharia bank) BRIS shares which are only in the range of IDR 781 / share.
The price of Rp. 781 / share was obtained from the fair price valuation of BRIS by the Public Appraisal Service Office (KJPP) Suwendho, Rinaldy and Partners.
BRIS is currently in the process of becoming a merger survivor by accepting the merger of two other state-owned sharia banks, namely PT Bank Syariah Mandiri (BSM) and PT Bank BNI Syariah (BNIS) with an effective target of completion on February 1, 2021.
After the merger, the results of the fusion of Islamic banks, which according to the news circulating among market players, will be called Amanah Bank, will become Islamic banking with the largest assets, financing and third party fund collection (TPF) in Indonesia.
However, what is the actual valuation of the merged Islamic bank as of February 2021?
This is because, as is known, the fair price of Rp. 781 / share is the fair price of BRIS going concern per June 2020 and not ‘Bank Amanah’ fair price as of February 2021.
Therefore, of course, investors are already looking to the future and have high expectations for this stock, so they do pricing-in against current BRIS shares.
However, there is some unpleasant news for BRIS investors.
After the merger, the book value of BRIS will be eroded. According to the calculations of the CNBC Indonesia Research Team, the consolidated book value of BRIS has the potential to be eroded to Rp. 499 / unit, which reflects the market price valuation compared to the book value (price t book value (PBV) of 2.5 times the current price.
However, later on, BRIS ‘earnings per share will also have the potential to increase because BSM and BNIS are more merged profitable compared to BRIS.
At its current position, with a net profit of IDR 117 billion as of June 2020, then the annual earnings per share (EPS) of BRIS shareholders is IDR 24 / share.
Once merged, the total net profit of ‘Bank Amanah’ will be IDR 1.1 trillion.
Or, if annualized it will be at Rp. 2.2 trillion, which represents an EPS of Rp. 53.8 / unit or an increase of 124.16%, which represents the valuation of the market price compared to net income (PER) of 24.16 times.
When using the previous year’s BRIS dividend distribution ratio (DPR), which was 10%, this represents the dividend yield or dividend yield by 0.4%.
So, are these valuation ratios cheap or expensive when compared to other similar companies peers company?
Well, if investors want to compare valuations, of course, they will experience difficulties because there are only three listed Islamic banks on the Indonesian Stock Exchange.
First is BRIS itself, next is PT Bank BTPN Syariah Tbk (BTPS). Third, PT Bank Panin Dubai Syariah Tbk (PNBS) which is a share gocap aka stocks that have fallen to the lowest level allowed by the regulator, so the analysis relative valuation difficult to do because the average valuation will lean in a certain direction alias skewed.
Therefore, the CNBC Indonesia Research Team compiled the valuation of public sharia banking which is the market leader alias market leader in their respective countries, so that the comparison with BRIS will later become market leader in Indonesia will be more objective.
Consider the following table:
In the first position appears the name Al Rajhi Bank from Saudi Arabia.
Even though it occupies the first position as the largest asset of sharia banking in the world, it has a relatively reasonable valuation with a PER valuation of 17.9 times.
The amount is slightly above the average of Islamic banking which is analyzed and the PBV valuation method is 3.2 times above the average of global Islamic banking at 2.05 times.
Even though the PBV is quite expensive, Al Rajhi Bank has a dividend yield above the average of 4.5%.
As for the valuation of sharia banking in the global capital market, the cheapest fell to Al Baraka Banking Group from Bahrain with PER of 3 times, PBV of 0.2 times, and dividend yield at 7.8%.
However, it is necessary to remember the Bahrain Stock Exchange, where Al Baraka Melantai is a small stock exchange both in terms of transactions and stock capitalization so that its shares are rarely glimpsed by investors both from abroad and within the country so that the shares are less attractive to trade.
For BRIS shares, using the PER, PBV valuation method, as well as the comparison dividend yield is already expensive and is above the average global sharia banking.
It is noted that the PER BRIS, although it has increased post-merger at the price of Rp 1,250 / unit, is currently still quite expensive because its PER is 23.2 times, which is above the average. market leader other Islamic banking at 17.3 times.
In addition, BRIS’s PBV valuation is recorded at 2.5 times.
This valuation is considered expensive because it is above the global Islamic banking average of 2.05 times yield which is classified as mini because it is far below the average of 0.4% compared to 3.71%.
For the record, PBV is used to see how big is the multiplication of the market value of a company’s stock and its book value.
The PBV, for example, is 2 times, which means that the share price is twice as much as the net worth of a company, or the share price is 2 times more expensive than the net capital.
However, even though the ‘Bank Amanah’ valuation figure is still quite expensive, of course there is a potential for an increase in net profit after the merger because later this bank will become the largest Islamic bank in Indonesia in terms of assets, financing, and depositing funds.
The merger will also increase the economies of scale for ‘Bank Amanah’ and will increase efficiency.
So, in the future, the ability of ‘Amanah Bank’ to take advantage of its dominance in the Islamic banking market will certainly be monitored by investors.
What’s more, the good news is that BRIS recorded a significant net profit growth in the first 9 months of this year or the period until the third quarter of 2020, amounting to 238% to IDR 190.58 billion, compared to the same period last year of IDR 56.46 billion.
CNBC INDONESIA RESEARCH TEAM
(trp/trp)
– .
