INVESTMENT HIGHLIGHTS

• PATAMI grew +4.4%yoy, uplifted by total income

• NII expanded despite NIM pressure due to lower income expenses

• Loans growth was steady from SME, Commercial and Sharia segment.

• Asset quality stable

• No change in our forecast for Maybank Group

• Maintain BUY with unchanged TP to RM11.40 based on PB multiple of 1.6x

Uplifted by income in 3QFY18. Maybank Indonesia reversed its earnings decline trend to post 9MFY18 PATAMI growth of +4.4%yoy to IDR1,545b. The rebound was due an uplift in income in 3QFY18 which expanded +21.3%yoy to IDR2,592b. This resulted in 9MFY18 income to rise by +2.2%yoy to IDR7,556b

NII continue to be resilient. For 3QFY18, NII grew strongly at +11.5%yoy to IDR2,08b, leading to 9MFY18 NII to grow +5.5%yoy to IDR6,040. The resilient NII in 9MFY18 was due to sharp decline in interest expense where it fell -7.2%yoy to IDR4,970b. We believe that lower deposits could be a contributor to this decline as we understand that pressure to NIM remains in Indonesia, stemming from rate hikes.

Steady loans growth. Gross loans as at 3QFY17 grew +9.9%yoy to IDR131.2t. Main contributors were SME, Commercial and Sharia segment. These grew +3.8%yoy, +8.0%yoy and +42.7%yoy to IDR20.1t, IDR23.6t and IDR23.8t respectively. Meanwhile, mortgages fell -18.6%yoy to IDR7.58t.

Deposits maintained downwards trend. Total deposits as at 3QFY18 contracted again. It came -4.6%yoy lower to IDR116.3t. However, time deposits declined -8.0%yoy to IDR69.1b while CASA expanded +0.8%yoy to IDR47.2t. We believe that this could partly explains for the fall in interest expense.

Asset quality improved. NPL fell by -26.4%yoy to IDR3.23t. This was mainly due to lower NPL in foreign currencies loan.

FORECAST

Pending the announcement of the Group's 3QFY18 result, we make no change to our forecast for now.

VALUATION AND RECOMMENDATION

We believe that the result from Maybank Indonesia will give an added boost to the Group’s overall 3QFY18 result. We believe that the fundamental of the Group remains intact and any downside risk should have been already priced in. We believe that the Group will be able to maintain its earnings growth trajectory despite potential headwinds such as pressure on NIM. Hence, we are maintaining our BUY call with unchanged TP to RM11.40 based on PB multiple of 1.6x. We believe that the projected dividend yield of 6.2% should not only limit downside risk to the stock, but should also enhance the attractiveness of the stock, especially in current market conditions.

Source: MIDF Research - 30 Oct 2018