Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

There is a BIG trade coming up starting next Monday. If you have exposure in Indonesia, it is worth thinking about. <hr>Back in January 2021, Bloomberg reported that <a href="https://www.smartkarma.com/entities/bank-rakyat-indonesia-persero" target="_blank" data-smartkarma-citation="entities:484:1" rel="noopener">Bank Rakyat Indonesia Persero (BBRI IJ)</a> - the country's largest lender by assets - was "exploring a plan to raise at least US$1bn through a rights issue."Almost a year ago in October 2020 BBRI signed a conditional deal to merge their Shariah-compliant unit with those of <a href="https://www.smartkarma.com/entities/bank-mandiri-persero-tbk-pt" target="_blank" data-smartkarma-citation="entities:441:1" rel="noopener">Bank Mandiri Persero (BMRI IJ)</a> and <a href="https://www.smartkarma.com/entities/bank-negara-indonesia-persero" target="_blank" data-smartkarma-citation="entities:8285:1" rel="noopener">Bank Negara Indonesia Persero (BBNI IJ)</a> and there had been talks (since Feb 2020?) with the government for BBRI to take over state-owned pawnshop lender PT Pegadaian and financing firm PT Permodalan Nasional Madani to provide affordable loans to SMEs. A deal for BBRI to take over those two firms was <a href="https://www.reuters.com/article/bank-bri-ma-idUSL4N2KE2J5" target="_blank" rel="noopener">decided</a> in early February, and the need for a rights issue was set, though this required parliamentary approval and BBRI needed shareholder approval for the rights issue - which it announced in June and <a href="https://www.thejakartapost.com/adv/2021/07/23/bri-egms-approves-rights-issue-of-28-billion-shares.html" target="_blank" rel="noopener">received</a> in July - under the mechanism of Capital Increase by Granting Securities Subscription Rights First (PMHMETD). <a href="https://www.smartkarma.com/profiles/angus-mackintosh" target="_blank" data-smartkarma-citation="accounts:937" rel="noopener">Angus Mackintosh</a> discussed the bank's initiatives and aspirations in the micro lending space in <a href="https://www.smartkarma.com/insights/bank-rakyat-indonesia-bbri-ij-both-micro-and-digital" target="_blank" data-smartkarma-citation="insights:48613" rel="noopener">Bank Rakyat Indonesia (BBRI IJ) - Both Micro and Digital</a> in February followed by a discussion of the rights issue itself in early July in <a href="https://www.smartkarma.com/insights/bank-rakyat-indonesia-bbri-ij-ultra-micro-and-digital-aspirations-in-place" target="_blank" data-smartkarma-citation="insights:54111" rel="noopener">Bank Rakyat Indonesia (BBRI IJ) - Ultra-Micro and Digital Aspirations in Place</a>. Angus made a strong case for the bank in both insights and they are worth a read. The shares have basically had an overhang in place since early this year but in June when it became clear the rights issue would be Very Large, that overhang became more pronounced. <section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/228/528/original/Screenshot+2021-09-08+at+2.18.15+PM.png?1631081912" class="editor-image img-responsive" data-smartkarma-image-id="228528"></figure></section>The presentation made to get this past shareholders (never really in doubt as the govt owns 57%) announced the development of an "Ultra-Micro segment" to create an Ultra-Micro Ecosystem as the foundation for further growth, structured under Ultra Micro Holding owned by BRI, in the form of previous precedents of SOE development platforms such as Biofarma/<a href="https://www.smartkarma.com/entities/indofarma-tbk-pt" target="_blank" data-smartkarma-citation="entities:5319:1" rel="noopener">Indofarma (INAF IJ)</a> and Inalum's investment in Indonesian mining companies. <section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/228/527/original/Screenshot+2021-09-08+at+2.02.45+PM.png?1631080980" class="editor-image img-responsive" data-smartkarma-image-id="228527"></figure></section>The way this would be done is a rights offering to offer 230,128,553 rights for every 1,000,000,000 Existing Shares (roughly 0.23013 for 1), with the government contributing its ownership of Pegadaian and PNM in kind to fulfil its rights exercise consideration payment.That means the ~0.23 to 1 Rights Offering would be in effect for the other 43% of holders, which is a vast array of local and international institutions and local retail shareholders, with an Exercise Price of IDR 3400/share, and assuming 100% participation, that would garner IDR 41.15trln in proceeds, which, according to the roadshow <a href="https://www.ir-bri.com/misc/PS/2021/RI-Deal-Roadshow-Presentation-Final.pdf" target="_blank" rel="noopener">presentation</a> released in early September, "will be used for working capital for BRI in order to develop an ultra-micro ecosystem as well as micro and small businesses."The shares traded on the regular market went ex-rights today. Rights will be distributed on 10 September, traded from 13-22 September and exercised in the same period, with the last day for Excess Rights Subscription the 24 September and allotment of Excess Rights on 27 September.There is considerable opportunity here. Some short-term, some longer-term. But it is considerable because there is a fair bit of potential overhang here.I consider the opportunity set below the fold.

There is a BIG trade coming up starting next Monday. If you have exposure in Indonesia, it is worth thinking about. Back in January 2021, Bloomberg reported that Bank Rakyat Indonesia Persero (BBRI IJ) - the country's largest lender by assets - was "exploring a plan to raise at least US$1bn through a rights issue."Almost a year ago in October 2020 BBRI signed a conditional deal to merge their Shariah-compliant unit with those of Bank Mandiri Persero (BMRI IJ) and Bank Negara Indonesia Persero (BBNI IJ) and there had been talks (since Feb 2020?) with the government for BBRI to take over state-owned pawnshop lender PT Pegadaian and financing firm PT Permodalan Nasional Madani to provide affordable loans to SMEs. A deal for BBRI to take over those two firms was decided in early February, and the need for a rights issue was set, though this required parliamentary approval and BBRI needed shareholder approval for the rights issue - which it announced in June and received in July - under the mechanism of Capital Increase by Granting Securities Subscription Rights First (PMHMETD). Angus Mackintosh discussed the bank's initiatives and aspirations in the micro lending space in Bank Rakyat Indonesia (BBRI IJ) - Both Micro and Digital in February followed by a discussion of the rights issue itself in early July in Bank Rakyat Indonesia (BBRI IJ) - Ultra-Micro and Digital Aspirations in Place. Angus made a strong case for the bank in both insights and they are worth a read. The shares have basically had an overhang in place since early this year but in June when it became clear the rights issue would be Very Large, that overhang became more pronounced. The presentation made to get this past shareholders (never really in doubt as the govt owns 57%) announced the development of an "Ultra-Micro segment" to create an Ultra-Micro Ecosystem as the foundation for further growth, structured under Ultra Micro Holding owned by BRI, in the form of previous precedents of SOE development platforms such as Biofarma/Indofarma (INAF IJ) and Inalum's investment in Indonesian mining companies. The way this would be done is a rights offering to offer 230,128,553 rights for every 1,000,000,000 Existing Shares (roughly 0.23013 for 1), with the government contributing its ownership of Pegadaian and PNM in kind to fulfil its rights exercise consideration payment.That means the ~0.23 to 1 Rights Offering would be in effect for the other 43% of holders, which is a vast array of local and international institutions and local retail shareholders, with an Exercise Price of IDR 3400/share, and assuming 100% participation, that would garner IDR 41.15trln in proceeds, which, according to the roadshow presentation released in early September, "will be used for working capital for BRI in order to develop an ultra-micro ecosystem as well as micro and small businesses."The shares traded on the regular market went ex-rights today. Rights will be distributed on 10 September, traded from 13-22 September and exercised in the same period, with the last day for Excess Rights Subscription the 24 September and allotment of Excess Rights on 27 September.There is considerable opportunity here. Some short-term, some longer-term. But it is considerable because there is a fair bit of potential overhang here.I consider the opportunity set below the fold. 

Bank Rakyat Indonesia (BBRI)'s Mega Rights Issue - Plenty of Opportunity Short-Term and Long-Term

External broker reports(aggregated public sources), BRI Danareksa Research

BRI Danareksa Research

External broker reports(aggregated public sources)

As a one-stop financial solution with the vision to be the most valuable securities house, BRI Danareksa Sekuritas (BRIDS) has maintained an excellent track record and extensive experience in the capital market as an underwriter, broker, and financial advisor for individual, institutional, foreign and domestic, private and government clients. Established in 1992, PT Danareksa Sekuritas is a securities company that performs activities as a securities broker, underwriter, or arranger and financial advisor.

Thematic (Sector/Industry)

<ul><li>Based on the MSME and consumer segments, BPR, and P2P data, we believe banks’ overall asset quality remains robust.</li><li>With higher FY24F CoC of 3.0%, BBRI has allocated adequate provisions to address the current issue in its MSME segment.</li><li>Maintain Overweight rating in the banking sector with BBCA remaining as our top pick.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Based on the MSME and consumer segments, BPR, and P2P data, we believe banks’ overall asset quality remains robust.With higher FY24F CoC of 3.0%, BBRI has allocated adequate provisions to address the current issue in its MSME segment.Maintain Overweight rating in the banking sector with BBCA remaining as our top pick.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Banks: Attractive Entry Point Amid Valuation Derating, Supported by the Still Robust Asset Quality

<ul><li>Supported by lower CoF increases compared to their peers, only BBCA, BRIS, and NISP booked double digit NP growth in 4M24.</li><li>Despite a slight improvement (-4bps mom) in Apr24, COF pressure might return in May24 from a higher benchmark rate.</li><li>For its resilient CoF, higher liquidity, and better NP growth outlook compared to its peers, BBCA remains our top pick in the sector.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Supported by lower CoF increases compared to their peers, only BBCA, BRIS, and NISP booked double digit NP growth in 4M24.Despite a slight improvement (-4bps mom) in Apr24, COF pressure might return in May24 from a higher benchmark rate.For its resilient CoF, higher liquidity, and better NP growth outlook compared to its peers, BBCA remains our top pick in the sector.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Cross Asset Strategy

<ul>
<li>The past week saw insights on <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a>, <a href="https://www.smartkarma.com/entities/grab-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab (GRAB US)</a>, <a href="https://www.smartkarma.com/entities/malaysia-airports-holdings-bhd" target="_blank" data-smartkarma-citation="entities:117:1" rel="noopener">Malaysia Airports Holdings (MAHB MK)</a>, <a href="https://www.smartkarma.com/entities/bangkok-dusit-medical-services-pcl" target="_blank" data-smartkarma-citation="entities:875:1" rel="noopener">Bangkok Dusit Medical Services (BDMS TB)</a>, and <a href="https://www.smartkarma.com/entities/great-eastern-holdings-ltd" target="_blank" data-smartkarma-citation="entities:13993:1" rel="noopener">Great Eastern Holdings (GE SP)</a>.</li>
<li>There were also macro insights on Indonesia, following the country's recent 1Q2024 GDP from <a href="https://www.smartkarma.com/profiles/manu-bhaskaran" target="_blank" data-smartkarma-citation="accounts:35" rel="noopener">Manu Bhaskaran</a> plus some macro commentary on the Philippines.</li>
<li>The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across Southeast Asia.</li>
</ul>


The past week saw insights on Sea Ltd (SE US), Grab (GRAB US), Malaysia Airports Holdings (MAHB MK), Bangkok Dusit Medical Services (BDMS TB), and Great Eastern Holdings (GE SP).
There were also macro insights on Indonesia, following the country's recent 1Q2024 GDP from Manu Bhaskaran plus some macro commentary on the Philippines.
The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across Southeast Asia.


The Week That Was in ASEAN@Smartkarma - Sea Ltd Harvesting, Grab's Initiatives, and Bangkok Dusit

<ul><li>We project a softer FY24 EPS growth outlook of +3% yoy (vs. +5% prev.) amid slowing growth in 2Q24, but see limited further downside risk.</li><li>JCI’s current 1.8x PBV (22% disc. to 10-year mean) seems unwarranted as we forecast FY24 ROE to fall only slightly to 9.5% (vs. 10y avg of 10%).</li><li>We lower our FY24-end JCI target slightly to 7,670 (vs. 7,830 prev.); our stock picks favor defensive and quality names.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

We project a softer FY24 EPS growth outlook of +3% yoy (vs. +5% prev.) amid slowing growth in 2Q24, but see limited further downside risk.JCI’s current 1.8x PBV (22% disc. to 10-year mean) seems unwarranted as we forecast FY24 ROE to fall only slightly to 9.5% (vs. 10y avg of 10%).We lower our FY24-end JCI target slightly to 7,670 (vs. 7,830 prev.); our stock picks favor defensive and quality names.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Growth Headwinds Priced In, but We Prefer Defensive and ‘quality’ Amid Lingering Uncertainties

Indonesia

PT Bank Rakyat Indonesia (Persero) Tbk provides commercial banking activities and its related services. The Bank also provides banking activities based on shariah principles.

PT Bank Negara Indonesia (Persero) Tbk is a state-owned bank that conducts commercial and consumer banking services.

PT Bank Syariah Indonesia Tbk. operates as a bank. The Bank offers checking accounts, credit and debit cards, loans, insurance, payment protection, phone banking, bill pay, fund transfer, and merchant services. Bank Syariah Indonesia serves customers in Indonesia.

PT Bank Mega Tbk provides banking services. Through its subsidiary the Company also provides bonds and shares underwriting, stock broking, investment management, consultation services, and other activities related to the capital market.

PT Bank CIMB Niaga Tbk operates in individual and private banking, merchant and corporate banking, regional banking, and investment services.  The Bank also provides financial services such as leasing and factoring, stock broking, underwriting, insurance and investment management through its subsidiaries.

PT Bank Panin Indonesia Tbk provides commercial banking and foreign exchange services in Indonesia and overseas.

PT Bank Permata Tbk provides commercial and foreign exchange banking services through a network of offices in Indonesia.  The Bank also performs custodianship and trusteeship services as well as manages pension funds.

PT Bank OCBC NISP Tbk provides general commercial banking services.  The Bank has branch offices located throughout Indonesia.

Bank Danamon Indonesia Tbk PT provides general banking services. The Bank's head office is located in Jakarta with branch offices throughout Indonesia.

PT Bank Tabungan Pensiunan Nasional Tbk. is a financial institution that specializes in funding and lending. The Bank offers accounts in deposits & savings, pension loans, small to medium sized business loans, and other financial products.  Bank Tabungan offers services in bank clearance, payment, collection, transfer, and payroll services.

Bank Tabungan Pensiunan Nasional (BTPN IJ)

Hang Seng Bank Limited and its subsidiaries provide banking and related financial services.

United Overseas Bank Limited provides a wide range of financial services including personal financial services, wealth management, private banking, commercial and corporate banking, transaction banking, investment banking, corporate finance, capital market activities, treasury services, futures broking, asset management, venture capital management and insurance.

Oversea-Chinese Banking Corporation Limited offers a comprehensive range of financial services.  The Company's services include deposit-taking, corporate, enterprise and personal lending, international trade financing, investment banking, private banking, treasury, stockbroking, insurance, credit cards, cash management, asset management and other financial and related services.

Kotak Mahindra Bank Limited is a full service commercial bank. The Bank offers a wide range of products and services such as personal, commercial, and corporate banking services, including deposit accounts, loans, and investments. Kotak Mahindra Bank serves customers in India.

Fifth Third Bancorp is a diversified financial services company that operates banking centers in the Midwestern and Southeastern regions of the United States. The Company's principal businesses include retail banking, commercial banking, investment advisory, and data processing.

Standard Chartered PLC is an international banking group operating principally in Asia, Africa, and the Middle East. The Company offers its products and services in the personal, consumer, corporate, institutional and treasury areas.

BOC Hong Kong (Holdings) Limited provides a comprehensive range of financial products and services to retail and corporate customers.  Its products include retail banking, corporate banking, and treasury services.  The Company operates its branches in Hong Kong and China.

Malayan Banking Berhad operates as a bank. The Company provides financial services such as insurance, asset management, stock broking, nominee services, venture capital, leasing, and Internet banking. Malayan Banking Berhad serves customers in South East Asia.

Ping An Bank Co Ltd provides a full range of commercial banking services including RMB and foreign currency deposit, loan, international and domestic settlement, discount, currency trading, letter of credit, bank guarantee, and other related services.

KB Financial Group Inc. (the "Company"), in accordance with Financial Holding Companies Act, was established on September 29, 2008, through stock transfer with the former shareholders of its subsidiaries including Kookmin Bank in order to provide management services and financing to associated companies. The headquarters are located at Seoul, Korea

PT Bank Mandiri (Persero) Tbk is formed by the merger of four state-owned banks, namely Pt Bank Bumi Daya, PT Bank Dagang Negara, PT Bank Ekspor Import Indonesia (Bank Exim), PT Bank Pembangunan Indonesia (Bank Bapindo). The Bank operates in the commercial banking services.

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Bank Mandiri Persero (BMRI IJ)

Bank Rakyat Indonesia (BBRI)'s Mega Rights Issue - Plenty of Opportunity Short-Term and Long-Term

Bank Rakyat (BBRI) Indonesia's largest bank by assets, has a rights issue (stock went ex-rights today). The bank hopes to raise $2.8bn from its...

Travis Lundy

Banks: Attractive Entry Point Amid Valuation Derating, Supported by the Still Robust Asset Quality

With higher FY24F CoC of 3.0%, BBRI has allocated adequate provisions to address the current issue in its MSME segment. Maintain Overweight rating...

BRI Danareksa Research

Banks: 4M24 Banks-Only Results

Supported by lower CoF increases compared to their peers, only BBCA, BRIS, and NISP booked double digit NP growth in 4M24.

BRI Danareksa Research

The Week That Was in ASEAN@Smartkarma - Sea Ltd Harvesting, Grab's Initiatives, and Bangkok Dusit

The past week saw insights on Sea Ltd (SE US), Grab (GRAB US), Malaysia Airports Holdings (MAHB MK), Bangkok Dusit Medical Services (BDMS TB), and...

Angus Mackintosh

Growth Headwinds Priced In, but We Prefer Defensive and ‘quality’ Amid Lingering Uncertainties

We project a softer FY24 EPS growth outlook of +3% yoy (vs. +5% prev.) amid slowing growth in 2Q24, but see limited further downside risk

BRI Danareksa Research

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