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 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 South East Asia.</li>
<li>This week we look at <a href="https://www.smartkarma.com/entities/link-net-tbk-pt" target="_blank" data-smartkarma-citation="entities:1050:1" rel="noopener">Link Net (LINK IJ)</a> post a call with management plus aggressive buybacks from <a href="https://www.smartkarma.com/entities/jardine-matheson-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19718:1" rel="noopener">Jardine Matheson Holdings (JM SP)</a> plus update in <a href="https://www.smartkarma.com/entities/genting-bhd" target="_blank" data-smartkarma-citation="entities:14210:1" rel="noopener">Genting Bhd (GENT MK)</a> </li>
<li>We also comment on WeLab acquiring a digital bank in Indonesia and the government's ongoing stimulus measures for property and retail in Indonesia.</li>
</ul>


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 South East Asia.
This week we look at Link Net (LINK IJ) post a call with management plus aggressive buybacks from Jardine Matheson Holdings (JM SP) plus update in Genting Bhd (GENT MK) 
We also comment on WeLab acquiring a digital bank in Indonesia and the government's ongoing stimulus measures for property and retail in Indonesia.


The Week That Was in ASEAN@Smartkarma - Link Net, Jardine Matheson, and WeLab

<ul>
<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 South East Asia </li>
<li>The past week saw knockout results from <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> and a resilient numbers from <a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab</a> plus we saw <a href="https://www.smartkarma.com/entities/siam-makro-public-co-ltd" target="_blank" data-smartkarma-citation="entities:5577:1" rel="noopener">Siam Makro Public (MAKRO TB)</a> back in the limelight.</li>
<li>We also have multiple comments on the IPO of <a href="https://www.smartkarma.com/entities/pt-avia-avian" target="_blank" data-smartkarma-citation="entities:35034:1" rel="noopener">PT Avia Avian (AVIA IJ)</a> in Indonesia plus <a href="https://www.smartkarma.com/entities/pt-dayamitra-telekomunikasi" target="_blank" data-smartkarma-citation="entities:34741:1" rel="noopener">Mitratel (MTEL IJ)</a> plus our usual comment on other developments in ASEAN</li>
</ul>


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 South East Asia 
The past week saw knockout results from Sea Ltd (SE US) and a resilient numbers from Grab plus we saw Siam Makro Public (MAKRO TB) back in the limelight.
We also have multiple comments on the IPO of PT Avia Avian (AVIA IJ) in Indonesia plus Mitratel (MTEL IJ) plus our usual comment on other developments in ASEAN


The Week That Was in ASEAN@Smartkarma - Sea Ltd's Knockout, Grab's Progress, and the Avian IPO

Equity Bottom-Up

Bank Negara Indonesia Persero / Equity Bottom-Up

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<a href="https://www.smartkarma.com/entities/bank-negara-indonesia-persero" target="_blank" data-smartkarma-citation="entities:8285:1" rel="noopener">Bank Negara Indonesia (BBNI IJ)</a> released 3Q2021 results this week, which presented a mixed bag due to the onset of a new wave of COVID-19 and subsequent Emergency PPKM measures, which slowed business activity at least in July and August, with some recovery in September.
Despite the more restrictive economic backdrop, the bank still managed to grow its loans with a focus on lower-risk sectors both in corporate and consumer lending. Its digital efforts continue to yield positive results, both for consumer and wholesale banking, and we see more to come in the coming months. 
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The bank grew its loans QoQ bringing 9M2021 loan growth to +3.7% YoY and it grew its third-party funds by +3.4% QoQ in 3Q2021. The cost of funds in 3Q2021 was the lowest ever at 1.54%, down by -10bps QoQ. 
The bank's PPOP (pre-provisioning operating profit) increased by +21% YoY for 9M2021, whilst its net profit was up by +79.3% YoY and +5.0% QoQ in 3Q2021, mainly due to an -18% decline in the bank's provisioning in 3Q2021. 
<a href="https://www.smartkarma.com/entities/bank-negara-indonesia-persero" target="_blank" data-smartkarma-citation="entities:8285:1" rel="noopener">Bank Negara Indonesia (BBNI IJ)</a> continued to focus on growing its loan portfolio, with a focus on low-risk areas such as top tier corporates but also lower risk consumer loans.
<a href="https://www.smartkarma.com/entities/bank-negara-indonesia-persero" target="_blank" data-smartkarma-citation="entities:8285:1" rel="noopener">Bank Negara Indonesia (BBNI IJ)</a> continues to focus on its ongoing digital transformation, both digitalising its own internal platform as well as developing digital native products.
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One key change in the bank's strategy and the fourth leg to its digital strategy is its move toward setting up a stand along the digital bank.
<a href="https://www.smartkarma.com/entities/bank-negara-indonesia-persero" target="_blank" data-smartkarma-citation="entities:8285:1" rel="noopener">Bank Negara Indonesia (BBNI IJ)</a> continues to capitalise on the Fintech boom through collaboration with e-commerce players including <a href="https://www.smartkarma.com/entities/traveloka-indonesia-pt" target="_blank" data-smartkarma-citation="entities:32155:1" rel="noopener">Traveloka</a> and Shopee on BNPL
In a landmark deal, <a href="https://www.smartkarma.com/entities/bank-negara-indonesia-persero" target="_blank" data-smartkarma-citation="entities:8285:1" rel="noopener">Bank Negara Indonesia (BBNI IJ)</a> has issued Indonesia's first AT1 Perpetual Bond, meaning that a future rights issue will likely be more moderate.
<a href="https://www.smartkarma.com/entities/bank-negara-indonesia-persero" target="_blank" data-smartkarma-citation="entities:8285:1" rel="noopener">Bank Negara Indonesia (BBNI IJ</a>) is often seen as the bank playing catch up with its peers but maybe this time is different and it may finally be ripe for a re-rating.
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Bank Negara Indonesia (BBNI IJ) released 3Q2021 results this week, which presented a mixed bag due to the onset of a new wave of COVID-19 and subsequent Emergency PPKM measures, which slowed business activity at least in July and August, with some recovery in September.
Despite the more restrictive economic backdrop, the bank still managed to grow its loans with a focus on lower-risk sectors both in corporate and consumer lending. Its digital efforts continue to yield positive results, both for consumer and wholesale banking, and we see more to come in the coming months. 

The bank grew its loans QoQ bringing 9M2021 loan growth to +3.7% YoY and it grew its third-party funds by +3.4% QoQ in 3Q2021. The cost of funds in 3Q2021 was the lowest ever at 1.54%, down by -10bps QoQ. 
The bank's PPOP (pre-provisioning operating profit) increased by +21% YoY for 9M2021, whilst its net profit was up by +79.3% YoY and +5.0% QoQ in 3Q2021, mainly due to an -18% decline in the bank's provisioning in 3Q2021. 
Bank Negara Indonesia (BBNI IJ) continued to focus on growing its loan portfolio, with a focus on low-risk areas such as top tier corporates but also lower risk consumer loans.
Bank Negara Indonesia (BBNI IJ) continues to focus on its ongoing digital transformation, both digitalising its own internal platform as well as developing digital native products.



One key change in the bank's strategy and the fourth leg to its digital strategy is its move toward setting up a stand along the digital bank.
Bank Negara Indonesia (BBNI IJ) continues to capitalise on the Fintech boom through collaboration with e-commerce players including Traveloka and Shopee on BNPL
In a landmark deal, Bank Negara Indonesia (BBNI IJ) has issued Indonesia's first AT1 Perpetual Bond, meaning that a future rights issue will likely be more moderate.
Bank Negara Indonesia (BBNI IJ) is often seen as the bank playing catch up with its peers but maybe this time is different and it may finally be ripe for a re-rating.



Bank Negara Indonesia (BBNI IJ) - Ripe for A Re-Rating?

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

*Solid Result, But Challenges Ahead: Bank Central Asia (BBCA.IJ) [BCA] reported 3Q21 results of IDR 8.7 tn, improving IDR 1.3 tn (17.9%) on a linked quarter basis. BCA’s positive operating performance was highlighted by a loss provision cut of 66.5%, a slightly reduced tax rate, and a modest decline in costs; and*Credit Challenges Abating: By our calculation, we find that 3Q21 net new NPLs amounted to IDR 942 bn for an annualized rate of increase of 27.2%, and comparing very favorably to the 92.4% rate in 2Q21. Despite the significant deceleration in net new NPL formation, we calculate that loss reserves are likely right where they need to be.

*Solid Result, But Challenges Ahead: Bank Central Asia (BBCA.IJ) [BCA] reported 3Q21 results of IDR 8.7 tn, improving IDR 1.3 tn (17.9%) on a linked quarter basis. BCA’s positive operating performance was highlighted by a loss provision cut of 66.5%, a slightly reduced tax rate, and a modest decline in costs; and*Credit Challenges Abating: By our calculation, we find that 3Q21 net new NPLs amounted to IDR 942 bn for an annualized rate of increase of 27.2%, and comparing very favorably to the 92.4% rate in 2Q21. Despite the significant deceleration in net new NPL formation, we calculate that loss reserves are likely right where they need to be.

Bank Central Asia – Substantial Credit Delta Improvement

Thematic (Sector/Industry)

<div class="content-highlight">
There have been ongoing signs that the competition within the digital finance space is starting to reach a hiatus as it moves up a gear both for the existing banks, as well as the digital economy players including GoTo, <a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab</a>, and Shopee (<a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a>).  
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Competition between digital banks and conventional banks has started to heat up in Indonesia and is only going to accelerate the digitization trend in the industry. In August, some digital banks were offering interest rates of 7% - 8% on current account deposits.
<a href="https://www.smartkarma.com/entities/bank-jago-tbk-pt" target="_blank" data-smartkarma-citation="entities:31094:1" rel="noopener">Bank Jago Tbk PT (ARTO IJ)</a> recorded a sevenfold annual increase in credit lending in 1H2021 and the bank plans to jack up its lending further through partnerships with peer-to-peer (P2P) lenders and multi-finance companies,
While some of these new digital banks might seem small compared to major established lenders, their ecosystem support and a steady stream of funding from big tech will make them potentially a formidable foe to the conventional banks.
Digitalization in the banking industry is inevitable and it is likely that the use-case for conventional and digital banking are likely to converge in a number of areas as digital banks become the new normal. 
We expect digital banking to be initially focused on consumer banking and SMEs and do not expect any major infringement into corporate banking, which still makes up the majority of the larger bank's business
Another very interesting area currently is the rapid pace of development and movement within the digital payments landscape in Indonesia.
There is little doubt that <a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab</a> is looking for partners to push out its digital finance aspirations. This may involve taking a stake in a smaller bank potentially with its partner <a href="https://www.smartkarma.com/entities/elang-mahkota-teknologi-tbk" target="_blank" data-smartkarma-citation="entities:7752:1" rel="noopener">Emtek (EMTK IJ)</a> to transform it into a digital bank.
We continue to favour <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> 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> in the sector. We also take a positive view of <a href="https://www.smartkarma.com/entities/bank-central-asia-tbk-pt" target="_blank" data-smartkarma-citation="entities:440:1" rel="noopener">Bank Central Asia (BBCA IJ)</a> as a core holding and rank its digital banking services the highest amongst the banks at this time.


There have been ongoing signs that the competition within the digital finance space is starting to reach a hiatus as it moves up a gear both for the existing banks, as well as the digital economy players including GoTo, Grab, and Shopee (Sea Ltd (SE US)).  

Competition between digital banks and conventional banks has started to heat up in Indonesia and is only going to accelerate the digitization trend in the industry. In August, some digital banks were offering interest rates of 7% - 8% on current account deposits.
Bank Jago Tbk PT (ARTO IJ) recorded a sevenfold annual increase in credit lending in 1H2021 and the bank plans to jack up its lending further through partnerships with peer-to-peer (P2P) lenders and multi-finance companies,
While some of these new digital banks might seem small compared to major established lenders, their ecosystem support and a steady stream of funding from big tech will make them potentially a formidable foe to the conventional banks.
Digitalization in the banking industry is inevitable and it is likely that the use-case for conventional and digital banking are likely to converge in a number of areas as digital banks become the new normal. 
We expect digital banking to be initially focused on consumer banking and SMEs and do not expect any major infringement into corporate banking, which still makes up the majority of the larger bank's business
Another very interesting area currently is the rapid pace of development and movement within the digital payments landscape in Indonesia.
There is little doubt that Grab is looking for partners to push out its digital finance aspirations. This may involve taking a stake in a smaller bank potentially with its partner Emtek (EMTK IJ) to transform it into a digital bank.
We continue to favour Bank Rakyat Indonesia Persero (BBRI IJ) and Bank Negara Indonesia Persero (BBNI IJ) in the sector. We also take a positive view of Bank Central Asia (BBCA IJ) as a core holding and rank its digital banking services the highest amongst the banks at this time.

CrossASEAN Digital Economy - The Gloves Are off in Digital Finance?

Indonesia

PT Bank Rakyat Indonesia Agroniaga Tbk operates general banking activities.

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Bank Rakyat Indo Agroniaga (AGRO IJ)

The Week That Was in ASEAN@Smartkarma - Link Net, Jardine Matheson, and WeLab

The week that was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity...

Angus Mackintosh

The Week That Was in ASEAN@Smartkarma - Sea Ltd's Knockout, Grab's Progress, and the Avian IPO

The week that was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity...

Angus Mackintosh

Bank Negara Indonesia (BBNI IJ) - Ripe for A Re-Rating?

Bank Negara Indonesia (BBNI IJ) is often seen as the bank playing catch up with its peers but maybe this time is different and it may finally be...

Angus Mackintosh

Bank Central Asia – Substantial Credit Delta Improvement

BANK CENTRAL ASIA : BCA reported a 3Q21 QOQ results increase of 17.9%, driven by justifiable credit leverage. 3Q21 net new NPLs decelerated from...

Thomas J. Monaco

CrossASEAN Digital Economy - The Gloves Are off in Digital Finance?

Competition between digital banks and conventional banks has started to heat up in Indonesia and is only going to accelerate the digitisation trend...

Angus Mackintosh

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