BNI Share Review, Is It Really Cheap?

BNI Share Review, Is It Really Cheap?

Jakarta, 15 April 2020 - In the midst of COVID-19 pandemic or corona virus, the economic conditions became increasingly erratic, and made the stock market volatile. This condition makes investors refrain and be careful in managing their portfolio in the Indonesian stock market.

Because, in recent times the Indonesia Composite Index (ICI) had touched its lowest point in recent years. As a result, a number of bluechip shares dropped and left the fair price. This makes some shares considered undervalued, or lower than their fundamental value.

One of the shares that must impacted by this pandemic is PT Bank Negara Indonesia (Persero), Tbk (BBNI) which closed at Rp 4,150 in trading on Tuesday (4/14/2020). BBNI's share price on 26 March touched Rp 2,970/share, and is the lowest level in the last decade or since 16 August 2010.

Based on the analysis, after 2010 BBNI has also touched the second lowest level, which is at the level of Rp 2,975/share in 2011. Therefore, the level of Rp 2,970 has the opportunity to become the bottom level so far this year. As long as the level is not broken, technically BBNI share has the potential to rise again.

Since the end of 2019 until Tuesday (14/4/2020), BBNI share has gone down by almost 50%, precisely 49.13%. Massive selling continues to occur since February 20, until finally touching the lowest level in 10 years.

The sharp decline in a short time is certainly too excessive, as seen from the weekly period stochastic indicator which is in oversold territory (below 20), as well as the month period. Stochastic is a leading indicator, or an indicator that initiates price movement. When Stochastic reaches the oversold area (below 20), then price of an instrument has the opportunity to turn upside down.

However, for the long term, the closest resistant of BBNI shares are at the level of Rp 4,850/share. If the level can be passed by BBNI, then the shares of this state-owned Bank have the opportunity to continue to climb towards Rp 6,000 - 6,150/share. Even the opportunity to reach the area of Rp 6,800 - 7,000 will be opened if BBNI is able to pass Rp 6,150/share.

Especially if we look at trends in the stock market lately, with the rise of selling action due to the COVID-19 pandemic. Not only banking or BBNI stocks in particular, were hit, but evenly on all sectors and hampered economic growth.

After the pandemic ends, of course, the global and national economy will bounce back, and investors will not hesitate to re-enter the stock market that provides high yields.

Is BNI Stock Cheap?

Currently the book value of BBNI shares at the level of Rp 6,570. With so, the share price today reflects at the level of 0.63 times of book value (PBV). PBV is the valuation of stock prices with the book value of a company. This valuation is used more for issuers from the financial services industry, especially Banks.

Before the ICI (Indonesia Composite Index) was depressed, the average PBV of the banking industry in Indonesia was around 2 times. Meanwhile historically, in the last five years BNI has an average PBV of 1.45%.

With the current position of PBV, it can be said that BBNI’s stock price tends to be cheap if compared to its fundamental value.

The next thing needs to be observed related to BBNI, is the company’s profitability in the future. As book value is not a fixed level, the ups and downs follow earnings performance. If the net profit increases, book value of the issuer will move up.

For this reason, it is important to note BNI's profitability projection for 2020, especially amid the threat of an economic slowdown due to the corona virus. However, certainly this fourth largest Bank in Indonesia has managed to record a good performance until February 2020. This is reflected in an increase in net income, credit, to third party funds.

This SOE Bank's net profit shot 22.27% to Rp 2.58 trillion, compared to February 2019 at Rp 2.11 trillion. When compared with the banking industry which only grew 8.25% in January 2020, BNI's profit grew beyond the industry.

The increase of BBNI's net profit is encouraged by the increase of net interest income (NII) of almost 16% to Rp 5.92 trillion in February 2020, compared to the same period last year at Rp 5.11 trillion. Meanwhile, commission and administration revenue remained strong at Rp 1.44 trillion.

This increase in revenue and net profit was also accompanied by an increase in assets of almost 10% in February 2020 to Rp 788.72 trillion. While in February 2019 the assets of the state-owned Bank were recorded at Rp. 718.82 trillion.

The increase in company assets was also supported by an increase in lending and third party funds. As of February 2020, BNI's credit distribution shot up 11.8% to Rp 529.53 trillion, compared to the same period in 2019 valued at Rp 473.61 trillion. While company deposits were recorded to rise 9.83% to Rp 573.3 trillion, compared to February 2019 at Rp 521.97 trillion.

The Head of Investment of PT Avrist Asset Management, Tbk., Farash Farich said that a positive signal for for banks to grow at the beginning of the year. Despite the increasingly severe challenges going forward, mainly due to the economic slowdown due to the spread of corona virus.

"In terms of valuation, BNI is already very low, Price to book is 0.65x, below its historical deviation standard," Farash said.

This could also be a moment for investors to collect BNI shares, especially with the current PBV which indicates that this state-owned Bank's shares are undervalued. Usually stocks that have large PBV ratios, have high valuations (overvalued) while stocks with PBV below 1 time, have cheap valuations.

"The possibility for a lower valuation remains. But at least the valuation at this time is quite interesting. But in anticipation of the possibility that prices could go down more can be done in stages," she said.

For more information, please contact :
Corporate Secretary BNI
Phone: 021-5728387


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