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

Private Capital Markets

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<p><a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek (1379371D IJ)</a> has bought a further 18% stake in Indonesia's <a href="https://www.smartkarma.com/entities/bank-jago-tbk-pt" target="_blank" data-smartkarma-citation="entities:31094:1" rel="noopener">Bank Jago (ARTO IJ)</a> bringing its total state to 22.16%. The transaction was executed at 1.14x PBV and a significant discount to the last traded price.</p>
<p><a href="https://www.smartkarma.com/entities/bank-jago-tbk-pt" target="_blank" data-smartkarma-citation="entities:31094:1" rel="noopener">Bank Jago (ARTO IJ)</a> has a market capitalization of IDR42.3tn (US$2.9bn), which values Gojek's stake in the bank at IDR9.3tn (US$641m).</p>
<p>Gojek's Indonesia users will in the future be able to open a bank account with <a href="https://www.smartkarma.com/entities/bank-jago-tbk-pt" target="_blank" data-smartkarma-citation="entities:31094:1" rel="noopener">Bank Jago (ARTO IJ)</a> and manage their finances through the <a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek (1379371D IJ)</a> App. </p>
<p>The <a href="https://www.smartkarma.com/entities/bank-jago-tbk-pt" target="_blank" data-smartkarma-citation="entities:31094:1" rel="noopener">Bank Jago (ARTO IJ)</a> deal marks an opportunity for <a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek (1379371D IJ)</a> to capitalize on its vast user base, especially through GoPay, to offer customers digital banking products and other financial services.</p>
<p><a href="https://www.smartkarma.com/entities/bank-jago-tbk-pt" target="_blank" data-smartkarma-citation="entities:31094:1" rel="noopener">Bank Jago (ARTO IJ)</a> has already moved its focus to digital banking, targeting SMEs and retail customers. GoPay also recently received investment from <a href="https://www.smartkarma.com/entities/facebook-inc-a" target="_blank" data-smartkarma-citation="entities:665:1" rel="noopener">Facebook Inc A (FB US)</a> and <a href="https://www.smartkarma.com/entities/paypal-holdings-inc" target="_blank" data-smartkarma-citation="entities:4747:1" rel="noopener">Paypal Holdings (PYPL US)</a>, which also provides a strong backing and the potential for collaboration from two heavyweight foreign investors</p>
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<div>For <a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek (1379371D IJ</a>, this will help it develop a process through which it can work with other banks, as well as providing customers with an increasing array of digital financial solutions.</div>
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<div>The deal also demonstrates that management is focused on building its competitive advantage in Indonesia rather than being sidelined any merger considerations with <a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab (0967655D SP),</a> which seems increasingly unlikely. </div>
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<p>Gojek is also seen to be on the path to profitability, with all its services generating positive margins on a product basis. <a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek (1379371D IJ)</a> also recently received US$150m in new money from <a href="https://www.smartkarma.com/entities/telekomunikasi-indonesia" target="_blank" data-smartkarma-citation="entities:1051:1" rel="noopener">Telekomunikasi Indonesia (TLKM IJ),</a> which represented another heavyweight local shareholder on top of <a href="https://www.smartkarma.com/entities/astra-international-tbk-pt" target="_blank" data-smartkarma-citation="entities:46:1" rel="noopener">Astra International (ASII IJ)</a> and Djarum Group. </p>
<p>We look at the background of the <a href="https://www.smartkarma.com/entities/bank-jago-tbk-pt" target="_blank" data-smartkarma-citation="entities:31094:1" rel="noopener">Bank Jago (ARTO IJ)</a> management team below the fold, which seems well-suited to building this future collaboration.</p>
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Gojek (1379371D IJ) has bought a further 18% stake in Indonesia's Bank Jago (ARTO IJ) bringing its total state to 22.16%. The transaction was executed at 1.14x PBV and a significant discount to the last traded price.
Bank Jago (ARTO IJ) has a market capitalization of IDR42.3tn (US$2.9bn), which values Gojek's stake in the bank at IDR9.3tn (US$641m).
Gojek's Indonesia users will in the future be able to open a bank account with Bank Jago (ARTO IJ) and manage their finances through the Gojek (1379371D IJ) App. 
The Bank Jago (ARTO IJ) deal marks an opportunity for Gojek (1379371D IJ) to capitalize on its vast user base, especially through GoPay, to offer customers digital banking products and other financial services.
Bank Jago (ARTO IJ) has already moved its focus to digital banking, targeting SMEs and retail customers. GoPay also recently received investment from Facebook Inc A (FB US) and Paypal Holdings (PYPL US), which also provides a strong backing and the potential for collaboration from two heavyweight foreign investors

For Gojek (1379371D IJ, this will help it develop a process through which it can work with other banks, as well as providing customers with an increasing array of digital financial solutions.

The deal also demonstrates that management is focused on building its competitive advantage in Indonesia rather than being sidelined any merger considerations with Grab (0967655D SP), which seems increasingly unlikely. 



Gojek is also seen to be on the path to profitability, with all its services generating positive margins on a product basis. Gojek (1379371D IJ) also recently received US$150m in new money from Telekomunikasi Indonesia (TLKM IJ), which represented another heavyweight local shareholder on top of Astra International (ASII IJ) and Djarum Group. 
We look at the background of the Bank Jago (ARTO IJ) management team below the fold, which seems well-suited to building this future collaboration.











































Gojek (1379371D IJ) - Upping the Ante on Financial Services

Equity Bottom-Up

<p>The recent announcement that the three state-owned Syariah banks including Mandiri Syariah, <a href="https://www.smartkarma.com/entities/bank-brisyariah-tbk-pt" target="_blank" data-smartkarma-citation="entities:26981:1" rel="noopener">Bank Brisyariah (BRIS IJ),</a> and BNI Syariah will merge together to form a new state-owned Syariah entity signals a change of pace in the space. </p>
<p>It is not surprising that Syariah banking is becoming increasing popular in Indonesia given the fact that the population is nearly 80% Muslim, with the largest population of Muslim in the world.</p>
<p>This is compounded by an increasing trend within society to "be a good Muslim", with the wearing  of Hijabs, the consuming of Halal products, making charitable donations ("Zakat"), pilgrimages to Mecca (Umrah and Hadj), and obviously Islamic Syariah Banking. </p>
<p>Syariah Banking can be a very profitable business, with an inherently low cost of funds and a different way of collecting "interest" on loans but this is not always the case. </p>
<p>Syariah lenders such as <a href="https://www.smartkarma.com/entities/bank-tabungan-pensiunan-nasi" target="_blank" data-smartkarma-citation="entities:27088:1" rel="noopener">Bank BTPN Syariah (BTPS IJ)</a> achieve super-normal returns with an ROA above 10% Pre-COVID and Mandiri Syariah (Indonesia's largest Syariah Bank by assets &amp; deposits) achieved an ROE of 15.7% in 2Q2020. </p>
<p>Other such as <a href="https://www.smartkarma.com/entities/bank-brisyariah-tbk-pt" target="_blank" data-smartkarma-citation="entities:26981:1" rel="noopener">Bank Brisyariah (BRIS IJ)</a> and BNI Syariah are much less profitable, with the former achieving an ROE of only 3%, with the latter close to zero. Even BCA Syariah ( <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> only achieved an ROE of 4.0% in 2019. </p>
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<p>Bringing the three SOE Shairya Banks together with Mandiri Syariah as the lead, will bring with it better scale and cost synergies, with targetted ROEs in the mid-teens in the medium-term. Though unconfirmed as yet, it is likely that <a href="https://www.smartkarma.com/entities/bank-mandiri-persero-tbk-pt" target="_blank" data-smartkarma-citation="entities:441:1" rel="noopener">Bank Mandiri (BMRI IJ)</a> will have a controlling interest in the merged entity, which will make it the key beneficiary of growth in the new entity. </p>
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The recent announcement that the three state-owned Syariah banks including Mandiri Syariah, Bank Brisyariah (BRIS IJ), and BNI Syariah will merge together to form a new state-owned Syariah entity signals a change of pace in the space. 
It is not surprising that Syariah banking is becoming increasing popular in Indonesia given the fact that the population is nearly 80% Muslim, with the largest population of Muslim in the world.
This is compounded by an increasing trend within society to "be a good Muslim", with the wearing  of Hijabs, the consuming of Halal products, making charitable donations ("Zakat"), pilgrimages to Mecca (Umrah and Hadj), and obviously Islamic Syariah Banking. 
Syariah Banking can be a very profitable business, with an inherently low cost of funds and a different way of collecting "interest" on loans but this is not always the case. 
Syariah lenders such as Bank BTPN Syariah (BTPS IJ) achieve super-normal returns with an ROA above 10% Pre-COVID and Mandiri Syariah (Indonesia's largest Syariah Bank by assets &amp; deposits) achieved an ROE of 15.7% in 2Q2020. 
Other such as Bank Brisyariah (BRIS IJ) and BNI Syariah are much less profitable, with the former achieving an ROE of only 3%, with the latter close to zero. Even BCA Syariah ( Bank Central Asia (BBCA IJ) only achieved an ROE of 4.0% in 2019. 

Bringing the three SOE Shairya Banks together with Mandiri Syariah as the lead, will bring with it better scale and cost synergies, with targetted ROEs in the mid-teens in the medium-term. Though unconfirmed as yet, it is likely that Bank Mandiri (BMRI IJ) will have a controlling interest in the merged entity, which will make it the key beneficiary of growth in the new entity. 


Bank Mandiri Persero (BMRI IJ) - The Unsung Hero of Syariah?

Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

<p>There are few banks that compare with profit measures for the all-female Shariya micro-finance lender, <a href="https://www.smartkarma.com/entities/bank-tabungan-pensiunan-nasi" target="_blank" data-smartkarma-citation="entities:27088:1" rel="noopener">Bank BTPN Syariah (BTPS IJ)</a>. Where forbearance is key in banking globally at present, those that have highly profitable lending can be even more spared. This is due to banks being able to stagger credit costs over time, where strong core income can mitigate the provisioning impact.  What is also important is that BTPS generally takes high credit costs even before shutdown, suggesting it well manages default, loss. Even where cash accounting on loans in forbearance can upset profit, stylized figures for BTPS do not suggest the figures as being dire. </p>

There are few banks that compare with profit measures for the all-female Shariya micro-finance lender, Bank BTPN Syariah (BTPS IJ). Where forbearance is key in banking globally at present, those that have highly profitable lending can be even more spared. This is due to banks being able to stagger credit costs over time, where strong core income can mitigate the provisioning impact.  What is also important is that BTPS generally takes high credit costs even before shutdown, suggesting it well manages default, loss. Even where cash accounting on loans in forbearance can upset profit, stylized figures for BTPS do not suggest the figures as being dire. 

Global Bank Equity Specialist, Creative Portfolios

Paul Hollingworth

Global Bank Equity Specialist

Creative Portfolios

<p>Behind the acquisitions, consolidation, and FX fluctuations, the trends at <a href="https://www.smartkarma.com/entities/otp-bank-nyrt" target="_blank" data-smartkarma-citation="entities:28806:1" rel="noopener">OTP Bank Nyrt (OTP HB)</a> continue to erode. For this most popular of GEM components, the direction of travel is far from clear. Similar to Sberbank, Credicorp, or even an Indonesian lender such as <a href="https://www.smartkarma.com/entities/bank-tabungan-pensiunan-nasi" target="_blank" data-smartkarma-citation="entities:27088:1" rel="noopener">Bank Tabungan Pensiunan Nasi (BTPS IJ)</a> , the temptation is to invest in a high profitability franchise in an attractive EM. The problem is that investors pay through the nose: valuation risk is high especially in these stressed and volatile times. The folly is to pay a premium for an eroding franchise in terms of fundamental momentum.</p><p>Trading at a FV of 16%, when the regional median stands at 9% and many lenders command &lt;5%, OTP is priced to deliver strong results. And recent data at Q120 <em>reveal a loss at Q120</em> even before the full onset of COVID-19 though an impact was visible across burgeoning "stage 2" exposures. The loss was rooted in, among items, the debt moratorium in Hungary and the banking tax in Hungary and in Slovakia which equated to a hit of HUF36.9bn. In the quarter, Loan Loss Provisions (despite flat NPLs) and OPEX climbed firmly wiping out "Core Income" progression.</p><p>Profitability is relatively elevated but markedly less so than in the past on a LTM basis. (Similar to Sberbank which commands a higher valuation). We may have seen peak OTP ROE and ROA. This will be related to the market share-driven credit growth and the effects of consolidation and FX fluctuations. Elevated Loan growth, compounded by corporate activity and FX effects plus market share focus are very often a signal of a subpar investment. Margin and Spread are narrowing too as cost of funds jumps. There is slippage in Capitalisation given the expansion of the consolidated loan book. Liquidity is weakening as robust consumer (subsidised "baby Loans" in Hungary, mortgages in Moldova, Croatia and Romania) and corporate (Hungary, Croatia, Slovenia, Moldova) credit supply  outpaces deposit expansion. Provisioning is reduced as a % of Loans despite much higher credit costs. Despite Q120, LTM Efficiency (CIR and "Core Jaws") and Asset Quality (bolstered by the denominator) show improvement however.</p><p>A PH Score™ of 4.3 is subpar, supported by the valuation variable.</p><div class="content-highlight"><p>The PH Score™ is a fundamental momentum-quantamental score that scores banks according to changes in value-quality. The Score encompasses Profitability, Operating Efficiency, Liquidity, Capital, Asset Quality, and Coverage as well as a valuation variable. Scores lie between 0 and 10, with higher scores representing more positive signs. The PH Score™ was back tested over 2007-17 for global banks and conclusively shows progressively higher returns across quintiles ranked by Score. </p></div>

Behind the acquisitions, consolidation, and FX fluctuations, the trends at OTP Bank Nyrt (OTP HB) continue to erode. For this most popular of GEM components, the direction of travel is far from clear. Similar to Sberbank, Credicorp, or even an Indonesian lender such as Bank Tabungan Pensiunan Nasi (BTPS IJ) , the temptation is to invest in a high profitability franchise in an attractive EM. The problem is that investors pay through the nose: valuation risk is high especially in these stressed and volatile times. The folly is to pay a premium for an eroding franchise in terms of fundamental momentum.Trading at a FV of 16%, when the regional median stands at 9% and many lenders command &lt;5%, OTP is priced to deliver strong results. And recent data at Q120 reveal a loss at Q120 even before the full onset of COVID-19 though an impact was visible across burgeoning "stage 2" exposures. The loss was rooted in, among items, the debt moratorium in Hungary and the banking tax in Hungary and in Slovakia which equated to a hit of HUF36.9bn. In the quarter, Loan Loss Provisions (despite flat NPLs) and OPEX climbed firmly wiping out "Core Income" progression.Profitability is relatively elevated but markedly less so than in the past on a LTM basis. (Similar to Sberbank which commands a higher valuation). We may have seen peak OTP ROE and ROA. This will be related to the market share-driven credit growth and the effects of consolidation and FX fluctuations. Elevated Loan growth, compounded by corporate activity and FX effects plus market share focus are very often a signal of a subpar investment. Margin and Spread are narrowing too as cost of funds jumps. There is slippage in Capitalisation given the expansion of the consolidated loan book. Liquidity is weakening as robust consumer (subsidised "baby Loans" in Hungary, mortgages in Moldova, Croatia and Romania) and corporate (Hungary, Croatia, Slovenia, Moldova) credit supply  outpaces deposit expansion. Provisioning is reduced as a % of Loans despite much higher credit costs. Despite Q120, LTM Efficiency (CIR and "Core Jaws") and Asset Quality (bolstered by the denominator) show improvement however.A PH Score™ of 4.3 is subpar, supported by the valuation variable.The PH Score™ is a fundamental momentum-quantamental score that scores banks according to changes in value-quality. The Score encompasses Profitability, Operating Efficiency, Liquidity, Capital, Asset Quality, and Coverage as well as a valuation variable. Scores lie between 0 and 10, with higher scores representing more positive signs. The PH Score™ was back tested over 2007-17 for global banks and conclusively shows progressively higher returns across quintiles ranked by Score. 

<p><a href="https://www.smartkarma.com/entities/bank-tabungan-negara-persero" target="_blank" rel="noopener" data-smartkarma-citation="entities:731:1">Bank Tabungan Negara Persero (BBTN IJ)</a> may look as if it has a dominant safe mortgage franchise. But we have seen how this can pan out. Asset growth has been way too exuberant in recent years and is now less reliant on cheaper CASA funding. Consequently, as per usual, the Balance Sheet shows signs of deterioration at a time of global slowdown when even Indonesia's forecast 5% GDP growth is under the microscope and asset bubbles are pervasive in property while Special Mention Loans remain elevated as in China.</p><p>The bank stands on a PH Score of 4.4 which is subpar by global and Indonesian standards. Our fundamental momentum gauge incorporates trends in Profitability, Efficiency, Capitalisation, Liquidity, Provisioning, and Asset Quality. The Score is well below other lenders in Indonesia such as the ridiculously profitable but absurdly expensive <a href="https://www.smartkarma.com/entities/bank-tabungan-pensiunan-nasi" target="_blank" rel="noopener" data-smartkarma-citation="entities:27088:1">Bank Tabungan Pensiunan Nasi (BTPS IJ)</a> and <a href="https://www.smartkarma.com/entities/bank-ocbc-nisp-tbk-pt" target="_blank" rel="noopener" data-smartkarma-citation="entities:6753:1">Bank Ocbc Nisp (NISP IJ)</a> though is better than MUFG's <a href="https://www.smartkarma.com/entities/bank-danamon-indonesia-tbk-pt" target="_blank" rel="noopener" data-smartkarma-citation="entities:135:1">Bank Danamon Indonesia (BDMN IJ)</a>.</p><p>Shares are cheapening and stand out in Indonesia in terms of Franchise Value (11%) and trade at Book Value. However, we would wait for a better entry point - at least until we see concrete signs that the Balance Sheet is stabilising and management has better control of rampant Funding Costs that crimp the top-line. In short, until we identify far better fundamental momentum.</p>

Bank Tabungan Negara Persero (BBTN IJ) may look as if it has a dominant safe mortgage franchise. But we have seen how this can pan out. Asset growth has been way too exuberant in recent years and is now less reliant on cheaper CASA funding. Consequently, as per usual, the Balance Sheet shows signs of deterioration at a time of global slowdown when even Indonesia's forecast 5% GDP growth is under the microscope and asset bubbles are pervasive in property while Special Mention Loans remain elevated as in China.The bank stands on a PH Score of 4.4 which is subpar by global and Indonesian standards. Our fundamental momentum gauge incorporates trends in Profitability, Efficiency, Capitalisation, Liquidity, Provisioning, and Asset Quality. The Score is well below other lenders in Indonesia such as the ridiculously profitable but absurdly expensive Bank Tabungan Pensiunan Nasi (BTPS IJ) and Bank Ocbc Nisp (NISP IJ) though is better than MUFG's Bank Danamon Indonesia (BDMN IJ).Shares are cheapening and stand out in Indonesia in terms of Franchise Value (11%) and trade at Book Value. However, we would wait for a better entry point - at least until we see concrete signs that the Balance Sheet is stabilising and management has better control of rampant Funding Costs that crimp the top-line. In short, until we identify far better fundamental momentum.

Indonesia

PT Bank BTPN Syariah Tbk is a sharia commercial bank in Indonesia, providing banking products and services based on Islamic principles. The bank focuses on financial inclusion, catering to productive underprivileged communities, particularly women, by offering savings, deposits, and various sharia financing products. It also provides financial education through its Daya program. The company was founded in 1991 as PT Bank Sahabat Purba Danarta, converted to a sharia bank in 2014, and is headquartered in Jakarta Selatan, Indonesia.

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Bank BTPN Syariah (BTPS IJ)

Gojek (1379371D IJ) - Upping the Ante on Financial Services

Gojek's recent move to increase its stake in Bank Jago to 22% signals it intends to move into providing a broader range of financial services.

Angus Mackintosh

Bank Mandiri Persero (BMRI IJ) - The Unsung Hero of Syariah?

The merger of the three state-owned banks Syariah Banking units will form a much more significant operator with the potential to make higher...

Angus Mackintosh

BTPS – Exceptional Core

There are few banks that compare with profit measures for the all-female Shariya micro-finance lender, Bank BTPN Syariah (BTPS IJ). Where...

Daniel Tabbush

OTP: A GEM Favourite Reports a Loss

Behind the acquisitions, consolidation, and FX fluctuations, the trends at OTP Bank Nyrt (OTP HB) continue to erode. For this most popular of GEM...

Paul Hollingworth

BBTN: Cheapening as Fundamentals Erode

Bank Tabungan Negara Persero (BBTN IJ) may look as if it has a dominant safe mortgage franchise. But we have seen how this can pan out. Asset...

Paul Hollingworth

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