Although Indonesia's property sector has grown sluggishly over the past few years, there remains ample room for House Ownership Credit (KPR) growth as the country's backlog in housing units is estimated to have reached somewhere between 11.3 million and 13.5 million units. This implies that there is great potential for KPR growth. Bank Tabungan Negara (BTN), market leader of KPR in the low and lower-middle income segment (those who seek property below a price of IDR 250 million, or, approximately USD $19,000), should then benefit the most of rising KPR demand stemming from those first home buyers.

Besides subsidized KPR (a program sponsored by the central government) that is estimated to grow 21 percent (y/y) in 2017, non-subsidized KPR demand is also expected to rise (by about 19.5 percent) this year and thus to boost the earnings of Bank Tabungan Negara. KPR is estimated to contribute nearly 72 percent to Bank Tabungan Negara's total credit disbursement. The bank's credit loans are expected to rise to IDR 196.4 trillion in 2017, up from an estimated IDR 164.4 trillion in 2016, and credit disbursement realization of IDR 139.0 trillion in 2015.

Meanwhile, Bank Tabungan Negara's non performing loans (NPL) are expected to fall slightly to 3 percent in 2017, from an estimated 3.1 percent in 2016, and realization of 3.4 in the preceding year. The bank is expected to maintain low cost of funds (at 5.1 percent) due to its rising current account savings accounts (CASA). CASA combines savings and checking accounts to entice customers to keep their funds in the bank by paying no - or very low interest - on the current account while the savings portion pays an above-average return. The higher CASA stems from those who buy KPR (currently there are 2 million accounts at BTN).

Future Projection of Bank Tabungan Negara's Financial Highlights:

    2014   2015  2016F  2017F  2018F
Interest Income 12,807 14,966 17,163 19,867 23,266
Non-Interest Income
   895  1,107  1,220  1,390  1,633
Net Profit  1,146  1,851  2,394  2,868  3,424
P/E Ratio (x)   17.5   10.9    8.4    7.0    5.9
P/BV (x)    1.6    1.4    1.1    0.9    0.8

in billion IDR rupiah, except otherwise indicated
Source: RHB Securities (18/01/2017)

However, Bank Tabungan Negara is expected to curtail dividend payouts to shareholders as the financial institution aims to boost credit growth by (at least) an annual 18 percent (y/y) over the next three years. The dividend payout ratio may therefore fall from 20 percent to 17.5 percent.

RHB Securities advises investors to buy BTN stocks and set its target price for the bank's shares at IDR 2,420 a piece. On Thursday (19/01) its shares were up 1.06 percent to IDR 1,900 per share at 2 pm local Jakarta time. Over the past 12 months, Bank Tabungan Negara's shares have risen nearly 38 percent.

Stock Quote Bank Tabungan Negara - BBTN: