On Monday, UBS initiated coverage on BFI Finance Indonesia Tbk PT (BFIN:IJ) (OTC: PBIIF) stock, assigning it a Buy rating and setting a price target of IDR1,200.00. The financial institution emphasized BFI Finance’s standing as Indonesia’s sixth largest multi-finance company, holding a 4% market share and specializing in automotive financing.
BFI Finance’s strengths were highlighted by a strong 10-year average return on equity (ROE) of 18.6%, a net interest margin (NIM) of approximately 15%, and a compound annual growth rate (CAGR) for loans surpassing the industry average at 11%.
The company has addressed rising delinquency rates over the past five quarters by decelerating its growth. However, there is optimism as the formation of non-performing loans (NPL) peaked in the first quarter of 2024, with year-over-year negative NPL growth now being observed.
UBS projects that a series of interest rate cuts by Bank Indonesia, totaling 150 basis points by the end of 2025, will accelerate BFI Finance’s revenue growth from flat in the first half of 2024 to 10% by the end of 2026.
The financial institution anticipates an expansion in BFI Finance’s ROE, predicting an increase from 14% to 17% by 2026. UBS’s valuation of BFI Finance at 1.4 times the 12-month forward price-to-book value (P/BV) and a 5% dividend yield were also factors contributing to the Buy rating. The price target of IDR1,200.00 set by UBS suggests there is a 19% upside potential for the stock.
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