BTPN Syariah Lowers FY23 Guidance: A Value Buy with Upside Risk

BTPN Syariah’s post-results call with management revealed a cautious tone, but their revised FY23 guidance is considered conservative. The bank is deliberately selective in underwriting quality in Java, which makes up 63% of its portfolio. They plan to write off between Rp1.0-1.1t of its financing portfolio and have provisions in place to match the entire write-off amount, resulting in a 9% credit charge guidance. The bank will limit new agent acquisition to ex-Java and pilot new financing models instead of rolling them out, but investment in the mobile banking platform continues.

As a value buy, the stock screens well, with a 7.2% estimated yield assuming a 60% payout against FY23 earnings. The bank targets a 36-38% Cost/Income ratio, and its growth continues mainly in Sumatra, underpinned by commodities. The stock’s 12-month price target is Rp2,700 based on a Two-stage Gordon Growth model. Upside risk includes government spending and election campaigns in 2H23.