Asian Gems Corporate Highlights: Regional Banks and Property Developers Drive Growth
UOB Kay Hian
October 10, 2024
The Asian financial landscape is experiencing robust growth across several sectors, particularly in Indonesia, Malaysia, and Thailand. Key regional players are capitalizing on opportunities in banking, property development, and other critical industries. The Asian Gems Corporate Highlights report showcases a comprehensive analysis of prominent companies, underscoring their growth potential and market positions. This article provides an in-depth look at the featured companies, shedding light on their financial health, market strategies, and future prospects.
Bank Central Asia (BBCA IJ)
Title: Bank Central Asia: Positioned for Growth Amidst Interest Rate Sensitivity
Overview:
Bank Central Asia (BBCA), Indonesia’s largest private bank, continues to maintain its dominant position as a transactional banking leader, supported by a strong CASA (Current Account and Savings Account) franchise. BBCA’s assets are more sensitive to interest rate changes than its deposits, allowing for better management of the net interest margin (NIM), even in a rate-cutting environment.
Key Highlights:
- CASA Strength: BBCA’s CASA market share increased to 17.3% in August 2024 from 16.8% in December 2023, reflecting the bank’s growing ability to attract low-cost funding. CASA comprises 80% of the bank’s deposits, further contributing to its low funding cost.
- Government Spending Impact: BBCA expects Indonesia’s GDP growth to rise by a couple of percentage points in 2025 due to increased government spending. This spending boost is anticipated to offset some of the pressures from the transition to a new government, which historically slows down economic activity.
- Loan Growth Drivers: While corporate and consumer loans remain the key growth drivers, the SME segment is expected to play a more significant role in the bank’s expansion plans in the coming years. As of August 2024, SME loans grew by 12.7% year-on-year, accounting for 13.5% of BBCA’s total loan portfolio.
Outlook:
BBCA’s low loan-to-deposit ratio (LDR) of 76.5% gives it room to support further loan growth. The bank’s focus on maintaining a balance between volume and pricing, coupled with its ample liquidity, positions it well to expand lending, particularly in the SME segment. The bank remains a top pick in the Indonesian banking sector due to its robust capital adequacy ratio and strong asset quality.
Bank Negara Indonesia (BBNI IJ)
Title: Bank Negara Indonesia: Targeting 20% ROE by 2028 with Improved Funding Structure
Overview:
Bank Negara Indonesia (BBNI), a state-owned bank in Indonesia, has focused on restructuring its loan book over the past three years, resulting in better asset quality and risk profile. As BBNI transitions to its next growth phase, the bank has set ambitious targets, including a 20% return on equity (ROE) by 2028.
Key Highlights:
- Improved NIM and CIR: BBNI expects its net interest margin (NIM) to increase to 4.8-4.9% by 2028, up from 4.0% in the first half of 2024. The improvement will be driven by a better funding environment and the strengthening of its CASA franchise.
- Loan Growth Recovery: Although loan growth decelerated to 9.0% in August 2024, BBNI remains optimistic about achieving its 10-12% loan growth target for the year. Corporate loans continue to drive growth, while the recovery in SME loans is expected to pick up in 2025.
- Cost Management: The bank aims to bring its cost-to-income ratio (CIR) down to below 40% by 2028 through cost optimization and NIM expansion. This would be a significant improvement from the 43.7% CIR recorded in the first half of 2024.
Outlook:
BBNI’s strategic focus on strengthening its CASA franchise and improving its funding structure is expected to lead to sustainable long-term growth. The bank’s commitment to enhancing operational efficiency and maintaining a robust balance sheet underpins its ambitious ROE target. Investors should consider BBNI a solid investment as it continues its transformation journey toward stronger profitability.
Mah Sing Group (MSGB MK)
Title: Mah Sing Group: Multiple Growth Engines Powering Future Expansion
Overview:
Mah Sing Group, a leading property developer in Malaysia, is diversifying its business model by exploring opportunities in data centers, plastic manufacturing, and glove production, alongside its core property development operations. This multi-pronged strategy positions the company for sustained growth across several industries.
Key Highlights:
- Data Center Expansion: Mah Sing is progressing with its data center partnerships, particularly in its Southville township, where it is in advanced discussions to secure further deals with global data center operators. Additionally, the company’s Meridin East development in Johor Bahru offers significant potential for data center capacity expansion, with the project expected to generate a substantial profit margin.
- Manufacturing and IPO Plans: Mah Sing’s plastic manufacturing business continues to grow, with plans for an IPO in the next three years. The company is also expanding its manufacturing footprint into Indonesia through a joint venture that will increase capacity by 10%.
- Glove Business Outlook: Mah Sing’s glove business, which primarily exports nitrile gloves to the US, is targeting profitability by the second half of 2025. The company currently operates five production lines and aims to increase utilization rates to 80% in order to break even.
Outlook:
Mah Sing’s ability to execute a diverse range of projects positions it as a key player in multiple sectors. The company’s strategic focus on fast-growing markets such as data centers and manufacturing, alongside its strong property development business, offers a compelling investment case for those seeking exposure to the Malaysian growth story.
WHA Corporation (WHA TB)
Title: WHA Corporation: Capitalizing on Data Centers and Industrial Land Pre-Sales
Overview:
WHA Corporation, a Thai-based industrial property developer, is benefiting from strong sentiment in the land pre-sales market, particularly as demand for data centers continues to rise. The company’s focus on data center-related developments and industrial land sales positions it well to capture growth in these fast-evolving sectors.
Key Highlights:
- Data Center Demand: WHA is experiencing strong demand for its land pre-sales, driven by the growing need for data centers. The company is capitalizing on this trend by developing properties that cater to data center operators, particularly in strategic locations.
- Land Sales and Growth: WHA’s industrial land sales continue to drive revenue, with pre-sales momentum expected to remain strong in the near term. The company is well-positioned to benefit from the expansion of digital infrastructure in Thailand.
Outlook:
WHA’s strategic focus on data centers and industrial land pre-sales provides the company with a significant growth runway. As digital infrastructure continues to expand, WHA is poised to capture increasing demand from data center operators, making it a top pick in the Thai property sector.
Conclusion
The companies highlighted in the Asian Gems Corporate Highlights report represent some of the most promising growth stories across Southeast Asia. From Indonesia’s banking giants to Malaysia’s innovative property developers and Thailand’s burgeoning data center sector, these firms are well-positioned to capitalize on regional growth trends. Investors should keep a close eye on these companies as they continue to expand and adapt to the evolving market landscape.
UOB Kay Hian
October 10, 2024
