UBS sets Buy rating on BFI Finance Indonesia stock, sees 19% upside By Investing.com

On Monday, UBS initiated coverage on BFI Finance Indonesia Tbk PT (BFIN:IJ) (OTC: PBIIF) stock, issuing a Buy rating and setting a price target of IDR1,200.00. The firm highlighted the company’s position as Indonesia’s sixth largest multi-finance company (MFC) with a 4% market share, specializing in automotive financing.

BFI Finance’s robust 10-year average return on equity (ROE) of 18.6%, a net interest margin (NIM) around 15%, and a higher-than-industry 11% compound annual growth rate (CAGR) for loans were among the key strengths noted.

The company has managed rising delinquency rates over the past five quarters by decelerating its growth. However, there is optimism as non-performing loan (NPL) formation peaked in Q1 2024, and year-over-year negative NPL growth is now being observed.

UBS anticipates that a series of interest rate cuts by Bank Indonesia, totaling 150 basis points by the end of 2025, will help accelerate BFI Finance’s revenue growth from flat in the first half of 2024 to 10% by the end of 2026.

UBS forecasts an expansion in BFI Finance’s ROE, expecting it to increase from 14% to 17% by 2026. The firm’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 IDR1,200.00 price target set by UBS suggests that there is a 19% upside potential for the stock.

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