Here's how Bank BJB can raise IDR400b in capital

Lowering the divident payout ratio is an option.

Here's Maybank Kim Eng's report on Bank BJB:

Ø To reach IDR5t core capital and be categorized in “Book 3” according to Bank Indonesia’s latest classification, BJB requires additional IDR400b capital based on 9M12 position. Options on how to raise this amount includes:

Ø First and foremost, lowering the dividend payout ratio (DPR). At a maximum 50% DPR and taking a conservative assumption that FY12 net profit will be 5% lower than our IDR1.3t estimate, BJB’s dividend per share (DPS) will still be higher than the IDR61 DPS (61% DPR) disbursed last year. Most importantly, under this scenario BJB’s dividend yield will remain above 5%, higher than the industry’s average of ~3%.

Ø Second, rights issue. Assuming freefloat will be increased to 40% from currently 25%, BJB will need to issue 2.4b new shares (25% of current outstanding shares). At current price, it implies total proceeds of nearly IDR2.9t, which will be sufficient to support medium-term growth. Note that BJB has strong CAR to begin with, of 19.1% by 9M12.

Ø BJB’s FY12 result is expected to be released in early March. We maintain our BUY call on BJB with TP at IDR1,370/share (8.9x 2013F PER; 1.9x 2013F PBV), implying 12% upside from its recent peak. We think the market has not fully priced BJB’s sizable consumer lending, and its move to improve funding base towards CASA which might result in higher NIM in 2013.