People are patient with a wide range, this is the prospect of BBRI-BRIS-AGRO shares

Jakarta, CNBC Indonesia – The stock prices of the big family issuers of PT Bank Rakyat Indonesia (Persero) Tbk (BBRI) have begun to consolidate in today’s trade, Monday (19/10/2020) after flying wild for a week yesterday.

The shares of the parent company BBRI managed to turn 2.19% green during the week as JCI posted a pretty week with a 0.34% increase.

Even the shares of BBRI’s subsidiary, PT Bank BRISyariah Tbk (BRIS) managed to soar 55% over the past week after certainty emerged regarding the merger.The three Islamic commercial banks are BUMN subsidiaries, namely PT Bank BNI Syariah, BRIS, and PT Bank Syariah Mandiri.

This is stated in an MoU or Memorandum of Understanding [Conditional Merger Agreement] between the three banks and their respective parent companies.

BRIS was determined to be a survivor bank or entity that received the merger (surviving entity) from the merger of three BUMN sharia banks.

Meanwhile the stock price sister company PT Bank Rakyat Indonesia Agroniaga Tbk (AGRO), which has historically followed BRIS shares, is also highly appreciated 25,58%.

Seeing the flying of the shares of the BBRI family, of course, makes investors wonder what the real potential of these three stocks is, is the consolidation of the share price of the bank family with the largest asset in Indonesia today the right time to enter?

BRI Group’s Share Movement Trend

In terms of valuation for the holding company of BBRI, actually when using the valuation method of market price compared to net income (price earnings ratio / PER) and market price compared to its book value (PBV, price to book value), BBRI’s shares are considered expensive because they are above average. the banking industry averages 8.8 times and 1.5 times, respectively.

However, it should be remembered, BBRI’s PBV has historically moved in the range of 2.48 times over the past 3 years, so that in the long term, BBRI actually still has the potential to book upside when the valuation returns to the level before being attacked by the corona virus.

But keep in mind, the details of the mega-merger of sharia banks have yet to be announced.

Considering the largest share equity of Bank Syariah Mandiri (BSM) among the three banks that will be merged, there is a possibility that BSM will control the melting of Islamic banks which according to the news circulating among market players will be called Bank Amanah.

This of course can be a negative sentiment for BBRI because the loss of control over the melted BRIS could be a harsh blow to the consolidated financial statements of BBRI.

As such, this has an impact on its share price at least in the short to medium term.

Furthermore, the currently actively traded stock, namely BRIS, will soon be merged into ‘Bank Amanah’, the prospect of this stock for the long term is actually bright.

This is because this bank is going to be market leader both in terms of assets, financing, and recipients of third party funds (DPK).

Even so, again, the uncertainty regarding the merger, which is of course the main enemy of the capital market, still overshadows this stock.

The news circulating among market players is that the government will appoint Public Appraisal Service Office (KJPP) who will later evaluate the fair price of BRIS shares and the government will do so tender offer at that price.

Of course, this is not good news for BRIS because the price has shot up over the past year, far above the initial offering price (IPO) of Rp. 510 / unit.

That is why, if the KJPP valuation price will be below the market price, there is a possibility that the BRIS market price will be pressured to the level of the KJPP valuation price.

Finally, AGRO shares may not be benefited from this merger, but the price continues to follow BRIS due to public speculation trader.

In terms of valuation, AGRO is also quite expensive with PER at 216 times and PBV at 2.2 times, which is far above the banking industry average.

Seeing the current market conditions which are full of uncertainty which caused the three stocks to consolidate, it is better for market players to wait in advance for the details of the merger which will be announced later on October 21, 2020.

Remember people are patient howwide.

CNBC INDONESIA RESEARCH TEAM

[Gambas:Video CNBC]

(trp/trp)

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