It is recommended that PT Bank Neo Commerce Tbk (BBYB) shares be kept buying with a target price of Rp 2,900. The target price illustrates the growing demand for digital credit which has an impact on increasing Bank Neo's net interest income.
RHB Sekuritas Indonesia analysts Ryan Santoso and Andrey Wijaya said the BBYB price target took a number of factors into account. Among them, Bank Neo managed to record a 242% increase in net interest income (NII) to Rp 180 billion in the first quarter of 2022. This increase was driven by the rapid distribution of digital credit and direct credit.
“Seeing this performance, we have increased Bank Neo Commerce's revenue projection by 108% this year, but with a higher net loss due to transfer and promotion fee subsidies. The company's net loss was revised up from Rp 306 billion to Rp 804 billion. We believe in growth,” he wrote in the research.
The upward revision of the NII, he said, was also driven by strong growth in digital credit and direct credit, contributing 63 percent to Neo Commerce Bank's total loans. "Nevertheless, we believe the realization of BBYB's credit growth can be higher than our initial assumption," he explained.
Since the Neo Commerce Bank application was launched in November 2021, the total loan disbursement of Neo Commerce Bank reached Rp. 1.6 trillion until March 2022 with 700 thousand users and 8.2% of users disbursed direct credit. Meanwhile, the total direct credit in circulation now reaches Rp. 1.3 trillion of the total credit disbursement of Rp. 2.1 trillion.
"The company targets digital credit disbursement to reach 30% of the total users. We estimate direct credit disbursement can reach Rp 5 trillion by the end of 2022," he explained.
The target price also takes into account Akulaku's aggressiveness in increasing share ownership in Neo Commerce Bank. The target has also considered delaying the issuance of new shares ( rights issue ) of Rp 5 trillion from the original plan in the second quarter to the end of this year. The delay was influenced by the negative sentiment in technology sector stocks.
Akulaku is reported to have expressed interest in increasing its ownership in BBYB to 40% from the current position of 25.2%, which can increase the synergy between Akulaku and BBYB, he explained.
The stock price target has also considered an increase in transaction volume on the Neo Commerce Bank application to reach 76% in the first quarter of 2022. Meanwhile, payments through the application rose 88% in the first quarter of 2022, compared to the fourth quarter of 2021.
RHB Sekuritas estimates that Bank Neo Commerce's interest income will increase to Rp 1.54 trillion in 2022, compared to last year's Rp 666 billion. Meanwhile, net loss is estimated to drop slightly from Rp 985 billion to Rp 804 billion. The company is predicted to start scoring a net profit in 2024 with a target of Rp 231 billion.
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