www.danareksa.com See important disclosure at the back of this report 1

Equity Research Company Update

Tuesday,28 September 2021

Bank Raya Indonesia (AGRO IJ) Not Rated

The Digital Trailblazer

AGRO is transforming into a fully-fledged digital bank, starting from name change to Bank Raya Indonesia and 9.9% pre-emptive rights issue approved by the EGM. AGRO has a clear roadmap supported by a sizeable USD314bn gig economy with 74.8mn individuals, and high barriers to entry segment addressable market. As part of BRI Ultra Micro Holding as the parent, BRI Agro will have access to BRI venture portfolio along 715k BRI and Payfazz agents as new subs and possibly becoming loan channels. The collaboration will ensure low customer acquisition costs, add recurring high yield short term loans, whilst also benefitting the whole Ultra Micro ecosystem. Grab is reportedly in talks with AGRO to become a shareholder and for a strategic partnership, benefitting both parties Digital embodiment of BBRI’s spirit of serving the underserved. As with its parent BBRI:IJ which serves the grassroots in remote areas, AGRO is also poised to serve the underserved and the unserved. The main target market is 46mn informal workers which poised to grow to 74.8mn by 2025 and worth USD314bn, currently relatively untapped, with AGRO the preferred choice. As for lending, this segment is relatively unfulfilled, and thus the funding and lending is still up for grabs with minimal risks of cannibalization with BBRI. Blue Ocean Strategy collaborating BBRI network. AGRO is now granted permission to also serve to its BRILink agents, other network agents along with BRI Ventures portfolio companies. This will: 1) Lower customer acquisition costs, 2) Benefit BRI, AGRO and the agents without cannibalization, 3) Enable data mining to enable better credit scoring of lenders. BRI’s database is also accessible by virtue of its Host to Host system with BRI to accelerate its lending process plus lowering credit cost in the future. All in all, this will lead to a sticky and higher lifetime value of each customer, to justify higher valuations upon translation to the actual figures. Strategic partnership is in the pipeline. Involving a unicorn, rumours on the street are that Grab is in discussions to become AGRO’s shareholder and tie up as a strategic partner besides setting up a digital bank with EMTK. If this materializes, AGRO offerings will become one of the options in Grab’s Indonesia ecosystem, serving as vote of confidence in AGRO’s Gig focused strategy. A different beast post rights issue. As AGRO will reprofile its loans with: 1) shorter tenor consumptive and productive, BNPL, supply chain financing within the gig economy. The strategy will enable AGRO to obtain a higher NIM by virtue of a higher loans yield and lower CIR leading to a wider NIM. The rights issue will beef up CAR and to buffer for additional legacy loans write offs and provisions whilst also providing much-needed ammo to realize the strategy.

Last price (IDR) 2,520

Stock Statistics

Sector Banking

Bloomberg Ticker AGRO IJ

No of Shrs (mn) 21,681

Mkt. Cap (IDRbn/USDmn) 54,638.2/3,847.8

Avg. daily T/O (IDRbn/USDmn) 207.4/14.5

Major shareholders (%)

Bank Rakyat Indonesia (Persero) Tbk 85.7

Public 14.3

EPS Consensus (IDR)

2021F 2022F 2023F

Consensus 1.9 9.7 26.1

AGRO relative to JCI Index

Source : Bloomberg

Andreas Kenny

(62-21) 5091 4100 ext.3509

andreas.kenny@danareksa.co.id

00

Eka Savitri

(62-21) 5091 4100 ext.3506

eka.savitri@danareksa.co.id

Key Financials Year to 31 Dec (IDRbn) 2017A 2018A 2019A 2020A 1H21A

PPOP (IDRbn) 323 446 455 380 300

Net profit (IDRbn) 140 204 51 31 26

EPS (IDR) 8.5 10.5 2.4 1.5 2.5

EPS growth (%) (4.5) 23.6 (77.2) (38.9) 30.3

BVPS (IDR) 174 207 210 201 201

PER (x) 302 245 1,028 1,713 1,028

PBV (x) 14.8 12.4 12.2 12.8 12.8

Dividend yield (%) 0.0 0.0 0.0 0.0 0.0

ROAE (%) 5.6 5.4 1.1 0.7 1.2

Source: AGRO

www.danareksa.com See important disclosure at the back of this report 2

Exhibit 1. BRI Agro digital transformation is in all aspects

Source: McKinsey, Company, Danareksa Sekuritas

Exhibit 2. High barrier to entry due to geographical spread and lack of data segment. TAM is a sizeable USD314bn spread within 74.8mn gig economy workers by 2025. Synergy with BBRI

Source: CEIC, Central Bureau of Statistics, Company Danareksa Sekuritas

www.danareksa.com See important disclosure at the back of this report 3

Exhibit 3. Low Hanging Fruit #1: 715k agents is ready to be served as borrower and potentially in the future as loan channel, BBRI fee-based income too will be enhanced. Overlaps in BRI existing loan and AGRO new product to be sorted out for AGRO to tap without cannibalization

Source: Company, Danareksa Sekuritas

Exhibit 4. Low Hanging Fruit #2: sizeable but non captive market in BRI ventures portfolio companies

Source: Company, Danareksa Sekuritas

www.danareksa.com See important disclosure at the back of this report 4

Exhibit 5. A virtuous cycle where all parties benefit, and more importantly AGRO and BBRI along with other subsidiaries gain more business

Source: Company, Danareksa Sekuritas

Exhibit 6. PBV is relatively high due to low capital base, and high share price appreciation as digibanks are poised to book significant future growth

Exhibit 7. Despite higher PBV, EV/users is still relatively reasonable and cheaper than conventional ones. Number of subs is the caveat in this comparison

Source: Company, Danareksa Sekuritas

Source: Techcrunch, Company, Danareksa Sekuritas

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www.danareksa.com See important disclosure at the back of this report 5

Exhibit 8. Income Statement

Year to 31 Dec (IDRbn) 2017A 2018A 2019A 2020A 1H21A

Interest Income 1,252 1,664 2,055 1,932 879

Interest Expense (749) (988) (1,362) (1,307) (445)

Net Interest Income 503 676 693 625 434

Non-Interest Income (NII) 58 51 74 71 39

Oper. Income 561 727 767 696 472

Oper. Expenses (238) (281) (312) (316) (172)

Pre-provisions profit 323 446 455 380 300

Provisions & Allowances (141) (154) (384) (323) (259)

Operating Profits 182 292 71 57 41

Non-Operating Income 12 1 3 6 0

Exceptionals 0 0 0 0 0

Pre-tax Profit 194 293 74 64 41

Income Tax (53) (88) (23) (33) (15)

Minorities 0 0 0 0 0

Net Profit 140 204 51 31 26

Exhibit 9. Balance Sheet

Year to 31 Dec (IDRbn) 2017A 2018A 2019A 2020A 1H21A

Gross Loans 10,982 15,671 19,366 19,492 18,369

Provisions (361) (451) (834) (1,006) (1,083)

Net Loans 10,621 15,220 18,533 18,486 17,286

Govt. Bonds 0 0 0 0 0

Securities 1,534 1,931 3,520 3,367 4,690

Other Earnings Assets 2,955 3,458 3,002 4,588 1,718

Total Earnings Assets 15,109 20,609 25,054 26,441 23,694

Fixed Assets 264 259 262 277 276

Non-Earnings Assets 950 2,446 1,752 1,297 1,433

Total Assets 16,323 23,314 27,068 28,015 25,403

Customer Deposits 12,419 18,065 21,145 22,995 20,055

Banks Deposits 31 81 745 213 365

Int. Bearing Liab. - Others 762 743 696 520 645

Total Liabilities 13,212 18,889 22,586 23,728 21,065

Share capital & Reserves 2,736 3,960 3,960 3,962 4,021

Retained Earnings 375 465 522 325 317

Shareholders' Funds 3,111 4,425 4,482 4,287 4,338

Minority interests 0 0 0 0 0

Total Equity & Liabilities 16,323 23,314 27,068 28,015 25,403

www.danareksa.com See important disclosure at the back of this report 6

Exhibit 10. Ratios

Year to 31 Dec (IDRbn) 2017A 2018A 2019A 2020A 1H21A

Yield on Earning Assets 9.7 8.8 8.5 7.9 7.5

Cost of funds 6.7 6.3 6.6 5.7 4.9

Interest Spread 3.0 2.5 1.9 2.2 2.6

Net Interest Margin 3.9 3.6 2.9 2.6 3.7

Cost/Income Ratio 42.5 38.7 40.7 45.4 36.5

Oper. Exp./Oper. Gross Inc. 86.1 83.0 96.6 97.1 95.5

Gross NPL Ratio 2.6 2.9 7.7 5.0 4.6

LLP/Gross NPL 127.0 100.7 56.2 103.9 128.4

Cost of Credit 1.5 1.2 2.2 1.7 2.72.

Loan to Deposit Ratio 88.4 86.7 91.6 84.8 91.6

Loan to Funding Ratio 85.0 84.4 89.5 83.9 90.5

CASA Mix 14.7 16.4 14.3 23.9 26.4

ROAE 5.6 5.4 1.1 0.7 1.2

ROAA 1.4 1.5 0.3 0.2 0.3

CAR 29.6 28.3 24.3 24.3 24.9

Exhibit 11. Dupont and growth

Year to 31 Dec 2017A 2018A 2019A 2020A 1H21A

Dupont

Pre-Tax ROAA 1.4 1.5 0.3 0.2 0.2

Tax Retention rate 72.6 69.8 68.8 48.8 63.3

Post-Tax ROAA 1.4 1.5 0.3 0.2 0.3

Goodwil, Assoc& Min 0.0 0.0 0.0 0.0 0.0

Leverage 4.0 3.6 3.7 3.5 4.0

ROAE 5.6 5.4 1.1 0.7 1.2

Growth (%)

Interest income 29.7 32.9 23.5 (6.0) (11.9)

Net Interest Income 19.3 34.3 2.6 (9.9) 34.1

Other Oper. Expenses 4.3 18.0 10.9 1.2 6.3

Fee Based Income 1.1 25.1 0.9 9.1 (20.3)

Pre-Provision Oper. Profit 22.4 38.1 2.1 (16.5) 73.6

Net Profit 36.4 45.4 (75.0) (38.8) 30.5

Shareholders’ Equity 60.7 42.2 1.3 (4.3) 3,7

Loan 34.3 42.7 23.6 0.6 (4.3)

Earnings Asset 51.8 43.5 17.3 5.9 (4.2)

Deposit 34.6 45.5 17.1 8.8 (4.8)

Int. Bearing Liab. 40.3 44.0 20.1 4.8 (4.7)

CASA 60.1 61.8 2.3 81.3 62.4

Total Asset 43.5 42.8 16.1 3.5 (3.0) Source : BBRI, Danareksa Estimates