Introducing an Agile, Robust, Transformational & Outstanding Digital Bank!
Bank Jago, the pioneer of domestic digital bank
Previously known as Bank Artos (ARTO IJ), Bank Jago began its digital banking journey in 2020, after MEI & WTT acquired majority stock in the company from the former ultimate shareholder Arto Hardy family in 2019. Through 2 rounds of rights issue (2020 & 2021) Bank Jago’s CET1 surged to IDR7.67tn as in Dec-21. Bank Jago’s share price soared and giving a multi-bagger return for investors on the back of : 1) digibank positive outlook; 2) new regulation promoting the establishment of digibanks and banking consolidation as well as 3) strategic investors (such as GoPay and Singapore SWF GIC) participation in Bank Jago’s stake.
Building competitive advantages
As a first mover in digibank arena, Bank Jago’s key competitive advantages include :
• Agility – lean structure to boost productivity with only 317 headcounts managing >IDR12tn assets supported by seasoned bankers at the top management level with a proven track record in building BTPN. Bank Jago also launched an apps which is considered as one of the most customer centric banking apps with a key strong point on seamless CX design. Bank Jago strategize to enhance banking core capability through IT infrastructure investment and prudent risk management focusing on attractive yielding asset with low risk.
• Robustness – Bank Jago’s business model is well positioned within GoTo’s vast ecosystem with >100mn MAU and ~2.5mn drivers. The integration to GoTo’s ecosystem, will benefit Bank Jago as it open up possibilities for bank to access low cost funding, disbursing loan as well as boosting its fee based income.
• Transformational – as a pioneer in digibank business, Bank Jago focus to serve mass market and MSME will also transform Indonesia’s banking landscape. We see a huge opportunity going forward supported by : 1) government target to cut unbanked population of Indonesia to at least 20% by 2025; 2) BI policy to increase loan disbursement to MSME; 3) Indonesia’s avid digital society as well as high NIM characteristics of the country.
• Outstanding – While many European, UK, and US digital bank still suffering from losses, APAC digibanks seem have been profitable. The average time needed for digibanks to record positive bottom line in APAC was only 3.1 years, while in Bank Jago’s case it only took 2 quarters to turnaround.
Initiate BUY with TP of IDR16,000/share
We believe that Bank Jago will continue its exponential growth phase this year. Our forecast showed 181% CAGR FY20-FY23F for loan and 177% CAGR FY20-FY23F for customer deposit. Considering its lucrative industry and operational efficiency, the premium ROE is likely. We initiated coverage on Bank Jago and employing Customer Lifetime Value to derive our Target Price given the nature of Bank Jago’s business model that will leverage its digital ecosystem. We also utilized bear/base/bull scenario with different assumption based on 3 factors : 1) digital ecosystem monetization; 2) operational efficiency and 3) risk management. Our baseline scenario TP : IDR16,000/share implying 25x P/B and 758x P/E for FY22F. This is reasonable due to potential EPS growth of 240% FY22F and we think Bank Jago will not give dividend to shareholder in the near future as it seeks to boost its BVPS. Key downside risks : macro-related factors, regulation and failure to integrate ecosystem smoothly. Meanwhile for the upside includes index inclusion and geographical rebalancing of financial assets due to heightened geopolitical tension.
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