PROPOSED STRATEGY AND VALUATION ANALYSIS TO INCREASE CAPITAL (CASE STUDY BANK BTPN)

• Main Author: Yulita, Yudia
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/47642
• Institution: Institut Teknologi Bandung

The result of this study is to suggest the most suitable strategy for BTPN to increase their core capital to achieve one of their merger objectives: to become a BUKU 4 category bank with core capital of more than Rp 30 trillion. To suggest such strategy, the author performed industry analysis using several macroeconomic indicators and microeconomic indicators and company analysis using several key financial ratios. Afterwards, the author also calculates the intrinsic value of BTPN’s equity using three widely used methods for banks and calculated the share dilution effect. Considering COVID-19 pandemic which will affect financial performances, the author also performed sensitivity analysis to the intrinsic equity value before concluding the result since the pandemic might affect the decision making. The author performed this research using BTPN and its peers’ secondary data and interview with one of BTPN’s executive employee. Based on the result of macroeconomic condition analysis, microeconomic condition analysis and financial ratio analysis as well as advantages and disadvantages analysis of three capital raising strategies, the author proposed BTPN to raise its capital through issuance of shares with pre-emptive rights (right issue) since it will suffice the capital needed by BTPN and process only take 14 months at the maximum. Further, based on valuation analysis, the estimated result of equity intrinsic value of BTPN using free cash flow to equity model and excess return models are Rp 3,293 and Rp 3,299, respectively. Based on the estimation results plus the relative valuation results of BTPN with its competitor banks, we can conclude it that the price of BTPN’s shares in the market, which is Rp 3,250, is slightly undervalued. Therefore, to reach the BUKU 4 bank category with an additional capital requirement of Rp 6,478,293 million, BTPN needs to issue 1,965,472,489 shares or 19.43% of the total new shares. Since current global and economic condition is uncertain because of COVID-19, the right issue process might need to be postponed until this pandemic issue subsides, expectedly in early 2021. Sensitivity analysis shows that BTPN equity value have a tendency to decrease during this time. In addition, in performing right issue, a transparent statement of right issue objective to the investors should be done to avoid a negative market sentiment inherent in right issues process.