Bareksa.com - PT Buana Capital upgraded their recomendation on PT Bank Central Asia (BBCA) to buy with target price of Rp13.600 per share (20 percent upside from current price). Their target price based on 3,8 x Price To Book Value (P/BV) 2015 projections.

BBCA's Loan To Deposit Ratio (LDR) stood at 78 percent, belom than peers, so BBCA actually has huge room for higher loan growth. However, management decided to maintain its LDR to 70-80 percent, due to liquidity priority over than aggressive loan growth.

BBCA's LDR vs. Peers'

Source : Company, Buana Research

BBCA limits its loan growth to 13-15 percent for 2014-2015 projections.

The tight liquidity environment has propelled BBCA to hike TD rate by 100-175 bps for deposits > Rp 2 bn starting in April 2014.

Thus for 2014-2015 , BBCA expects its Current Account Saving Account Ratio (CASA) or cheap funding will slightly decline to 76 percent of total Third Party Fund (TPF), but still higher than peers.

To anticipate potentially increasing cost of fund, BBCA managed to increase its loan yield gradually across all segments by 125-150 bps, started in the first half of 2013.

For mortgage loan which account for 60.7 percent of total consumer loan (or 16.7 percent of total loan), BBCA increased its yield by 150-200 bps.

Buana Capital projecting that BBCA's Net Interest Margin Ratio (NIM) for 2014-2015 to stay at 6,3-6,4 percent.

BBCA's CASA vs Peers'

Source : Company, Buana Research

BBCA also have stellar coverage ratio of 388 percent in the first quarter of 2014. Management has budgeted provision at 1.7-1.9 percent of gross loan to maintain strong coverage ratio above 375 percent for 2014.

BBCA will have the lowest Non Performing Loan Ratio (NPL) and the highest coverage ratio among its peers.

In comparison to its peers, BBCA has the lowest NPL of 0.4-0.5 percent with the highest coverage ratio of 308-409 percent for the last 5 years. This strong asset quality is very essential especially in current economy situation.

BBCA's Asset Quality vs Peers'

Source : Company, Buana Research

Financial Summary

Source : Company, Buana Research

*Marisa Wijayanto is a Research Analyst of PT Buana Capital