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Tuesday, March 1, 2011

United Tractor Tbk

by Samuel Securities

In Line FY10 result

Highlights
· In FY10, UNTR booked Rp37.3 tr of revenue (+28% YoY) with heavy equipment as the
largest contributor of 46% to revenue. Meanwhile, net income was flat compared to
FY09 due to significant increase on COGS. This result is in line with our projection.

Comment:
· On QoQ basis, revenue declined 2% mainly due to heavy rainfall in 4Q10. On full year
basis gross margin declined to 18.2% from 22.2%, mainly due to decline on PAMA’s
margin from 21.4% to 13.8%. Heavy rainfall during 2010 caused the cost of
production to increase significantly as majority of fuel price of PAMA is not charged to
mining producer. Pama also booked lower revenue in addition to the impact of
stronger Rupiah.


· Komatsu sales volume reached 5,404 units (+74% YoY) in line with our estimate and
increased revenue of construction machinery by 57% to Rp17.3 tr. But, rupiah
appreciation also hurts the gross margin of mining construction machinery from 19.1%
in FY09 to 17.4% (revenue was booked in Rupiah). Only the mining business recorded
an increase of 13.6% in FY09 to 14% in FY10 mainly due to the increase of average
selling price as the impact of rising coal price. Moreover, the additional production of
Tuah Turangga Agung enhanced production 27.3% YoY to 3 mn ton.

· The additional of bank loan in 2010 brought net gearing to 0.26x and debt to equity at
0.8x (vs 0.07x, 0.7x in FY09), but it is stil be accepted by investors and banks.

Action and recommendation:

· Bank Indonesia annunciates to let Rupiah to appreciate and continues to raise BI rate
to fight inflation, where this policy can be negative to UNTR revenue. We are also
worried by the continuing heavy rainfall and oil price pressure that can swell cost of
production. We maintain our forecast with target price of Rp23,700 reflecting 17.2x
PE’11F, while being cautious negative on the sentiments mentioned. Maintain Hold

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