Wednesday, December 7, 2011


by Lauthandana Sec


During the 9M11 periods, UNTR’s consolidated revenue and net profit grew by 42.9% YoY and 46.9% YoY, respectively, attaining to Rp 39.8 trillion and Rp 4.3 trillion. On quarterly basis, the company has recorded consolidated revenue of Rp 14.1 trillion (+9% QoQ) and net profit of Rp 1.8 trillion (+45.5% QoQ).

The total heavy equipment sales attained to 8,064 units (+55.7 % YoY, +7.7% QoQ) during the same period. Its mining contracting subsidiary, PT Pamapersada Nusantara (Pama), delivered coal extraction of 63 million tons (+11.1% YoY, +13.6% QoQ) and OB removal of 585 bcm (+21.9% YoY, +10.7% QoQ), while total coal sales volume reached to 3.2 million tons (+62.6% YoY, -16.3% QoQ).


On quarterly basis, UNTR managed to improve its profitability in 3Q11, triggered by weakening Rupiah and an increase in mining service’s activity (through its subsidiary, Pama) supported by favorable weather condition (please refer to UNTR profitability appendix,

We noted that Pama successfully recorded 10.7% growth QoQ in overburden removal (219.5 bcm in 3Q11 vs 198.2 bcm in 2Q11), while its coal extraction has also increased by 13.6% QoQ reaching to 23.4 million tons in 3Q11. As the result, Pama’s gross margin has improved up by 400 bps from 14.1% in 2Q11 to 18.1% in 3Q11 with operating and EBITDA margin jumped by 360 bps and 60 bps attained at the level of 15.9% and 25.8%, respectively.

In its Construction Machinery division, Komatsu’s 3Q11 sales have slightly declined by 3% QoQ from 2,126 units in 2Q11 become 2,063 units. This was due to the Idul Fitri holiday in August, where most operations are normally limited. Nevertheless, it still showed better 3Q11 performance and profitability on the back of higher Komatsu’s selling price (US$ 265 thousand/unit in 3Q11 vs US$ 232 thousand/unit in 2Q11) and significant sale’s increase from UD Truck (+91.5% QoQ) and Nissan (+ 34.8% QoQ).

Meanwhile, Coal Mining's performance contracted in 3Q11 due to coal barging transportation disruption on the back of lack water debit at Barito’s river. However, 3Q11 coal mining’s gross margin remained stable at the level of 12.0% which was compensated by average selling price’s increase of 2.3% QoQ (US$138/ton in 3Q11 vs US$ 135/ton in 2Q11).

As of September 2011, UNTR has used Rp 4.3 trillion from its total cash proceeds from rights issue IV of Rp 6 trillion. Around 51% of its cash proceeds utilization was allocated to acquire 4 Green Field coal mines (with additional potential of coal reserves of 204 million tons to 319 million tons), i.e.:

1. Agung Bara Prima (ABP), Asmin Bara Bronang (ABB), Asmin Bara Jaan (ABJ) and Duta Sejahtera (DS) which are located close to TTA infrastructure in Central Kalimantan. ABP, ABB and ABJ mines are projected to commence operation at the end of 2012 or 2013 early;

2. Bukit Enim Energi, located in South Sumatera and is a joint venture between its subsidiaries, Pama and ADRO.

RECOMMENDATION – Adjustment of Target Price to Rp 33,300/share

We revised our assumptions for Construction Machinery and Coal Mining business for the year 2011-2012, following current UNTR’s guidance and the 9M11 result was above our expectation. We increased our 2011 Komatsu sales from 7,000 units to 8,500 units, while 2012 Komatsu sales is projected to reach 10,000 units (+17.6% YoY) which resulted in a revenue of Rp 24.9 trillion-Rp 29.6 trillion. We also increased coal sales volume from Coal Mining by 12.5% in 2011 and 28.6% in 2012, to become 4.5 million tons and 6.8 million tons. As the result, 2011F-2012F UNTR consolidated revenue and net profit increase by 8.1%-10.2% and 7.8%-4.9%, respectively.

Based on our new estimates, we published a new fair value of Rp 33,300/share (previously at Rp 32,550/share). We maintain our BUY recommendation since our fair value offered 35% upside potential from yesterday’s closing price, while the counter was trading at attractive valuation of 7.19x EV/EBITDA FY12 compared to the industry.

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