Danareksa UNTR Higher Jan 09 Sales with Pama’s Help

Higher Jan 09 sales with Pama’s help
UNTR was able to deliver 216 units in Jan 09. Of this, 23% were delivered to Pama. Pama usually accounts for only around 15% of the sales. UNTR said this trend of higher Pama sales will likely continue up to June 09 asPama needs to replace existing equipment and purchase new equipment to expand its capacity. Pama expects to spend $250mn on capex this year as its 09F production target has been increased by 10% yoy while its stripping ratio shows no signs of coming down (Jan 09’s SR: 8.1 vs FY08’s 7.5).

Maintaining a Leading Position
Komatsu has retained its leading position in the heavy equipment market and its market share in Jan 09 increased significantly to 51.8% from 44.6% in Dec 08. As such, we believe our target of 3,000 units for the full year is reasonable as the backlog for unit sales has reached 750 units and, in addition, we expect demand to recover in 2H09 as commodity prices stabilize.

Weak Pama & DEJ production due to seasonality
Pama’s Jan 09 coal production was weak at 4.8mn tons, 7.3% of our full year target. The weak coal production can be explained by seasonal factors as high rainfall tends to hamper production, in South Kalimantan. DEJ was only able to sell 201,000 tons of coal in Jan 09, 5% of our full year forecast.

Upgrade TP to Rp6,100, maintain BUY
We raise our 09-10F earnings forecasts by 17.5%-16.1% as we apply new forex, inflation, and lower tax rate assumptions to our forecasts. UNTR remains one of our top picks in the commodity sector as we like its business model and robust earnings growth (2008-10F EBITDA CAGR of 19.9% and 2009-10F ROE of 21.3%-19.3%). Our TP implies PE09-10F of 8.5-7.9x, BUY.