CIMB United Tractors Result note - Rising challenge

United Tractors Result note - Rising challenge - by Liliana Bambang
(UNTR IJ / UNTR.JK, NEUTRAL - Upgraded, Rp5,350 - Tgt. Rp6,300, Industrial Goods and Services)

2008 was an excellent year for UNTR, with its earnings up by 78.2% yoy to Rp2.66tr, beating our forecast and consensus. However, challenges abound in 2009. Heavy equipment demand is likely to remain weak with difficulties in obtaining financing. Although we are comfortable with UNTR's coal mining contracting and coal mining divisions, recent newsflow on the deferment of coal deliveries bring risks. We raise our earnings estimates and upgrade the stock to NEUTRAL from Underperform, nonetheless, with a higher target price of Rp6,300 following our earnings upgrade (from Rp6,200) as recent valuations are decent.