Credit Suisse - United Tractors 2008 results

United Tractors’2008 results came in 15% above our expectations (13% above consensus’ due to a better( more resilient)-than-expected 4Q08 performance, confirming our positive view on our report, entitled visibility, quality, and valuation

The weaker rupiah, higher ASP (due to product mix) and inventory gains are the key reasons.

Despite a 37% YoY and a 61% QoQ drop in equipment sales volume, revenues were still up 76% YoY and only down 3% QoQ. Half of the growth was due to the weakening of the rupiah. The other coal-related divisions also were impacted by heavy rains in 4Q08. Financially, the company is sitting comfortably with a net gearing of 14%.

Although the results seem to suggest upside risk to our earnings forecasts, we maintain our number unchanged for the moment as we believe that the inventory gains are likely to gradually decline. We are now looking at earnings to decline by 25% YoY this year.

Given the improving earning visibility, quality, and undemanding valuations, we maintain our OUTPERFORM rating on the stock.