Trimegah UNTR FY08 Result: Surpassing Expectations

United Tractors (HOLD – Rp5,350) - FY08 Result: Surpassing Expectations

FY08 revenue growth jumped significantly, by 53.6% YoY, to Rp27.9tr from Rp18.2tr a year earlier. Growth was propelled by a 42.2% YoY growth in heavy equipment (HE) sales to Rp12.4tr, 48.1% YoY growth in mining contracting (MC) revenue to Rp11.6tr and 141.2% YoY growth in coal sales (CS) to Rp3.9tr.

Strong revenue growth translated to a gross and operating profit growth of 69.3% YoY and 73.5% YoY to Rp5.5tr and Rp4.2tr, respectively. As such, FY08 gross margin improved to 19.7% from 17.9%, while operating margin improved to 14.9% from 13.2%.

FY08 net profit was given a further boost from lower interest expense of Rp189.7tr, translating to a 78.2% YoY net profit growth to Rp2.7tr from Rp1.5tr a year earlier.

FY08 earning beats our estimate. Revenue is 2.1% below our estimate of Rp28.5tr while gross, operating and net profit are 7.4% - 8.8% above our estimates of Rp5.1tr, Rp3.9tr and Rp2.4tr, respectively. Nevertheless, we note that coal production fee showed a significant decline by 21.6% QoQ to US$6.9/ton in 4Q08. UNTR explained that the decline was mainly due to a change in accounting treatment in the HE rental revenue to Darma Henwa (DEWA). In 9M08, Pama recorded the transaction as operating lease but in 4Q08 the auditor revised it to capital lease. As such, the company loss about Rp100bn of MC revenue in 4Q08. We maintain our HOLD recommendation with TP of Rp5,300/share.