Liquidity and Business Dominance
As of April 24th, 2009 UNTR market capitalization, at Rp24.29 triliun, is among the 15 highest ones listed in the Indonesia Stock Exchange. In addition, its two main sources of revenues claimed the highest market share in the sectors in Indonesia. Its Komatsu brand heavy equipment commands a 50.3% market share, while mining contracting subsidiary Pama Persada commands a 41% market share as of 3M09. With these traits, we view that UNTR share price appreciation during 2009, to bring back to its 8 times historical PER multiple range in 3M09 (vs. 3 times historical PER in 4Q08) is not excessive.
3M09 Operational Performances
UNTR’s March 2009 operational data for heavy equipment division showed a continued stabilization, while mining contracting and coal divisions showed a MoM improvement. The MoM drop in heavy equipment sales to 189 unit in March 2009 (vs. 223 unit in February 2009) was due to delay of delivery while purchase order had already been received. 3M09 Komatsu sales at 628 unit is 5% higher than our expectation of 600 unit. Meanwhile, mining contracting delivered a MoM improvement to both coal delivery (+6%), overburden removal (+16%). On coal sales, Dasa Eka Jasatama posted a MoM growth of 8% at 0.254 mn ton in March 2009. We are positive operational targets can be met for this year.
Positive climate
Investment activities in the agro industry that has resulted from the recent increase of the CPO price will have positive impact on sales of heavy equipment for UNTR. Year to date, CPO price has increased by 44%, and this bode well with the fact that Indonesia is biggest CPO producer in the world, at 45% production share and at 19 mn ton as at end of 2008. The government has made statement this week that the country will double its CPO production in ten years time. Heavy equipment from the agro industry is the second biggest units sold that accounted for 24% in the division as of December 2008. We did not factor in the impact of higher CPO price in 3M09 in our current estimates.
Valuation and Recommendation
We still believe that our current model contain positive surprises (stock note 31/03/09). At our target price of Rp8.878, the share is trading at 10 times our FY10 earnings estimate, to yield a 20% capital gain from yesterday’s closing price of Rp7.400. We continue to rate the share a BUY
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