(HEXA IJ / HEXA.JK, OUTPERFORM, Tgt. Rp2,100, Industrial Goods and Services)
HEXA's sales of small excavators tend to outpace the industry during an upcycle. This coming upcycle should be no different, led by an expected recovery in the agro and construction sectors in 2010. HEXA should report firm 1Q09 profits, with indicated core earnings of around Rp75bn. As the company has signed around US$144m of mining equipment deals for 2009-10, we expect stronger quarters ahead. Initiate coverage with an OUTPERFORM rating and a target price of Rp2,100 (9x CY10 earnings). Catalysts are expected to include further deals with other mining companies.
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