ASTRA INT’L (ASII): Upgrades on better loans loss & UNTR upgrade- reit Core Buy!
Arief Wana (Daily): Astra’s 1Q09 results showed positive developments on two key fronts, namely 1) loss on repossessed assets and 2) strong United Tractors’ performance. Coupled with a lower tax rate, we are upgrading our forecasts by 12-17% for FY09E-10E and TP to Rp21,200 (from Rp14,500 previously).
Loss on reposessed assets, which was the major dragging factor in the 2006 crisis, was not a factor so far. In our view, this could suggest 1) better, resilient purchasing power in general and 2) better control over financing activities. We halve our loss estimates to Rp500bn (vs. 1Q09 of only Rp67bn and 2006 of Rp949bn).
In addition, we have upgraded United Tractors by 17-42% on the back of higher ASPs, weaker rupiah, and therefore margins (please see note/Daily below).
Although we expect auto volume to remain soft this year (and bottoming in 2Q09), we continue to like Astra International as a core holding for the Indonesian market given its strong market positioning, conservative management and strong balance sheet. Our new TP of Rp21,200 implies a 10.2-11.5x FY09E-10E PER (which is relatively in line with the market for FY10E) and 5.3-5.7x FY09E-10E EV/EBITDA multiples. We maintain our OUTPERFORM rating on the stock.
UNITED TRACTORS (UNTR): Still Positive, Upgrade EPS & TP (Rp11,400)- reit Buy
Arief Wana (Daily, Report emailed yesterday): We have just published a report on United Tractors (UT). UT’s robust 1Q09 results, stemming from higher ASPs, a weaker IDR and therefore margins – due to inventory gains and a bigger proportion of higher margins in the parts and services division – have beaten our as well as the street’s expectations.
The strong results reaffirm our view that UT’s business is not only resilient, but also offers positive leverage on a weaker IDR. We have therefore upgraded our forecasts by 17-42% over FY09-11E (putting our forecasts 13-23% above the street’s), while maintaining our volume assumptions.
Despite the positive share price performance, we believe that the recovery in equipment volumes and strong earnings are likely to be the main catalysts for the company. Low gearing should give UT flexibility for future expansion. We have increased our sum-of-the-parts-based (SOTP) target price by 24% to Rp11,400 (from Rp9,200), implying 27% upside, a P/E multiple of 11.5x FY10E and 5.8x FY10E EV/EBITDA. We therefore maintain our OUTPERFORM rating on the stock.
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