UBS ASII S peed bump due to vehicle taxes hike TP 49,300

􀂄 Potential vehicle taxes (BBN and PKB) hikes
Jakarta’s provincial government is proposing to raise registration tax (BBN) from
10% to 20% and to implement progressive vehicle tax (PKB), which is possibly
effective Jun 2010. Things are fluid as it remains a proposal and each of 33
provincial governments has to come up with its own local regulation.

􀂄 Most likely impact
The most likely impact to vehicle (both car and motorcycle) price is a 10%
increase, in our opinion. Encouragingly, a look back to 2009 (last price increase)
reveals demand elasticity of -1.33x (20% volume decline/15% price increase) and
-1.2x (6%/5%) for car and motorcycle, respectively. This is not so bad considering
tight auto financing in 2009.

􀂄 Earnings speed bump, not major earnings downgrade
We revise down mainly 2011/12E earnings by 7% from Rp3,289/3,890 to
Rp3,064/3,600. The earnings downgrade extent is not so great due to: 1) we never
adjusted our car and motorcycle sales assumption to current run rate (Jan-Apr)
which is beyond our expectation; 2) we have not upgraded Astra’s earnings on the
back of better than expected Q110 results (some 8-10% ahead).

􀂄 Valuation: Maintain Buy rating
Our SOTP-derived price target is revised up by 5% to Rp49,300 due to: 1) lower
risk-free rate from 10% to 9.3%; and 2) roll over of DCF cut off date to June 2011.
We consider higher vehicle tax as a speed bump (1-year push back), not the
derailment of the structural growth story.