Mansek ASII: Challenge to maintain current pace of growth

Rolling over to 2011, our TP is set at Rp58,000/share. 1H10 results were expected, except for a minor hiccup in UNTR. Our revised target price poses a more moderate upside, taking into consideration (a) next year’s rate of vehicle growth may not be as high, considering a record year for 2010, (b) inflation concerns which could dr! ive inter est rates up and (c) lingering potential tax changes which could result in higher car prices in 2011. At our revised TP of Rp58,000/share, the stock trades at PER11F of 16.9x.

1H10, within confines of expectations. Except for UNTR’s slight mistep on the mining contracting side (1-week work stoppage for Pama’s overburden activities in the Kideco mine site, which did not affect the mine’s production) and sloppy weather in 2Q, which was compensated by a 10% qoq rise in car sales in 2Q, 1H10 net income of Rp6.4tn (+52%yoy) was in line with ours and consensus projections, representing about 55% and! 52% of f ull-year earnings forecasts.

Could a 700k domestic demand market for cars be sustained? Judging on the 70k initial domestic sales number for the month of July, this brings cumulative 7M10 to some 442k units (+75%yoy). Thus, car sales could be very well headed to breaching the 700k unit by year end; a historic high. However, with vehicle tax changes in the horizon as well as rising inflation pressures, we think a moderated 10% growth rate in vehicl! e sales t o some 750k would be more reasonable for 2011. On motorcyles, initial numbers showed 7M10 sales of 4.3mn(+39%yoy, 67% of FY10F), with Astra’s Honda locking in a tight competition with Yamaha with market share of 46%, just slightly higher than Yamaha’s 45%.

Rolling over to 2011 valuations with a TP of Rp58,000/share. Our sum-of-the parts valuation shows a TP of Rp58,000/share. Earning uplifts for FY10-11F of 8.1% and 3.3% from previous forecast have been effected due to (a) higher vehicle sales assumptions for FY10-11 as well as better earnings outlook for its non-auto segments. Currenty the stock trades at PER11F of 14.2x. Maintain buy.