· UT is currently eyeing 2 power plant projects worth US$1.2bn, which consist of 2x300MW thermal power plant in Palembang and another 2x300MW in Riau. For the project in Palembang, UT holds a consortium with Wijaya Karya (WIKA, Rp630) and municipal government, while for Riau, UT cooperate with municipal government on the project.
· UT is currently preparing fresh cash to finance the project as it has to be started imminently after the winner is announced. The company is currently waiting for the announcement from PLN.
· UT balance sheet position is healthy with net cash position as of 1H10 and this would enable the company to finance this project and also maintain its capex without any difficulty.
· However our concern is on the company’s margin due to mounting cost from its mining contracting business. Currently UNTR is trading at 2011F PER of 14.3x and EV/EBITDA of 7.5x, Hold.
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