Flash Note United Tractors

UNTR IJ / UNTR.JK
27 September 2010

HOLD
Possibility of Soft 3Q10 Performance Price : Rp20,200
Target Price : Rp20,600

Key Financial and Valuation Metrics

Year-end 31-Dec 2008 2009 2010F 2011F 2012F
Revenue (Rp bn) 27,903 29,242 36,001 40,294 44,301
EBITDA (Rpbn) 5,458 7,076 7,613 8,933 9,641
Net profit (Rp bn) 2,661 3,818 3,993 4,849 5,232
EPS (Rp) 800 1,147 1,200 1,457 1,573
EPS growth (%) 78.0 43.0 5.0 21.0 8.0
DPS (Rp) 222 350 459 480 583
Dividend yield (%) 1.1 1.7 2.3 2.4 2.9
P/E Ratio (x) 25.3 17.6 16.8 13.9 12.8
EV/EBITDA (x) 12.0 9.3 8.6 7.3 6.7
Return on Equity (%) 31.6 30.6 26.5 27.0 24.7
Net Gearing (%) 16.4 9.6 4.6 -1.9 -8.5

Source: Company and NISP Sekuritas

• Strong YoY performance. During 8M10, UT sold 3,653 units of heavy equipment, 81.4% YoY higher from 2,014
units a year earlier. Such increase was attributable to increase in all segments. Heavy equipment sales for mining
jumped to 2,188 units, or increased by 1,024 units compared to 1,164 units in 8M09. This was also followed by
heavy equipment sales for agribusiness, construction and forestry. Similar achievement was also posted by UT’s
other business, where mining contracting posted 20.1% YoY growth in 8M10, while coal mining performance was
relatively stable as it only posted a slight 0.2% YoY decrease during the same period.

• However, heavy equipment sales volume decreased by 3.2% MoM. Despite impressive YoY performance, UT
posted a decrease in its August heavy equipment sales volume, only selling 453 units compared to 468 units a month
earlier. This 3.2% MoM decrease was mostly due to lower sales volume on agribusiness segment of 63 units, 35.1%
MoM lower from 97 units a month earlier. We foresee such decrease was attributable to slower production rate amid
fasting season.

• Difficulties to maintain production rate in coal mining. Beside lower heavy equipment business, UT’s coal
mining also recorded a 20.5% MoM decrease on coal sales volume to 174k tons in August 2010 from 219k tons a
month earlier. It seems that Tuah Turangga Agung, UT’s arm in coal mining, still failed to maintain its production
output last month. We foresee that the weather condition had taken a large role in this decrease.

• Pama posting positive MoM performance. The only division that managed to record growth in August was its
mining contracting arm, Pama Persada, that produced higher coal by 7.6% MoM to 6.8mn tons from 6.3mn tons in
July 2010. With this achievement, Pama now has produced 50.8mn tons of coal during 8M10, or 20.1% YoY higher.

• Expect a weak 3Q10 performance. These data presents possibility of soft profit in 3Q10 financial reporting
period, in particular from UT’s mining contracting business. During 2Q10, as the company boosted its production
amid bad weather condition, UT posted a lower gross margin in mining contracting of 14.0% compared to 18.0%
during 1Q10 period. Thus, as UT’s July – August coal production was still running at the same speed as 2Q10, we
foresee its mining contracting margin will come in at around 14.0% in 3Q10 period. In addition, contribution from
heavy equipment and coal mining would also be lessening as both units may find difficulties in matching their 2Q10
sales volume on the back of the long holiday in September 2010 that reduces effective working days, which have
also affected heavy equipment sales volume in the previous years.

Bagus Hananto
bagus@nispsekuritas.com
62-21-8379 5238 ext.7311
United Tractors

Exh. 1: UT’s sales volume

1,600 1,514 25 800 744

1,400 700
1,218 20 19 19
1,200 600

1,000 921 15 500 461

13
393
800 400
10
600 300

400 200
5
200 100

0 0 0
Heavy M achineries (units) Co al M ining (k to ns) M ining Co ntracto r (mn to ns)

1Q10 2Q10 July - A ugust 2020 1Q10 2Q10 July - A ugust 2020 1Q10 2Q10 July - A ugust 2020

Source: Company

• Hold. Thus, we still maintain our Hold stance on UT, which currently trading at 2011F PER of 13.9x and EV/EBITDA
of 7.3x.

Exh. 2: Sales Volume Breakdown

8M09 8M10 YoY Aug-09 Jun-10 Jul-10 Aug-10 MoM YoY
Heavy Equipment (unit)
Agro 402 737 83.3% 112 92 97 63 -35.1% -43.8%
Construction 293 370 26.3% 49 43 42 42 0.0% -14.3%
Forestry 155 358 131.0% 15 46 33 57 72.7% 280.0%
Mining 1,164 2,188 88.0% 128 326 296 291 -1.7% 127.3%
2,014 3,653 81.4% 304 507 468 453 -3.2% 49.0%

Mining Contractor (mn ton)

Coal 42.3 50.8 20.1% 6.2 6.3 6.3 6.8 7.9% 9.7%
Overburden 383.2 426.0 11.2% 57.1 53.8 53.7 57.8 7.6% 1.2%

Coal Mining (mn ton)

Coal 1,601 1,598 -0.2% 204 170 219 174 -20.5% -14.7%

Source: Company

2
United Tractors

PT NISP Sekuritas
Puri Imperium Building (Head Office)
Office Plaza Unit G. 2, 3, 5
Jl. Kuningan Madya Kav. 5-6, Kuningan
Jakarta 12980 Indonesia
Phone. (021) 8379 5238 (hunting)
Fax. (021) 8379 5240
Email: info@nispsekuritas.com
Website: www.nispsekuritas.com

Research Team
+62 21 83795238
Bagus Hananto Deputy Head of Research bagus@nispsekuritas.com Ext 7311
Lyana Margareth Equity Analyst lyana.margareth@nispsekuritas.com Ext 7327
Ariawan Fixed Income Analyst ariawan@nispsekuritas.com Ext 7711
Yuni Pratiwi Research Assistant yuni.pratiwi@nispsekuritas.com Ext 7338

Branches
Phone: Fax:

Jl. Pluit Kencana Raya No. 59

Pluit Jakarta (021) 6667 5050 (hunting) (021) 6667 5051
Jakarta Utara 14450

Wisma HSBC, 3A Floor

Bandung Jl. Asia Afrika No. 116 (022) 426 7288 (022) 426 8009
Bandung 40261

Intiland Tower, 1st Floor Suite 7

Surabaya Jl. Panglima Sudirman 101-103 (031) 547 1213 (031) 547 1314
Surabaya 60271

Medan Jl. Bogor No. 51, Medan (061) 415 4512 (061) 456 4753

Rating Definitions
BUY : We expect this stock to give total return of above 15% over the next 12 months.
HOLD : We expect this stock to give total return of between -15% and 15% over the next 12 months.
SELL : We expect this stock to give total return of -15% or lower over the next 12 months.

DISCLAIMER:

This report was produced by PT NISP Sekuritas, a member of the Indonesia Stock Exchange (IDX). The Information contained in this report
has been obtained from public sources believed to be reliable and the options, analysis, forecasts, projections and expectations contained in
this report are based on such information and are expressions of belief only. No representation or warranty, express or implied, is made that
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