Sales volume hit record high number Buy United Tractors, UNTR, TP: Rp25,900, Share Price: Rp22,300, Upside: 16.1% - UOB

Komatsu sales volume in March hit 789 units, a +14.8% mom jump, contributed by the strong demand for commodities, esp. mining sector
Strong 1Q11 sales volume,a 71.1% qoq increase to 2,207 units. This number accounts for 36.8% of our 2011 assumption.
In general, we are positive on coal production and prices (production projected to rise 12% yoy to 280mn tonnes in 2011) – hence positive on heavy equipments and mining contracting sector in 2011.

BUT
How about Komatsu's supply disruption from Japan?
Sales volume of big machineries imported from Japan accounts for 10% of total Komatsu sales in Indonesia
But major Komatsu plants will start production in less than a month, and the others will catch up delayed production by end of May.

And share price overhang from rights issue plan?
The Rights issue plan to raise Rp6.1tn for expansion is expected to list on 16th of May 2011. And 90% of the proceeds will be used for business expansion and 10% for working capital and general expenses.
- - Share price have dropped because of this news, but fundamentals remains strong in the long term as high commodity prices and increased demand will serve as a positive catalyst for this sector.