COMPANY_NOTES UNTR_Advanced Start - Indopremier Securities

UNTR booked good start in early 2011 after disappointing performance on the last two months. Strong Komatsu sales will be the key growth however weather challenge slightly adjusts our FY11 forecast. Robust national coal production target, land clearing activities and government spending for infrastructure will be the catalyst for UNTR performance in years to come. BUY Recommendation for UNTR with TP Rp 26,800,-.

All Time High Monthly Record
UNTR starts 2011 with robust performance in all division. Komatsu hits ceiling sales record by 115.6% YoY (133.5% MoM) to 731 units after the last two months disappointed performances. We noted the soaring sales at the beginning of the year are due to several reasons: 1) Numerous days off in December 2010 has shifted the purchasing day into January 2011; 2) The expectation of rising borrowing rate has prompted coal miners to accelerate the purchase of heavy equipment. To capture this moment, UNTR plans to raise Komatsu sales price by 3% in February 2011. Despite encouraging result at the beginning of the year, we revise down our FY11 Komatsu sales from 6,400 units to 6,000 units as the 2010 result was lower than the target.

…To Record Inline Performance
Pama posted Jan-11 overburden removal of 55.4 mn bcm (19.7 YoY increase) and coal extraction by 6.3 mn tons (5% YoY increase). We believe the improvement should continue as the government set 2011 coal production target to reach 327 mn tons in 2011, up 24% YoY on the back commodity price hike. However, weather factor may serve as a challenge to achieve the target. Going forward, we expect Pama to deliver 716 mn bcm OB and 86 mn tons CE in 2011, translating to 10% growth. Due to heavy rainfall, we forecast mining contracting operating margin to squeeze to 14.5% in 2011 and expected to normal in 2012 forward.

Downgrade but Still BUY
We revise down our FY11 estimate due to lower than expected FY10 performance and bad weather that predicted to continue up to first half 2011. We expect UNTR to deliver moderate revenue growth by 10% YoY, along with pressing down margin in 2011, especially in mining contracting business. As a result, we downgrade our TP to Rp 26,800 per share (from Rp 29,300). Our target price reflect 20.5x PER and 9.2x EV/EBITDA in 2011.