Senin 23 Juli 2012

13:48

HIGHLIGHT

·          United Tractor: Disappointing June12 volume (UNTR, Rp22,500, Under review)

·          Kawasan Jababeka: KIJA notes offered at 11.75-12% (KIJA, 190, Buy, Rp220)

·          Indomobil Sukses Internasional: 400 units of Nissan Juke are being recalled (IMAS, Buy, Rp7,300, TP: Rp10,000)

Mandiri Sekuritas Research Team

11:15  

CITI Indo UNTR weak Komatsu in June / Strategy: Profit growth vs Mkt cap / Macro: import to slowdown (20 July 12)

UNTR weak Komatsu sales in June; Further cut in guidance?

UNTR heavy equipment sales in June plunged 32% YoY, 35% MoM to 502 units. This brings 1H12 sales to 4,231 units (2% YoY) vs UNTR’s (revised last month) guidance of 8500 units for FY12. Assuming Komatsu’s volume to avg at June’s 500 units, UT’s Komatsu sales would drop 15% Y-Y in 2012 impacting earnings by 9%. While the huge drop is due to mining sector (-42% M-M; - 47% Y-Y), surprisingly the construction volume was also very weak (almost half M-M). UNTR is reviewing their guidance again and not ruling out another cut to their guidance. Every 10% change in Komatsu volume will impact EPS by 6-7%. Shr px could come under pressure again on weak June volume but after -31% drop in four months, a lof of bad news has been priced in, in our view. Stock trades at 11x PE 2013 (below mean 11.6x). We rate Buy TP Rp 26,900.

Jayden downgrades the coal sector following CLSA’s cut in the thermal coal price estimate by 9% to $99/t for 12CL and $100/t for 13CL. Preference for ITMG and PTBA due to high degree of fixed price contracts and good dividend yield.

Coal price assumption changes

Other key points from the report:

·         Jayden downgrades both Indo Tambangraya (ITMG IJ) and PTBA (PTBA IJ) to O-PF from BUYs. All other recommendations remain unchanged. He downgrades ITMG and PTBA’s TP to Rp39,000 and Rp16,500 from Rp41,000 and Rp17,500 respectively.  But both ITMG and PTBA are still his top picks in the sector.

·         He also raises Adaro (ADRO IJ)’s TP to Rp1,400 from Rp1,330 but lowers Harum Energy (HRUM IJ)’s TP to Rp5,800 from Rp6,200. Both recs remain UPF.  Finally INDY and BUMI’s TP are reduced to Rp2,000 and Rp1,100 from Rp2,100 and Rp1,300 respectively.

·         CLSA has reduced our forecast seaborne thermal coal prices by 8% to US$99/t in 12CL and 9% to US$100/t in 13CL. Weaker demand, lower cost inflation and less RMB appreciation all contribute to a softening of the cost curve versus our original forecast. As a result of the price change, we reduce average earnings in 12CL by 7% and in 13CL by 19%.

·         Our earnings estimates are on average 20% and 13% below consensus in 13CL and 14CL meaning near term appeal will be subdued in the face of broker downgrades. Assuming a US$100/bbl oil price we estimate consensus is currently forecasting US$110/t average seaborne price for both 13CL and 14CL.

·         For investors that have to be in the sector, we recommend ITMG and PTBA though we downgrade both from to O-PF recommendations. We retain BUMI, ADRO and HRUM as U-PFs and recommend switching to ITMG or PTBA due to their relative safe-haven status.

·         ADRO has a lower yield vs peers due to higher capex and we are concerned on potential shareholder value erosion from a recent related party transaction. HRUM is most exposed to near term spot price weakness vs peers due to a higher degree of index linked and spot contracts. We see most risk of downgrades to 2012 consensus earnings to this stock and BUMI.