Company Update, 25-Jul-2019

UNITED TRACTORS (UNTR)

6M19 Komatsu unit sales fall 20% YoY, while OB removal and coal production Sector: Trade
volume by Pama manage to climb 5% and 7% YoY each Heavy equipment & mining services
Mixed operational performance in heavy equipment and mining services business
segments
BUY
Target Price 31,000
6M19 Komatsu sales fell 20% YoY to only 1917 units, from 2400 units in 6M18, following a P/E 19F/20F (x) 8.7 7.4
21% YoY decline in global coal price (Newcastle) to $77/ton* (as of Jun-2019) from $97/ton Last Price 26,975
(as of Jun-2018). However, we see this steep decline of coal price impelled most miners in P/E 19F/20F (x) 7.6 6.5
the country to ramp up production in the effort to sustain income levels. As a result, 52 Week High/Low 37,450 24,000
Pamapersada Nusantara (Pama - a subsidiary), currently the largest coal mining contractor Prev. Target Price 30,000
in the country, reported a 5% and 7% YoY increase in its overburden removal and coal As of Dec 2018 2019F 2020F
production volume, to 469mn bcm and 60.8mn tons each, respectively. Revenue (Rp bn) 84,625 99,534 114,464
*Jul-2019 price is slightly higher at $81.8/ton Net Profit (Rp bn) 11,126 13,239 15,570
Net Debt (Cash) (3,004) (4,272) (9,593)
6M19 6M18 Chg 2019F 2018 Chg EPS (Rp) 2,983 3,549 4,174
DPR, as paid 49% 49% 49%
Koma ts u s a l es (uni ts ) 1,917 2,400 -20% 4,000 4,878 -18% DPS, as paid (Rp) 976 1,467 1,745
OB Remova l vol . (mn bcm) 469 446 5% 950 978 -3% BV/share (Rp) 14,418 16,356 18,795
Coa l Producti on vol . (mn tons ) 60.8 56.7 7% 121.8 125.3 -3% P/E (x) current price 7.6 6.5
ROA 10% 11% 11%
Coa l Sa l es vol . (mn tons ) 4.9 4.4 11% 9.0 7.0 28%
ROE 20% 21% 21%
Gol d Sa l es vol . ('000 oz) 195 n/a n/a 400 355 13%
Major Shareholders
Sources: UNTR, Kresna Securities
Astra International 59.5%
Public & Others 40.5%
6M19 coal sales volume at Tuah Turangga Agung (TTA) was up 11% YoY to 4.9mn tons from
4.4mn tons in 6M18. Gold sales volume at Agincourt Resources (Martabe) managed to
reach 195,000 oz. Company description
United Tractors (UNTR, a subsidiary of Astra
Maintain BUY, at a TP of 31,000 International Tbk) is a distributor of Komatsu
With 1Q19 revenue and net profit reaching IDR 22.62 and 3.05 tn each, and considering its trucks and tractors, along with Scania and UD
solid operational performance up until 6M19, we expect 2019F revenue and net profit to Trucks. The Company is also involved in the
be able to reach IDR 99.53 and 13.24 tn, respectively. Therefore at the current market cap business of mining contracting (through
Pamapersada Nusantara - Pama), coal mining and
of IDR 100.6tn, UNTR is currently trading at 7.6x/6.5x of its 19F/20F P/E Ratio.
trading (through Tuah Turangga Agung - TTA),
A possible impairment loss recognition that can potentially peel off IDR 500bn – 1tn from and construction services (through Acset
our projected bottom line will still place valuations in the range of 7.9 - 8.2x of its 2019F P/E Indonusa Tbk - ACST). Together with Sumitomo
Corp and Kansai Electric, the Company is currently
Ratio. Still fairly under its average in the last 5-years of 11-12x (Figure 6). in the process of completing the construction of
We maintain a BUY rating, at a TP of IDR 31,000, implying 8.7/7.4x of its 19F/20F P/E Ratio. Tanjung Jati power plant in Jepara (Central Java)
that will have 2x1,000 MW of capacity. UNTR
We are of the view that the strong operational results of Agincourt and Pama will support
recently acquired PT Agincourt Resources, a gold
its profitability this year, even though Komatsu unit sales will most likely be lower, mine operator in Martabe (North Sumatra) with
compared to last year. more than 350,000 oz of estimated annual
production capacity.
Investment Risks
1) Another significant decline in global coal and gold price towards the end of year, that
38,000
potentially can lead to higher-than-expected impairment loss recognition. 2) Lower-than-
expected overburden removal volume of 950mn bcm this year. 33,000

28,000
(IDR bn) 2017 2018 2019F 2020F 2021F 23,000
Revenue 64,559 84,625 99,534 114,464 128,772
Dec-17

Jun-18

Dec-18
Oct-18
Feb-18
Apr-18

Feb-19
Apr-19
Aug-18

growth 41.8% 31.1% 17.6% 15.0% 12.5%

Gross profit 14,484 21,110 25,327 29,412 33,410
margin 22.4% 24.9% 25.4% 25.7% 25.9% Sources: Bloomberg, UNTR, Kresna Securities
OP profit 10,523 15,709 18,693 21,984 25,223
margin 16.3% 18.6% 18.8% 19.2% 19.6%
Total Assets 82,262 116,281 122,528 140,329 160,533 Robertus Hardy
robertus.hardy@kresnasecurities.com
Total Equity 47,538 57,051 63,936 73,472 84,212
Net debt (cash) (16,032) (3,004) (4,272) (9,593) (16,257)
ROA 9.0% 9.6% 10.8% 11.1% 11.1%
ROE 15.6% 19.5% 20.7% 21.2% 21.2%
Sources: UNTR, Kresna Securities

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Company Update, 25-Jul-2019

Key Performance Figures: United Tractors (UNTR)

Figure 1: Komatsu sales (units) Figure 2: UD Trucks and Scania sales (units)

UD Trucks/Nissan Diesel Scania

4,878
1,116
3,788 4,000
3,513 893
819
700
2,124 2,181 600640
532
365 361
246
171
77

2014 2015 2016 2017 2018 2019F 2014 2015 2016 2017 2018 2019F

Sources: UNTR, Kresna Securities Sources: UNTR, Kresna Securities

Figure 3: Overburden Removal volume (mn bcm) Figure 4: Coal Sales, Tuah Turangga Agung (‘000 tons)
9,000
978.4 950.0
806.4 800.8 6,809 7,024
766.5 6,335
701.6 5,672
4,626

2014 2015 2016 2017 2018 2019F 2014 2015 2016 2017 2018 2019F

Sources: UNTR, Kresna Securities Sources: UNTR, Kresna Securities

Figure 5: Agincourt Gold sales volume (oz) Figure 6: UNTR Standard Deviation of P/E Ratio

400,000

302,448
280,363

2013 2014 2015 2016 2017 2018 2019F

Sources: Agincourt, Kresna Securities Source: Bloomberg Finance LP

Figure 7: Gold price (USD / t oz)

Source: Bloomberg Finance LP

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Company Update, 25-Jul-2019

Financials: United Tractors (UNTR)

Income Statement (Rp bn) 2018 2019F 2020F 2021F Liabilities (Rp bn) 2018 2019F 2020F 2021F
Revenue 84,625 99,534 114,464 128,772 Trade Payables 32,691 29,825 34,299 39,444
growth 31.1% 17.6% 15.0% 12.5% Taxes Payables 3,231 2,717 3,124 3,593
Gross Profit 21,110 25,327 29,412 33,410 Accruals 3,763 4,805 5,526 6,354
margin 24.9% 25.4% 25.7% 25.9% ST Bank Loans 6,857 3,104 3,570 4,105
Selling expenses (968) (886) (1,018) (1,143) Current Portion of LT Debts 164 178 205 236
G&A expenses (3,371) (4,041) (4,646) (5,226) Others 2,080 2,339 2,690 3,094
Other expenses (977) (717) (823) (925) Total Current Liabilities 48,786 42,968 49,413 56,825
Other income 282 219 253 286 Deferred tax liabilities 4,550 4,384 4,713 5,067
Finance income 764 508 513 518 Employee benefit 1,948 2,067 2,232 2,411
Finance costs (1,438) (2,152) (2,147) (2,142) Long-term debt 3,286 8,461 9,730 11,189
Net profit of associates & JVs 307 435 440 445 Others 661 712 768 829
Profit bef income tax 15,709 18,693 21,984 25,223 Total NC Liabilities 10,445 15,624 17,444 19,496
margin 19% 19% 19% 20% Total Liabilities 59,230 58,593 66,857 76,321
Profit for the period 11,498 13,683 16,092 18,463
Net Income 11,126 13,239 15,570 17,864 Equity (Rp bn) 2018 2019F 2020F 2021F
growth 50% 19% 18% 15% Share Capital 933 933 933 933
margin 13% 13% 14% 14% Additional paid in capital 9,704 9,704 9,704 9,704
EPS 2,983 3,549 4,174 4,789 Retained earnings
Current Price 26,975 26,975 26,975 Appropriated 187 187 187 187
P/E 7.6 6.5 5.6 Unappropriated 40,335 48,166 57,289 67,559
Target Price 31,000 31,000 31,000 Others 2,621 2,021 1,998 1,976
P/E 8.7 7.4 6.5 Equity attributable to parents 53,779 61,010 70,110 80,358
Total Equity 57,051 63,936 73,472 84,212
Assets (Rp bn) 2018 2019F 2020F 2021F Total Liabilities & Equities 116,281 122,528 140,329 160,533
Cash 13,438 16,184 23,279 31,982
Trade Receivables 20,610 21,004 23,105 25,415 Cash Flows (Rp bn) 2018 2019F 2020F 2021F
Inventories 13,618 12,626 13,888 15,277 Change in working capital 3,462 (2,881) 1,651 2,114
Others 7,985 9,386 10,324 11,357 Others 1,593 975 137 138
Total Current Assets 55,652 59,200 70,596 84,031 Net income 11,126 13,239 15,570 17,864
Restricted cash 2,341 2,142 2,356 2,591 Depreciation 6,185 3,265 2,941 2,649
Fixed Assets 24,585 27,371 30,179 32,993 Nett cash flow from operation 22,366 14,597 20,299 22,766
Mining Properties 15,889 15,761 17,337 19,071 Capex (14,414) (6,074) (5,770) (5,482)
Others 17,815 18,055 19,860 21,846 Others (19,386) (924) (3,195) (3,514)
Total NC Assets 60,629 63,329 69,733 76,502 Net cash flow from investment (33,800) (6,998) (8,965) (8,996)
Total Assets 116,281 122,528 140,329 160,533 Change in debts 5,635 1,477 1,774 2,039
ROA 10% 11% 11% 11% Dividend (3,641) (5,471) (6,511) (7,657)
Change in equity 1,965 (946) 414 469
Net cash flow from financing 3,959 (4,940) (4,323) (5,149)
Remeasurements 63 63 63 63
Share of other (0) (0) (0) (0)
Acc Impairment Losses 19 23 21 19
Net Cash Flows (7,393) 2,746 7,095 8,703
Cash at the beginning of the year 20,831 13,438 16,184 23,279
Sources: UNTR, Kresna Securities Cash at the end of the year 13,438 16,184 23,279 31,982

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Definition of ratings:
BUY = stock return > 10% over the next 12 months (excluding dividend)
HOLD = stock return -10% to 10% over the next 12 months (excluding dividend)
SELL = stock return <10% over the next 12 months (excluding dividend)

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