R e g i o n a l M o r n i n g N o t e s Thursday, 02 May 2019

COMPANY RESULTS BUY

United Tractors (UNTR IJ) (Maintained)
1Q19: Significantly Above Expectations
Share Price Rp27,175
1Q19 net income rose 17.3% yoy and 53% qoq to Rp3,143b, driven by the Target Price Rp42,000
unexpected excellent pre-tax profit at Pama Persada which grew 20.8% yoy. The
Upside +54.6%
higher-than-expected profit from Martable gold mine with annual run rate that was
nearly double of guidance. We raise our 2019-20 net income forecasts by 5.9% and (Previous TP Rp37,000)
4.7% respectively. Maintain BUY with a higher target price of Rp42,000, pegged to
12.7x 2019F PE, or the stock’s historical mean. COMPANY DESCRIPTION
United Tractors distributes and leases
1Q19 RESULTS construction machinery, including Komatsu,
Nissan, Scania and other brands. The company
Year to 31 Dec (Rpb) 1Q19 1Q18 yoy % chg 4Q18 qoq % chg Remarks also provides mining contracting services and
Revenue 22,621 19,011 19.0 23,811 (5) engaging coal mining business with coal sales
Heavy Machinery 6,752 6,862 (1.6) 8,417 (20)
volume of 7m tones per annum.
Mining Contracting 9,518 7,954 19.7 11,646 (18) Unexpected performance at
mining contracting business
Coal Sales 3,631 3,460 4.9 2,593 40 STOCK DATA
Gold Mining 1,918 GICS sector Energy
Construction 802 734 9.3 1,183 (32) Bloomberg ticker: UNTR IJ
Gross Profit 5,700 4,453 28.0 6,031 (5)
EBIT 4,564 3,538 29.0 4,428 3 Shares issued (m): 3,730.1
Net Income 3,143 2,680 17.3 2,054 53 Market cap (Rpb): 101,366.4
Market cap (US$m): 7,109.9
Margins (%)
Gross Margin 25.2 23.4 177 25.3 3-mth avg daily t'over (US$m): 10.1
EBIT Margin 20.2 18.6 156 18.6
Net Margin 13.9 14.1 (20) 8.6 Price Performance (%)
Source: UNTR, UOB Kay Hian
52-week high/low Rp37,500/Rp24,825
RESULTS 1mth 3mth 6mth 1yr YTD
 1Q19 results above expectations. United Tractors (UNTR) reported 1Q19 net income of 0.5 5.6 (18.9) (20.3) (0.6)
Rp3,143b, up 17.3% yoy. With 1Q historically contributing to 19.4% of full- year earnings, Major Shareholders %
1Q19 net income is ahead of our (26.8%) and consensus (26.7%) full year forecasts of Astra International 59.5
Rp11,729b and Rp11,765b respectively.
FY19 NAV/Share (Rp) 15,914
 Upside surprises. The mining contracting division recorded a 21% yoy growth in pre-tax
profit. Contribution from gold mining was also a positive surprise as UNTR and ASII guided FY19 Net Debt/Share (Rp) 217
only Rp1t in net income for 2019 from gold mining. The run rate in 1Q19 suggests net
income close to Rp2t. PRICE CHART
KEY FINANCIALS (lcy) UNITED TRACTORS TBK PT UNITED TRACTORS TBK PT/JCI INDEX (%)
Year to 31 Dec (Rpb) 2017 2018 2019F 2020F 2021F 40000 120

Net turnover 64,559 84,625 97,433 103,364 110,402 110

EBITDA 14,479 21,811 24,771 25,296 27,057

35000
100
Operating profit 10,756 16,770 18,161 18,078 19,343
Net profit (rep./act.) 7,403 11,126 12,418 12,934 13,861 30000 90

Net profit (adj.) 7,403 11,126 12,418 12,934 13,861 80

EPS (Rp) 1,984.6 2,982.6 3,329.2 3,467.5 3,716.0 25000

70
PE (x) 13.7 9.1 8.2 7.8 7.3
P/B (x) 2.2 1.9 1.7 1.5 1.4 20000
30
60

EV/EBITDA (x) 7.3 4.8 4.3 4.2 3.9 20

Volume (m)
Dividend yield (%) 2.5 3.8 5.5 6.2 7.7 10
Net margin (%) 11.5 13.1 12.7 12.5 12.6 0
Net debt/(cash) to equity (%) (35.6) (5.8) 1.4 (7.0) (15.1) May 18 Jul 18 Sep 18 Nov 18 Jan 19 Mar 19 May 19

Interest cover (x) n.a. 32.4 24.7 91.4 78.7

ROE (%) 17.2 22.4 22.0 20.7 20.1 Source: Bloomberg
Consensus net profit - - 11,894 12,312 12,911
UOBKH/Consensus (x) - - 1.04 1.05 1.07 ANALYST(S)
Source: UNTR, Bloomberg, UOB Kay Hian
Indonesia Research
+6221 2993 3845
researchindonesia@uobkayhian.com

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SEGMENTAL ANALYSIS SEGMENTAL GROSS MARGINS

70.0%
Construction  Mining  Coal  Gold 
60.0%
Machinery Contracting Mining Mining Construction Sub Total Elimination Total
50.0%
Sales 40.0%

1Q19                6,752            9,518   3,631    1,918                  802    22,621          (6,351) 16,271 30.0%

20.0%
1Q18                6,862            7,954   3,460                  734    19,010          (5,535) 13,474
10.0%
Growth ‐1.6% 19.7% 4.9% NA 9.3% 19.0% 14.7% 20.8% 0.0%
2,017 2,018 2019F 2020F 2021F 2022F 2023F

Gross Profit Construction Machinery Mining Contracting Coal Mining

Gold Mining Construction
1Q19                1,694            2,436      840       843                    99       5,913             (213)    5,700
Source: UNTR, UOB Kay Hian
1Q18                1,737            1,963      867                  145       4,712             (260)    4,453
Growth ‐2.5% 24.1% ‐3.1% NA ‐31.7% 25.5% ‐17.9% 28.0% KOMATSU UNIT SALES AND ASP
8,000 350,000

Profit Before Tax 7,000 300,000

6,000 250,000
5,040
1Q19                   896            2,138      757       665                   (89)       4,368             (196)    4,172 5,000
4,878
4,354 4,571 4,800
4,146 200,000
3,788
1Q18                   934            1,770      856                      2       3,562               (25)    3,538 4,000
150,000
3,000
Growth ‐4.0% 20.8% ‐11.6% NA ‐4653.9% 22.6% 689.0% 17.9% 100,000
2,000
Source: UNTR, UOB Kay Hian 1,000 50,000
0 0
STOCK IMPACT 2,017 2,018 2019F 2020F 2021F 2022F 2023F

 Heavy equipment. Against the 18% yoy decline in sales volume from 4,878 units to Komatsu Unit Sales - L Heavy Equipment ASP (US$/unit) - R

4,000 units as guided by management, heavy equipment sales in 1Q19 rose 1% yoy Source: UNTR
from 1,171 units in 1Q18 to 1,181 units. Sales of spare parts and maintenance service
PAMA OVERBURDEN AND COAL DELIVERY
increased 2% yoy to Rp2.2t. Construction machinery pre-tax profit declined 4% yoy. 250.0 1,400.0

 Mining contracting. Sales growth was unexpectedly strong at 19.7% yoy from Rp7,954b 200.0
1,200.0

1,000.0
to Rp9,518b. PAMA produced 30.5m tons of coal and 234.6m bcm in overburden
150.0 800.0
removal. This led to 20.8% growth in profit before tax.
100.0 600.0

 Coal mining. The segment’s coal sales volume fell 2% yoy to 2.5m tonnes. Net revenue 400.0
50.0
200.0
increased 4.9% yoy on higher contribution from coking coal.
- -

 Gold mining. In 1Q19, gold mining recorded 97,000 ounces of gold with pre-tax profit of 2,017 2,018 2019F 2020F 2021F 2022F 2023F

Coal Delivery (m tonnes) - L Overburden Removal (m bcm) - R

Rp665b. According to UNTR and ASII, the newly-acquired Martabe mine should
contribute at least Rp1t to UNTR’s net income in 2019. However, the 1Q19 run rate Source: UNTR
points more to Rp1.5t-2t contribution.
 Construction. Net profit reversed from Rp2b profit in 1Q18 to Rp89b loss in 1Q19 while
sales were up 9.3% yoy. Lower margin caused gross profit to decline 31.7% yoy.
EARNINGS REVISION/RISK
 We raise 2019-20 net profit forecasts by 5.9% and 4.7% respectively as we lift our
Komatsu unit sales by 3.7% and overburden removal volume by 4%. Our forecasts are
5.6% and 6.3% higher than that of the street.
FORECAST REVISION
New Original Difference Consensus Difference
2019F 2020F 2019F 2020F 2019F 2020F 2019F 2020F 2019F 2020F
Komatsu Unit 4,146 4,354 4,000 4,200 3.7% 3.7%
Komatsu ASP per unit 247,062 252,003 247,062 252,003 0.0% 0.0%
Overburden removal rate 2.88 2.85 2.88 2.85 0.0% 0.0%
Overburden removal volume 1,009 1,059 970 1,018 4.0% 4.0%
Sales 97,433 103,364 95,265 101,094 2.3% 2.2% 90,011 95,787 8.2% 7.9%
Gross Profit 23,355 23,726 22,804 23,165 2.4% 2.4% 23,010 24,339 1.5% -2.5%
Operating Profit 18,161 18,078 17,478 17,500 3.9% 3.3% 17,763 18,515 2.2% -2.4%
Net Income 12,418 12,934 11,729 12,350 5.9% 4.7% 11,763 12,165 5.6% 6.3%
Source: UNTR, UOB Kay Hian

VALUATION/RECOMMENDATION
 Maintain BUY with a higher target price of Rp42,000 (from Rp37,000), pegged at five-
year average PE of 12.7x to 2019F EPS. With a 54.5% upside from current price levels,
maintain BUY. UNTR is one of our top picks for Indonesia.

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PROFIT & LOSS BALANCE SHEET

Year to 31 Dec (Rpb) 2018 2019F 2020F 2021F Year to 31 Dec (Rpb) 2018 2019F 2020F 2021F
Net turnover 84,625 97,433 103,364 110,402 Fixed assets 40,474 44,652 46,871 47,243
EBITDA 21,811 24,771 25,296 27,057 Other LT assets 20,156 20,945 21,784 22,676
Deprec. & amort. 5,041 6,609 7,219 7,714 Cash/ST investment 13,438 11,057 17,217 24,323
EBIT 16,770 18,161 18,078 19,343 Other current assets 42,214 38,026 40,828 41,564
Total other non-operating income (695) (300) (300) (300) Total assets 116,281 114,679 126,699 135,806
Associate contributions 307 368 442 530 ST debt 7,021 8,083 8,575 9,159
Net interest income/(expense) (673) (1,002) (277) (344) Other current liabilities 41,765 32,337 36,359 37,864
Pre-tax profit 15,709 17,228 17,943 19,229 LT debt 3,286 3,783 4,013 4,287
Tax (4,210) (4,393) (4,575) (4,903) Other LT liabilities 7,159 7,517 7,893 8,287
Minorities (373) (416) (433) (464) Shareholders' equity 53,779 59,361 65,901 71,854
Net profit 11,126 12,418 12,934 13,861 Minority interest 3,271 3,598 3,958 4,354
Net profit (adj.) 11,126 12,418 12,934 13,861 Total liabilities & equity 116,281 114,679 126,699 135,806

CASH FLOW KEY METRICS

Year to 31 Dec (Rpb) 2018 2019F 2020F 2021F Year to 31 Dec (%) 2018 2019F 2020F 2021F
Operating 18,960 11,924 20,916 21,755 Profitability
Pre-tax profit 15,709 17,228 17,943 19,229 EBITDA margin 25.8 25.4 24.5 24.5
Tax (4,210) (4,393) (4,575) (4,903) Pre-tax margin 18.6 17.7 17.4 17.4
Deprec. & amort. 5,050 6,621 7,232 7,728 Net margin 13.1 12.7 12.5 12.6
Associates (373) (416) (433) (464) ROA 11.2 10.8 10.7 10.6
Working capital changes 3,462 (5,240) 1,220 769 ROE 22.4 22.0 20.7 20.1
Other operating cashflows (677) (1,875) (470) (603)
Investing (27,731) (11,589) (10,289) (8,992) Growth
Capex (growth) (28,635) (10,800) (9,450) (8,100)
Turnover 31.1 15.1 6.1 6.8
Others 904 (789) (839) (892)
EBITDA 50.6 13.6 2.1 7.0
Financing 1,121 (3,406) (4,936) (6,260)
Pre-tax profit 49.3 9.7 4.2 7.2
Dividend payments (3,883) (5,600) (6,251) (7,760)
Net profit 50.3 11.6 4.2 7.2
Issue of shares 0.0 0.0 0.0 0.0
Net profit (adj.) 50.3 11.6 4.2 7.2
Proceeds from borrowings 5,625 1,560 722 857
EPS 50.3 11.6 4.2 7.2
Others/interest paid (621) 634 592 643
Net cash inflow (outflow) (7,650) (3,071) 5,690 6,504
Leverage
Beginning cash & cash equivalent 20,831 13,438 11,057 17,217
Debt to total capital 15.3 15.9 15.3 15.0
Changes due to forex impact 257 689 470 603
Debt to equity 19.2 20.0 19.1 18.7
Ending cash & cash equivalent 13,438 11,057 17,217 24,323
Net debt/(cash) to equity (5.8) 1.4 (7.0) (15.1)
Interest cover (x) 32.4 24.7 91.4 78.7

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R e g i o n a l M o r n i n g N o t e s Thursday, 02 May 2019

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