Indonesia Market Summaries 5 September 2014

PT Modernland Realty Tbk (MDLN, Rp510, NEUTRAL, TP Rp510) to revise marketing sales target to IDR 3.8 trillion. MDLN decided to revise the target company's marketing sales in 2014 to IDR 3.8 trillion from IDR 4 trillion since the launch of the bari project in the first semester of 2014 is lower than the target.

Pre-sales for 7M14 reached IDR 1.88 trillion (49.5% of the target). The company is optimistic to achieve the new targets by launching two new housing clusters in Jakarta Garden City in the second semester of 2014 and the contribution of Cikande Modern Industrial Estate. (Bisnis Indonesia)

PT Kresna Graha Sekurindo Tbk (KREN, Rp 405) intends to rights issue worth IDR 2 trillion. The step is a part of restructuring of the company into a group holding company, and will acquire Affiliate company in the insurance sector and the property. (Kontan)

Astra Group targeting Mulut Tambang power plant project worth USD 900 million in South Sumatra through tenders. Tender was followed by the Astra Group through PT United Tractors Tbk (UNTR, Rp 21.475, NEUTRAL, TP Rp 23.000) subsidiary', PT Pamapersada Nusantara (PAMA). (Investor Daily)

Division of Flour, PT Indofood Sukses Makmur Tbk (INDF, Rp 7.050, BUY, TP Rp 8.200) is targeted to achieve Bogasari revenue IDR 19.6 trillion this year, up 5% from last year. The target was supported by an increase in demand for capacity on the market, but there is no expansion this year. (Bisnis Indonesia)

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Operational performance of PT United Tractors Tbk down 2.5% on July

Operational performance of PT United Tractors Tbk (UNTR, Rp14.750, NEUTRAL, TP Rp17.000) during July were down 2.5% month on month (MoM) rated below expectations. The decline caused by a decrease in mining and construction sectors in the same period.



Sales of UNTR in construction sector during the first 7 months of 2013, which represents 55% of the 2013 target is still under estimation. The sales decline was associated with rising interest rates and the fell of Rupiah's exchange rate against the U.S. dollarto undermine the interests of the non-mining sector. Mining sector demand is still low due to the price of coal is still weak.

Contract mining down 5% MoM due to higher rainfall in July. Overburden removal project fell 5.7% MoM and coal production fell 5.2% MoM in July, still within the expectations. July coal sales volume fell 41.2% MoM due to weak prices.

Low price also makes UNTR lowering sales volume and are under expectation and only 41.7% of our 2013-year target. UNTR currently traded at the price per earnings ratio (PE ratio)  11.6 x for 2013 and 10.5 x for 2014.

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The year of low strip ratio of United Tractors

United Tractors: The year of low strip ratio (UNTR, Rp17,300, Sell, TP:Rp17,000)

Feb’13 Komatsu sales volume of 412 units is within our expectation (2M13 Komatsu sales represent around 16.3% of FY). Interesting point from Feb’13 Komatsu sales compare to Feb’12 is Feb’13 Komatsu sales to all sector decrease yoy. Meanwhile, although demand from construction sector is expected to increase due to infrastructure story in Indonesia, Feb’13 Komatsu sales unit to construction sector decrease mom and yoy.

2M13 PAMA’s OB and coal production are within our expectation. As we expect, year on year growth in Overburden and coal production start to decrease since Feb’13 (Overburden yoy growth: 1M13=10.6%yoy vs 2M13=4.5%yoy. Coal production yoy growth: 1M13=19.0%yoy vs 2M13=12.7%yoy).  Strip ratio decrease to 8.12x in Feb’13 (vs 8.76x in Jan’13 vs 8.79x in Feb’12). Considering unfavorable spread between brent crude oil price (significant cost of mining) and coal price since the beginning 2012 would force PAMA’s clients to reduce their strip ratio, especially if current coal price, which lower than US$90 per ton, is sustainable.

Reiterate SELL recommendation. Although current share price of Rp17,300 almost reach our TP of Rp17,000, we think current slump in coal price to below US$90 per ton would make UNTR price to decrease further.