Stocks in Focus: Heavy Equipment Distributor United Tractors
Indonesia's largest heavy equipment distributor United Tractors, a unit of the Astra Group, is one of the leaders on the Indonesia Stock Exchange. So far this year its shares have surged 62.8 percent to IDR 34,600 a piece. The company is also one of foreign investors' favorites. So lets zoom in closer on United Tractors.
On Thursday (28/12) shares of United Tractors climbed 0.07 percent to IDR 34,600 a piece, slowly approaching its all-time record high position of IDR 36,250 per share that was touched in early November 2017.
It is interesting to note that foreign investors have high confidence in United Tractors. Foreigners bought IDR 1.3 trillion (approx. USD $96 million) worth of United Tractors shares so far in 2017. Only Bank Rakyat Indonesia (BRI), Bank Negara Indonesia (BNI), and Bank Mandiri managed to attract more foreign investment (showing that foreigners expect to see big growth in Indonesia's financial sector).
It is also worth mentioning that - so far this year - foreigners have sold more Indonesian shares than they have bought. According to Indonesia Stock Exchange officials this is due to profit taking and not because foreigners have left the Indonesian market. Despite these outflows Indonesia's benchmark Jakarta Composite Index still managed to post a new all-time record high of 6,314.05 points on Thursday (28/12). Thus, domestic investors have been pouring money into Indonesian stocks this year.
Back to United Tractors; the reason why the performance of this company has been strengthening is due to improving conditions (and activities) in Indonesia's mining and agriculture sectors. The company is highly dependent on demand for heavy equipment from mining and agricultural companies. However, on the short term there are some concerns because bad weather (heavy rainfall) is plaguing activities in the mining and agriculture sectors. The year-end and year-start fall within the rainy season and therefore United Tractors always sells less heavy equipment in this period. However, the La Nina effect makes conditions wetter than usual this time.
The question now is: until when will the La Nina effect be felt in Indonesia (and Southeast Asia). Opinions vary. Whereas Australian, US, and Indonesian weather forecast agencies expect the La Nina phenomenon to be felt up to May 2018, Japan says the effect will cease in February. For sure, United Tractors' sales will be affected up to the first quarter of 2018.
RHB Sekuritas Indonesia still expects to see rising net profit for United Tractors in the years ahead: IDR 7.66 trillion in 2017, IDR 8.86 trillion in 2018 and IDR 9.44 trillion in 2019. Its recommendation for the company's shares, however, is at "neutral" with the short-term share price target at IDR 36,250 a piece.
In November 2017 United Tractors sold 406 Komatsu units, up sharply from 196 sold units in the same month one year ago. Meanwhile, in the first 11 months United Tractors sold 3,467 Komatsu units, up 73 percent from sales in the same period one year earlier, hence the company's corporate performance has improved markedly due to improving conditions in the country's mining and agriculture sectors.
Stock Quote United Tractors - UNTR: