The stock market witnessed a significant wave of panic selling yesterday as United Tractors (UNTR) shares plummeted over 12% in the opening minutes of trade. This sharp sell-off followed a decisive move by President Prabowo Subianto to revoke the business licenses of 28 companies for forest area violations, a list that includes PT Agincourt Resources (PTAR). The Martabe gold mine, operated by PTAR, has long been the crown jewel of UNTR’s diversification strategy, following a massive $1 billion acquisition in 2018 aimed at reducing the group's heavy reliance on the coal sector.

The sudden halt of Martabe’s operations is expected to create a massive earnings vacuum, with potential profit losses estimated at Rp5.2 trillion annually. Without this high-margin gold contribution, UNTR’s earnings profile shifts back to being highly sensitive to volatile coal prices and heavy equipment cycles. The situation is further complicated by an ongoing legal overhang from the Ministry of Environment involving claims of approximately Rp4.8 trillion, which could severely strain the company’s cash flow and margins if these risks materialize.
 

This regulatory shock fundamentally alters the long-term outlook for UNTR, particularly regarding its status as a reliable high-dividend play, a key attraction for many investors. While there is talk of potential new acquisitions to replace the lost gold output, the timing and execution remain clouded in uncertainty. With the primary stabilizer of the company’s earnings mix now offline, the downside risks currently far outweigh any potential recovery in the near term.

Given the structurally weaker earnings visibility and the diminished attractiveness of the stock's dividend profile, our analysts suggest taking a defensive stance. We have downgraded our recommendation to SELL, as the loss of Martabe’s contribution leaves the company’s bottom line increasingly exposed to market volatility without its most significant earnings buffer.