media · surya citra media scma trading buy 3,870 47.5 47 29.6 25 12.6 10.7 ... tv companies’...
TRANSCRIPT
Analysts who prepared this report are registered as research analysts in Indonesia but not in any other jurisdiction. PLEASE SEE
ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.
Media
Prime time to overweight
We initiate our coverage on media companies MNC Nusantara Citra (MNCN/ Buy/ TP
IDR2,700) and Surya Citra Media (SCMA/ Buy/ TP IDR3,870). We like SCMA on the back
of its: 1) low gearing and high free cash flow (FCF), 2) robust dividend payout ratio, and
3) stellar ROE compared to peer. For MNCN, we favor the company due to 1) its strong
audience share, 2) top notch power ratio, 3) the fact that it is the only TV operator that
has integrated studio facilities located in one area in Kebon Jeruk, (MNC studio complex).
We also believe MNCN will benefit from the strengthening of the rupiah given its USD
debt exposures.
Indonesian media: appealing outlook ahead
We believe the media industry is well positioned to benefit from the continued
expansion of private consumption. Given the large population base (4th populous
country in the world) combined with stable income growth of consumers, we believe fast
moving consumer goods (FMCG) companies are likely to benefit from this favorable
macro backdrop. Furthermore, we expect FMCG companies to gear up their
advertisement spending to maximize their position in the market. Even though Indonesia
has exhibited high ad spend growth over the past couple of years (16% CAGR during
2011-2016F), we note that the average price for 30-second prime-time spot is relatively
inexpensive at only USD5,400/spot compared to peer countries such as Australia,
Singapore, Philippines (indicating ample room for growth). Furthermore, existing free-to-
air TV operators are likely to benefit from the natural entry barrier given broadcasting
license is limited by the regulators.
Expecting better revenue in2Q on the back of Ramadhan
We project revenue growth for both MNCN and SCTV will jump in 2Q, largely due to the
sahur (“pre-dawn meal” which refers to food consumed early in the morning) base effect.
As a quick reminder, Ramadhan was held during mid-June to July last year (vs. during the
early part of June in 2016). MNCN and SCMA feature popular religious dramas during
sahur in Ramadan.
We initiate coverage on SCMA with a buy recommendation and a target price of
IDR3,870, implying 34.7x 2016F P/E. We think the premium valuation on SCMA is
justified, given that SCMA has a strong track record and a solid balance sheet. Our
IDR3,870 target price is derived by using a blended calculation of target P/E at 35x and
Discounted Cash Flow (DCF) method with 10-year time span.
We initiate our coverage on MNCN with a trading buy rating and a target price of
IDR2,700, implying 27.5x 2016F P/E. Our target price of IDR2,700 was derived using a
blended calculation of target P/E at 28x and Discounted Cash Flow (DCF) method with
10-year time span.
Media companies covered in this report
Company name Ticker Rating TP
(IDR)
ROE (%) P/E(x) P/B(x)
2016F 2017F 2016F 2017F 2016F 2017F
Media Nusantara Citra MNCN Buy 2,700 14.2 16.6 22.4 17.8 3.1 2.9
Surya Citra Media SCMA Trading Buy 3,870 47.5 47 29.6 25 12.6 10.7
Source: Daewoo Securities Research
Overweight (Initiate)
Initiation
July 29, 2016
PT Daewoo Securities Indonesia
Trade
Christine Natasya
+62-21-515-1140
Media
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Daewoo Securities Research
Daewoo Securities Research
C O N T E N T S
Investment summary 3
Indonesian media: appealing outlook ahead 3 Buy rating for SCMA (TP IDR3,870) and Trading buy for MNCN (TP IDR2,700) 4
Overview of the media industry 5
Private consumption is the backbone for advertisement demand 5 FMCG companies, especially cigarettes companies dominate the TV ad spend 9 TV companies’ biggest revenue comes from PT.Wira Pamungkas Pariwara 11 Ad supply: Limited for TV, yet huge potential for online advertisement 13 Biggest media TV competitor: Online advertisement 15
Surya Citra Media 18
Company Background 18 PT Indonesia Entertainment Group 20 Management team 21 Famous TV shows/drama currently played on SCTV 23 Famous TV shows/drama that is currently playing on Indosiar 24 SCMA investment in iflix 25 Analyzing the Sports content 26 Investment thesis on SCMA 28 Surya Citra Media (Valuations) 34 Surya Citra Media (Ticker SCMA IJ/ Buy/ TP: IDR3,870) 35
Media Nusantara Citra 39
Company Background 39 MNCN’s local content 40 MNC Pictures 40 Talent management 41 MNC Channels 41 MNC’s FTA stations appeal to different audience segments 47 Famous dramas currently played on RCTI 47 Famous dramas that are currently played on GlobalTV 48 Famous dramas that are currently played on MNC TV 49 MNCN charges more premium advertising cost through its quality contents 50 Investment thesis on MNCN 51 Media Nusantara Citra (Valuations) 54 Media Nusantara Citra (Ticker MNCN IJ/ Trading buy/ TP: IDR2,700) 55
Risks to our call 58
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Investment summary
Indonesian media: appealing outlook ahead
We believe Indonesia’s TV media industry is well poised to benefit from the continued private
consumption expansion. Given the large population base (Indonesia is the world’s 4th
largest
populous country) combined with stable income growth of consumers, we believe fast moving
consumer goods (FMCG) companies are likely to benefit from this favorable macro backdrop.
Furthermore, we expect FMCG companies to increase their advertisement expenses to maximize
their position in the market. Even though Indonesia has already exhibited high ad spend growth
over the past couple of years (16% CAGR during 2011-2016F), we note that the average price for
30-second prime-time spot is relatively inexpensive at only USD5,400/spot compared to peer
countries such as Australia, Singapore, Philippines (indicating ample room for growth).
Furthermore, existing free-to-air TV operators are likely to benefit from the natural entry barrier
given broadcasting license is limited by the regulators.
Figure 1. Indonesia ad spending has grown by 16% CAGR in 2011-2016F
Source: Media Partners Asia, Daewoo Securities Research
Figure 2. Average price for 30 seconds prime-time spot
Source: Media Partners Asia, Daewoo Securities Research
80,000
5,400
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
Australia Singapore Philippines Thailand Vietnam Malaysia Indonesia
USD/spot
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Media
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Daewoo Securities Research
Figure 3. Prime time all demography (Free-to-air TV market share)
Source: Nielsen, Daewoo Securities Research
Buy rating for SCMA (TP IDR3,870) and Trading buy for MNCN (TP IDR2,700)
We like Surya Citra Media (SCMA) due to 1) its ability to maintain strong revenue growth despite
lower audience share compared to Media Nusantara Citra (MNCN), 2) better monetization of its
audience shares, and 3) high dividend payout ratio and strong cash position, as well as its stellar
EBITDA margin compared to peers.
MNCN, we favor the company due to 1) its strong audience share, 2) top notch power ratio, 3) the
fact that it is the only TV operator that has integrated studio facilities located in one area in Kebon
Jeruk, (MNC studio complex). We also believe MNCN will benefit from the strengthening of the
rupiah given its USD debt exposures.
Risks to our investment call
Risks to our call include 1) growing internet penetration which should prompt higher demand for
digital advertisement growth and pose threat to the conventional TV ad market, 2) government’s
regulation on cigarettes advertisement (as a quick reminder, cigarette companies command a
large portion of TV operators’ revenue), as well as 3) macroeconomic factors such as weaker-than-
expected Indonesian GDP (Daewoo forecast: 5.1% in 2016F, 5.3% in 2017F), commodity prices,
inflation rate, as well as the rupiah value against other countries.
48%
23%
14%
11%
4%
MNC Group
SCMA
VIVA
Trans group
Others
Media
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Daewoo Securities Research
Overview of the media industry
Private consumption is the backbone for advertisement demand
Private consumption is a crucial part of Indonesia’s economy
Indonesia’s 1Q16 GDP growth picked up 4.9% YoY. Although 1Q16 GDP growth is below the 2-
year average of c. 5.0% YoY growth, at the same time, we note that 1Q16 GDP print was higher
than the 4.7% YoY growth in 1Q15. Given private consumption is a key growth driver for the
broader economy (accounting for c. 55% of Indonesia’s economic output), we judge private
consumption growth to be an important economic indicator for growth.
We suspect consumers now have greater purchasing power following the sharp decline in
inflation (average CPI: 4.3% YoY in 1Q16 vs. 6.4% YoY in FY15). However, contrary to market
expectations, private consumption growth remained sluggish in 1Q16 (4.9% YoY). Despite fatter
pockets for consumption, we judge that mid-to-higher income households are hesitant to spend.
We attribute this conservative spending to escalating uncertainties related to the macroeconomic
environment.
Nevertheless, we forecast consumption growth to pick up in 2Q16. Our view largely embeds the
Ramadan effect, school holiday and Idul Fitri festive. Furthermore, low inflationary pressures and
potential fund flows into Indonesia from the tax amnesty program should add more momentum
to private consumption, in our opinion. We retain our view that economic growth is likely to hinge
on private consumption. However, we remain positive on the broader economic growth outlook
given 1) strong willingness from the government to pace up its spending initiatives, 2)
implementation of multiple economic packages to bolster the sagging economy and 3)
elimination of bureaucratic hurdles for investments. Yet, we still think the backbone of Indonesia's
economic growth stems from private consumption, evidenced by President Jokowi’s efforts to
enhance the purchasing power.
Figure 4. Sluggish consumption growth despite low CPI Figure 5. Population is relatively young
Source: BPS, Daewoo Securities Research
Source: BPS, Daewoo Securities Research
4.4%
4.5%
4.6%
4.7%
4.8%
4.9%
5.0%
5.1%
5.2%
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16
(YoY)
26%17%
age 25-54,
42% 8%
7%
age 0-14
age 15-24
age 25-54
age 55-64
age 65+
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Media advertisement is a proxy to consumption
We believe Indonesia’s long term growth remains intact, supported by our government’s actions
to boost public expenditure. In addition, young demographic profile (figure 5) and growing
population, higher education and improving infrastructure situation will collectively be key
catalysts for Indonesia’s long term economic outlook.
Given our positive long-term growth outlook for Indonesia, we firmly believe media companies
are likely to benefit as we expect increased demand for advertisement from various industries.
Media advertisement is an impersonal one way mass-communication related to products and/or
services which play an important role in enhancing sales and market share. Hence, we expect the
trend will continue to grow in tandem with consumption spending.
According to Media Partners Asia, Indonesia’s net advertising spending (including rate card
discounts and agency commission) will reach c. USD3,500mn in 2016F, where most of the
spending is expected to be allocated to TV and print media (figure 6). As >70% of advertising
spending is likely to be skewed towards TV, growing audiences for TV is the key determinant of TV
rate card.
Figure 6. Ad spend is focused on TV Figure 7. Free-to-air TV advertising
Source: Media Partners Asia, Daewoo Securities Research
Source: Media Partners Asia , Daewoo Securities Research
Low net Ad spend as % of GDP compared to other countries
Moreover, Indonesia’s net ad spend as a % of GDP is still relatively low compared to neighboring
countries at 0.2% in 2013 and the average price for 30 seconds prime-time spot is relatively cheap
(USD5,400/spot) compared to Australia (USD80,000/spot).
Figure 8. Net Ad spend as % of GDP (2013) Figure 9. Thirty seconds prime time spot
Source: Media Partners Asia, Daewoo Securities Research
Source: Media Partners Asia 2016, Daewoo Securities Research
80,000
5,400
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
USD/spot
0
500
1,000
1,500
2,000
2,500
3,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
USDmn
TV
Newspaper
Magazine
Online
Out-Of-Home advertising
Radio
0
500
1,000
1,500
2,000
2,500
3,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
(USDmn)
0.2%
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
0.7%
0.8%
0.9%
1.0%
Media
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Daewoo Securities Research
Prime time show on TV
TV operators are regulated under the Law number 32 of 2002 on Broadcasting (Law 32/2002)
dividing broadcasters into 1) public broadcasters, 2) private broadcasters, 3) community
broadcaster and 4) subscription-based broadcasters.
In the area of broadcasting, there are several provisions concerning the minimum requirement to
air local contents. For example, broadcast content of private and public TV broadcasters must
contain at least 60% of domestic programs. Therefore, Indonesian TV stations have set up in-
house production facilities to produce local contents. Popular programs which are aired on TV
stations are locally produced dramas which are aired during prime time.
Prime time in Indonesia is considered to be from 18:30 to 22:00. It is imperative for TV
broadcasters to air the most popular movie or the highest rated drama during prime time since it
lifts up the all-time audience shares. In addition, prime time shows are highly profitable since
clients take advantage of the prime time shows to advertise. MNCN’s top TV channel namely, RCTI,
generates around USD6,000 gross rate per episode. The price of an advertising slot is mostly
determined by the number of viewers, with upper ratings leading to higher rates.
Following the prime time hours, “adult” programs are allowed to be broadcasted. In addition,
there is also a midnight prime time during sahur (“pre-dawn meal” which refers to food consumed
early in the morning) during the month of Ramadhan. It usually takes place from 02:30 and end at
the Fajr prayer call which varies from 04:30 to 05:00 in the early morning.
Figure 10. Screen use during the day
Source: Millward Brown, Daewoo Securities Research
0%
5%
10%
15%
20%
25%
30%
35%
40%
6 am-9 am 9 am-12 noon 12 noon- 3 pm 3 pm -6 pm 6 pm- 9 pm 9 pm-12midnight
12 midnight - 6am
TV Laptop Smartphone Tablet
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Indonesian favorite prime time dramas
Indonesian people love local dramas which are aired by RCTI, ANTV (program name: Uttaran) and
SCTV. As we can see from the chart below (figure 11), RCTI and SCTV have strong negative
correlation in terms of audience share. We ascribe this to the popularization of TV programs which
affect Indonesian preference of which drama to watch. We see that the audience share of RCTI
and SCTV has widened since October 2015 due to the success of RCTI’s programs including Anak
Jalanan (which began showing on October 12, 2015) and Tukang Ojek Pengkolan (on April 12,
2015). On the other hand, SCTV was the all-time audience share winner in 2014 thanks to the
great performance of prime time drama namely, Ganteng-Ganteng Serigala, which grabbed the
highest audience shares from May to December 2014.
Figure 11. RCTI, SCTV and ANTV audience shares (%)
Source: Nielsen, Daewoo Securities Research
Figure 12. Anak Jalanan soap opera (RCTI) Figure 13. Mermaid in Love soap opera (SCTV)
Source: Internet, Daewoo Securities Research
Source: Internet, Daewoo Securities Research
0
5
10
15
20
25
30
35
SCTV
RCTI
ANTV
Media
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FMCG companies, especially cigarettes companies dominate the TV ad spend
According to Nielsen, cigarette companies such as Djarum (Not listed), HM Sampoerna
(HMSP/Hold/TP IDR4,260), Gudang Garam (GGRM/Buy/TP IDR81,200) are large spender of TV
advertising, with a total advertising value of IDR1,356bn, IDR1,228bn and IDR866bn, respectively,
as of FY2015. Second large spenders are Indomie, Traveloka, Tokopedia and Unilever products.
Figure 14. Top brands TV advertising spending (as of FY15)
Source: Nielsen, Company data, Daewoo Securities Research
IDR1,356bn
IDR225bn
IDR1,228bn IDR212bn
IDR866bn IDR592bn
IDR569bn
IDR938bn
IDR311bn
IDR685bn
IDR276bn
IDR431bn
IDR65bn IDR276bn
IDR467bn
IDR229bn
IDR460bn
IDR324bn
IDR254bn IDR407bn
IDR233bn
IDR367bn
IDR232bn
Media
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Daewoo Securities Research
Figure 15. Brands that do advertisement on TV
Source: Nielsen, Company data, Daewoo Securities Research
Given our expectations for improving economy this year, we expect higher advertising expenses
from FMCG companies in 2016. Indeed, we have witnessed higher ad spend in 1Q16. According to
Nielsen Indonesia, total ad spend growth jumped 33% YoY in 1Q16 reaching IDR31.5tr (77% of
total ad spend allocated to TV worth IDR24.2tr).
Media
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Daewoo Securities Research
TV companies’ biggest revenue comes from PT.Wira Pamungkas Pariwara
Revenues from customers which individually represent more than 10% of the total revenue largely
come from PT. Wira Pamungkas Pariwara (Not listed). PT Wira Pamungkas Pariwara is a local
subsidiary of Young & Rubicam Advertising which is one of the world’s largest consumer
advertising agencies. Young & Rubicam Advertising ranks as the world's 10th largest advertising
agency. The company is a subsidiary of WPP plc (Wire and Plastic Products) which is a British
multinational advertising and public relations company with its main office in London and its
executive office in Dublin. WPP plc is the world's largest advertising company by revenues and has
c. 3,000 offices across 112 countries with 190,000 employees. Both MNCN and SCMA generate
revenue mostly from PT Wira Pamungkas Pariwara. In FY15, MNCN received IDR1.65tr from WPP,
representing 25.64% of total revenues, while SCMA received IDR1.28tr or 30.38% of total revenue.
Figure 16. % of revenue that comes from PT. Wira Pamungkas Pariwara
Source: Company data, Daewoo Securities Research
We consider media companies to be key beneficiaries of rising competition between FMCG
companies. Large cap FMCG names such as Gudang Garam (GGRM/Buy/TP IDR81,200), HM
Sampoerna (HMSP/Hold/TP IDR4,260) and Unilever Indonesia (UNVR/Buy/TP IDR52,000) have
begun to normalize their advertising spending since 2015, after being cost sensitive during the
presidential election year (2014). In particular, Indofood CBP Sukses Makmur (ICBP/Buy/TP
IDR9,200) and HMSP’s ad spending has demonstrated tremendous growth. ICBP’s advertisement
spending grew by 24% CAGR during 2011-2015 (figure 18), HMSP increased by 23% CAGR during
the same time frame (figure 19) – which were higher compared to that of GGRM at 6% CAGR
(figure 20) and UNVR’s 6% CAGR (figure 17). Furthermore, financial data from ICBP, GGRM, HMSP
further supports the appealing media outlook as their A&P spend per total sales is growing (see
figure 21).
Figure 17. UNVR advertising and promotion spending Figure 18. ICBP advertising and promotion spending
Source: Company data, Daewoo Securities Research
Source: Company data, Daewoo Securities Research
35% 34%
25%
30%
25%26%
23%
26%
0%
5%
10%
15%
20%
25%
30%
35%
40%
2012 2013 2014 2015
SCMA
MNCN
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2011 2012 2013 2014 2015
6% CAGR (2011-2015F)
(IDRbn)
0
100
200
300
400
500
600
700
800
900
1,000
2011 2012 2013 2014 2015
24% CAGR (2011-2015)
(IDRbn)
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Figure 19. HMSP advertising and promotion spending Figure 20. GGRM advertising and promotion spending
Source: Company data, Daewoo Securities Research
Source: Company data, Daewoo Securities Research
Figure 21. GGRM, ICBP and HMSP A&P spend per sales (%)
Source: Company data, Daewoo Securities Research
On the other hand, we see that UNVR’s advertisement spending has been gradually transferred to
direct promotions (see figure 22).
Figure 22. UNVR promotion spending Figure 23. UNVR’s ad vs promotion to total A&P Spending
Source: Company data, Daewoo Securities Research
Source: Company data, Daewoo Securities Research
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2011 2012 2013 2014 2015
6% CAGR (2011-2015)
(IDRbn)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2011 2012 2013 2014 2015
23% CAGR (2011-2015)
(IDRbn)
2.6%
2.9%
3.4% 3.3%
3.7% 4.0%
2.4% 2.4%
2.1%
3.1%3.2%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
2011 2012 2013 2014 2015
GGRM ICBP HMSP
78% 80% 76% 74% 70%
22% 20% 24% 26% 30%
0%
20%
40%
60%
80%
100%
120%
2011 2012 2013 2014 2015
Promotion Advertising
0
200
400
600
800
1,000
1,200
1,400
2011 2012 2013 2014 2015
(IDRbn)
Media
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Daewoo Securities Research
Ad supply: Limited for TV, yet huge potential for online advertisement
Free-to-air dominates TV ad
TV advertising – the main channel to reach both mass market and premium segments – is mostly
dominated by free-to-air TV rather than subscriber-based TV (figure 12). Free-to-air TV
advertisement market is expected to dominate more than 65% of the total ad market by 2019F,
whereby print media will have around 20% and online of c. 11% (see figure 25).
Figure 24. Free to Air TV dominates the TV ad spend Figure 25. The pie of advertising spending in 2019F
Source: Media Partners Asia, Daewoo Securities Research
Source: Media Partners Asia , Daewoo Securities Research
Limited supply for TV advertisement: Indonesia has only 11 FTA TV stations
In the past, there was only 1 state-owned TV channel, namely, TVRI which dominated the market
for over 25 years. This changed when the government allowed Rajawali Citra Televisi Indonesia
(RCTI) – a privately owned TV operator – to broadcast. However, when RCTI was introduced to the
market, viewers with satellite dish and a decoder were able to receive and watch the programs.
Began operating in 1989, RCTI is the first commercial TV station in Indonesia with a nationwide
coverage.
Currently, there are 11 private channels with nationwide coverage, such as Indosiar, SCTV, Global
TV (which initially offered programs from MTV Indonesia), MNC TV (formerly known as TPI), RCTI,
TV One, ANTV, Trans7, Trans TV, Metro TV and iNews TV.
While prime time slots in the private free-to-air TV are limited, there is growing demand for
advertisement. Given c. 65% of total advertisement is allocated to TV, while there are only 11 TV
channels available, we believe the potential for growth is huge and attractive. Moreover, since the
enactment of UU Penyiaran No. 32/2002 (Broadcasting Act No. 32/2002) TV operators what have
nationwide coverage must be affiliated with the local TV stations. We consider this regulation to
be positive given it creates a natural barrier to new local TV entrants.
0
500
1,000
1,500
2,000
2,500
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
USDmn
FTA
Pay Tv
Online/ mobile, 11%
Magazines, 2%
Newspapers, 18%
Out-Of-Home advertising,
2%
Radio, 1%
TV, 66%
Media
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Daewoo Securities Research
Figure 26. Prime time all demography (Free-to-air TV market share)
Source: Nielsen, Daewoo Securities Research
Broadcasting Act No. 32/2002
The Indonesian Broadcasting Commission (Komisi Penyiaran Indonesia or KPI) – an independent
body whose responsibility is to regulate and provide recommendations in the area of
broadcasting – was established under the Law 32/2002. It also recognizes broadcasting as a
subject to government regulation and a matter of public interest. In other words, private
broadcasting institutions (Lembaga Penyiaran Swasta or LPS) are commercial broadcasters in the
form of a limited liability company (Perseroan Terbatas or PT) where they are able to engage in
radio or television broadcasting services under the broadcasting license.
Regulation under the Minister of Communication and Information (MoCI) of the Republic of
Indonesia No.28 year 2008 (MoCI 28/2008) – which is the regulatory framework of the
Broadcasting Act 32/2002 – stipulates the provisions concerning the requirements to establishing
a private broadcasting company and the licenses required.
MoCI 28/2008 states that private broadcasting institutions shall obtain the Broadcasting License
(IPP) in order to conduct broadcasting activities. The Minister shall issue a Broadcasting Operation
License to the private broadcasting institutions after obtaining the recommendation from the
broadcasting evaluation team. The Broadcasting Operation License for radio shall be granted for 5
(five) years and 10 (ten) years for television broadcasting, while both licenses are extendable.
Indonesian government limits the number of broadcasting licenses due to inadequate frequency.
Therefore, we think this creates a natural barrier to entry for new local TV stations.
Currently, the Indonesian Broadcasting Commission (KPI) states that all 10 privately owned FTA TV
stations – Media Nusantara Citra’s (MNCN) RCTI, MNC TV and Global TV, Surya Citra Media’s
(SCMA) SCTV and Indosiar, Visi Media Asia’s (VIVA) ANTV and TV One, Trans Group’s Trans TV
and Trans 7, and Metro TV – are subject to the renewal process once their licenses expire (e.g.,
MNCN is expected to renew its license on October 2016). The KPI is currently conducting a factual
verification of the administrative, content and technical requirements of the 10 individual TV
stations.
We believe the licenses can be extended for another 10-year period if it is renewed by the KPI and
the Minister of Communications and Information (MoCI). We believe, MNCN and SCMA should be
able to get the approval for renewal for their TV stations without any major issues.
48%
23%
14%
11%
4%
MNC Group
SCMA
VIVA
Trans group
Others
Media
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Daewoo Securities Research
Biggest media TV competitor: Online advertisement
Daytime screen use- Smartphone is the highest media screen used by Indonesian
According to Milward Brown research, Indonesian people spend nine hours or 540 minutes in
front of their screens (Television, laptop, smartphone, tablet, etc) each day. This is the highest view
time compared to peer countries (see figure 31) with smartphone being the most viewed screen
by Indonesian people (figure 27). Therefore, we think, over the next few years (albeit slow), a
gradual shift towards digital-based advertisement will take place, given the number of
smartphone users are increasing and mobile advertisements are getting more popular. While TV is
where most companies spend for advertisement, ironically, smartphone is the most widely used
device by Indonesians. Having said that, we judge TV broadcasters will eventually need to adapt
to the changing environment.
Figure 27. % of hours people spent on media (hours)
Source: Milward Brown research ,Daewoo Securities Research
Figure 28. Example of digital advertising on Youtube
Source: Internet, Daewoo Securities Research
24%
22%34%
20% TV
Laptop
Smartphone
Tablet
Media
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Daewoo Securities Research
However, the digital advertisement needs strong internet connection…
Indonesian internet penetration still remains low at c. 20.4%, and it is worth noting that the fourth
largest nation in the world (with population of more than 250mn). It is also the largest archipelago
in the world consisting five major islands that stretch from Sabang to Merauke. Given the natural
characteristics of Indonesia, we believe it is more convenient and effective for companies to
advertise their products through Television as it has wide coverage.
Figure 29. Indonesia large archipelago Figure 30. Indonesia is the fourth largest country
Source: Internet, Daewoo Securities Research
Source: Wikipedia, Daewoo Securities Research
Figure 31. Average daily screen use (hours) Figure 32. Indonesian internet users
Source: Millward Brown, Daewoo Securities Research
Source: Internet live stat, Daewoo Securities Research
0
200
400
600
800
1,000
1,200
1,400
1,600
mn pax
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
Indo
nesia
Ph
ilipp
ines
Ch
ina
Bra
zil
Vie
tna
mU
SA
Nig
eri
aC
olo
mbia
Th
aila
nd
Saudi
So
uth
Afr
ica
Szech
Ru
ssia
Arg
en
tina
UK
Ke
nya
Au
str
alia
Sp
ain
Tu
rke
yM
exic
oIn
dia
Po
lan
dS
outh
Ko
rea
Ge
rma
ny
Ca
nad
aS
lova
kia
Hu
nga
ryJap
an
Fra
nce
Italy
hours
6.9%
10.9%
12.3%
14.5%14.9%
17.1%
19.4%20.4%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
0
10
20
30
40
50
60
2009 2010 2011 2012 2013 2014 2015F 2016F
(mn pax)
Internet users (L)
Penetration (R)
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Surya Citra Media (SCMA IJ)
Grist to the mill
Surya Citra Media in brief
The company was first established under the name PT Cipta Aneka Selaras in 1999. The
company changed its name into PT Surya Citra Media (SCMA) in 2001. In 2002, the
company acquired 99.9% of shares of PT Surya Citra Televisi (SCTV) and then listed the
shares on the exchange with a ticker code, SCMA. In 2013, SCMA and IDKM merged
together to become the current SCMA.
Highest EBITDA margin compared to peers
SCMA has the highest EBITDA margin compared to peers. We believe its high margin is
supported by Indosiar’s prudency in replacing some of its expensive drama during prime
time with in-house produced talent, variety and entertainment shows. In-house production
shows bear significantly low cost base. Moreover, for SCTV’s locally produced dramas, 90%
of contents are produced in-house which is created under Screenplay production house (51%
owned by SCMA) which was bought from PT Elang Mahkota Teknologi, Tbk (EMTK) for
IDR242.25bn, and also PT Amanah Surga which is owned through PT IEG (IEG owns 70% of
the outstanding shares).
SCTV’s audience share started to recover
SCMA has launched several new dramas to fill in their prime time slots, such as Mermaid in
Love (began airing on May 2, 2016) and Surga yang ke 2 (started airing on April 18, 2016),
in an attempt to increase its audience shares. We expect the company to be successful in its
new drama releases, evidenced by its improvement in audience share in May 2016.
Initiate with a Trading Buy (TP: IDR3,870)
We initiate our coverage on SCMA with an overweight recommendation and present a
blended target price of IDR3,870, implying a 34.7x P/E to our 2016F EPS estimates. We think
the premium valuation on SCMA is justified, given SCMA has strong track record and
strong balance sheet. Our target price of IDR3,870 was derived by using a blended
calculation of target P/E of 35x and Discounted Cash Flow (DCF) method with 10-year time
span.
We like SCMA on the back of its 1) low gearing and high free cash flow (FCF), 2) high ROE,
preferably above market average, and 3) high EBITDA margin.
Media
(Initiate) Trading Buy
Target Price (12M, IDR) 3,870
Share Price (7/28/16, IDR) 3,300
Expected Return 17.2%
OP (16F, IDRbn) 2,191
Consensus OP (16F, IDRbn) 2,226
EPS Growth (16F, %) 6.7
Market EPS Growth (16F, %) 9.6
P/E (16F, x) 29.6
Market P/E (16F, x) 28.9
JCI (7/28/2016) 5,299.2
Market Cap (IDRbn) 48,251.3
Shares Outstanding (mn) 14,621.6
Free Float (%) 39.8
Foreign Ownership (%) 6.56
Beta (5Y) 0.90
52-Week Low (IDR) 2,285
52-Week High (IDR) 3,550
(%) 1M 6M 12M
Absolute 2.17 13.4 14.58
Relative -6.37 1.44 2.19
FY (Dec.) 12/13 12/14 12/15 12/16F 12/17F
Revenue (IDRbn) 3,695 4,075 4,238 4,663 5,417
Gross profit (IDRbn) 2,313 2,591 2,712 2,951 3,428
Operating profit (IDRbn) 1,759 1,928 2,015 2,191 2,545
NP (IDRbn) 1,286 1,458 1,522 1,630 1,934
EPS (IDR) 88 100 104 111 132
BPS (IDR) 186.41 236.34 215.19 254.04 308.72
P/E (x) 37.5 33.1 31.7 29.6 25.0
ROE (%) 48.6% 47.2% 46.1% 47.5% 47.0%
ROA (%) 32.9% 33.2% 32.7% 32.4% 32.4%
Note: NP refers to net profit attributable to controlling interests
Source: Company data, Daewoo Securities Indonesia Research estimates
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Surya Citra Media
Company Background
The company was first established under the name PT Cipta Aneka Selaras in 1999. The company
changed its name into PT Surya Citra Media (SCMA) in 2001. In 2002, the company acquired 99.9%
of shares of PT Surya Citra Televisi (SCTV) and then listed the shares on the exchange with a ticker
code, SCMA. In 2010, SCMA established PT Surya Citra Pesona which engages in the field of
television broadcasting service with the coverage area in Gorontalo.
As of 2012, the board of directors of SCMA and PT Indosiar Karya Mandiri Tbk (previous ticker
code: IDKM) reviewed the potential synergies that might be achievable through merging the two
entities. SCMA and IDKM are both controlled by Elang Mahkota Teknologi (Ticker code: EMTK).
Hence, in 2013, SCMA and IDKM merged together to become the current SCMA.
Figure 33. Company’s shareholding structure (2015)
Source: Company data, Daewoo Securities Indonesia
Eddy Kusnadi Sariatmadja
18.37%
PT Elang Mahkota Teknologi Tbk
61.80% Ir Sutanto Suwarto
10.52%
PT Adikarsa Sarana
15.05%
Piet Yaury
8.85%
The Northern Trust Company
S/A Archipelago Investment Pte Ltd
Public 8.07%
38.20%
ING Bank NV SG Branch
S/A PT Prima Visualindo
5.94%
Standard Chartered Bank SG PVB Clients
7.84%
Public
25.36%
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Figure 34. SCMA’s business line structure (2015)
Source: Company data, Daewoo Securities Indonesia
PT Surya Citra Televisi
Broadcasting PT Indosiar Visual Mandiri
PT Bangka Tele Vision
PT Surya Citra Pesona
PT Screenplay Produksi
PT Indonesia Entertainmen
Group
PT Indonesia
Entertainmen Studio
PT Indonesia
Entertainmen
Production
Content
PT Amanah Surga
Produksi
PT Animasi Kartun
Indonesia
Supporting
and others PT Screenplay
Sinema Film
PT Surya Trioptima Multikreasi
PT Surya Citra Gelora
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PT Indonesia Entertainment Group
PT Indonesia Entertainmen Group (IEG) was set up in July 2015 to recognize the content
businesses of SCM and Emtek in order to 1) consolidate content resources and capabilities to
expand production and maximize utilization and efficiency, 2) create contents business that can
service multiple media distribution platforms, and 3) create new revenues which can provide
diversification from FTA TV revenues.
Figure 35. IEC’s business line of structure (2015)
Source: Company data, Daewoo Securities Indonesia
51% PT Screenplay Produksi
72% 70%
PT Amanah Surga Productions
50.10%
PT Animasi Kartun Indonesia
PT Indonesia Entertainmen grup
(IEG)
99.90% PT. Indonesia Entertainmen Produksi
PT Elang Mahkota Teknologi Tbk
28%
99.90% PT Indonesia Entertainmen Studio
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Management team
Board of Commissioners
President Commissioner (Independent): Raden Soeyono
Mr Raden Soeyono was born in 1943 in Malang, East Java. He has been serving as the President
Commissioner of the Company since 2005. His academic background includes the National
Military Academy in Magelang in 1965 and the National Defense Agency regular course class XXII.
He obtained his Bachelor’s Degree in Economics from Universitas Terbuka. His career path ranged
from Aide de Camp to President Soeharto, Vice Assistant of Security to the Head Staff of Military,
Vice Commander to the Centre of Infantry Arms, Commander of Regional Military IV/ Diponegoro,
Head of Staff of the Armed Forces, Secretary to the Bureau of Aid Coordination to National
Stability, and Secretary General of the Defense and Security Department.
Vice President Commissioner: Suryani Zaini
Mrs Suryani Zaini is an Indonesian citizen who was born in 1962 in Jambi. She graduated from the
Department of Economic Laws and Notarial Program of the University of Indonesia. In 2011, she
joined PT Indosiar Karya Media (IDKM) and held the position of President Commissioner and
Independent Commissioner of IDKM and Indosiar. She has been the Company’s Vice President
Commissioner and Independent Commissioner since April 2013. Aside from holding the position
of Vice President Commissioner, she actively participated in various social and educational
programs in the community.
Independent Commissioner: Glenn M Surya Yusuf
Mr Glenn M Surya Yusuf is an Indonesian citizen who was born in 1955 in Jakarta. He obtained his
Bachelor of Arts Degree in Economics from University of the Philippines, Manila, the Philippines,
and a Master’s Degree in Business from the Asian Institute of Management, Makati, Philippines.
He commenced as the Company’s Independent Commissioner since May 24, 2012. In addition, he
is also chairman of the Audit Committee since October 2012. He has had important roles as the
President Director and Director in several companies in Indonesia since 1991. Currently, his title
includes Non-Executive Independent Director of CIMB Group Holdings Berhad, in Malaysia, since
2010, and Vice President Commissioner of PT Bank CIMB Niaga Tbk. Several governmental roles
previously assumed includes: Chairman of the Assistance Team to the Minister of Finance for the
Financial Sector Restructuring during the period of October 2001 - October 2002, Chairman of the
Indonesian Bank Restructuring Agency (IBRA) for the period of June 1998- January 2000, and
Director General for Finance Institutions, Ministry of Finance for the period of April-June 1998.
Commissioner: Alvin W. Sariaatmadja
Mr Alvin W Sariaatmadja is an Indonesian citizen who was born in 1983 in Sydney, Australia. He
graduated from University of New South Wales, Australia, with a bachelor’s degree in law and
finance. He has been serving as the Company’s Commissioner since 2015. Previously, he served as
a Director of the Company from 2013 to 2015. Previously, he served as a Director of PT Indosiar
Karya Media Tbk and PT Indosiar Visual Mandiri from 2011 to 2013.
Commissioner: Jay Geoffrey Wacher
Mr Jay Geoffrey Wacher is an Australian citizen, born on September 16, 1967. He was appointed as
Commissioner since April 2013. He has over 26 years’ experience in finance, private equity,
mergers and acquisitions, direct investment, business development and strategy. He is also a
Commissioner of PT Elang Mahkota Teknologi Tbk (EMTK IJ), Plan B Media Public Co. Ltd
(Thailand) and Property Guru Pte Ltd (Singapore). Previously, he served as a Financial Director of
PT PP London Sumatra Indonesia Tbk from 2004 to 2007 and Investment Director of Carnegie
Wylie & Company, Sydney, Australia, from 2000 to 2006. He held various other corporate finance
and investment roles in Australia from 1993 to 2000 and started his career as a Lawyer of Blake
Dawson Waldron, Sydney, Australia, from 1992 to 1993. He completed his studies at the University
of New South Wales, Sydney, Australia in 1991, earning a Bachelor of Law and Commerce degree
as well as becoming an Associate of the Australia Securities Institute in 1996.
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Directors
President Director: Sutanto Hartono
Mr Sutanto Hartono was born in 1967 in Yogyakarta. He was appointed as the Company’s
President Director in 2013. Prior to his appointment, from 2011 to 2013 he served as the President
Director of SCTV, a role for which he was re-appointed in 2015. Previously, he was the Country
General Manager/President Director of PT Microsoft Indonesia and the CEO of Rajawali Citr
Televisi (RCTI) since 2008. He served as a Managing Director since 2003 and, at the same time, the
Director of Media Nusantara Citra (MNC). Prior to this, Sutanto started his career in Sony Music
Entertainment as the Senior Vice President to the South East Asia Divis ion, and a Senior Associate
at Booz Allen & Hamilton, Southeast Asia.
He obtained his Bachelor’s Degree in Chemical Engineering from the University of Notre Dame,
Indiana, and obtained his Master of Business Administration Degree from University of California,
Berkeley, US.
Director: Harsiwi Achmad
Mrs Harsiwi Achmad was born in 1966 in Karanganyar, Central Java. She was the best graduate of
Gadjah Mada University in 1990, and in 1992, she secured a scholarship from AIDAB Australia to
study for a Master’s Degree at Monash University.
Mrs Harsiwi Achmad has been serving as the Company’s Director since 2013. Previously, she held
the position of Programming Director of PT Surya Citra Televisi (SCTV) in 2010-2013, Director at PT
Rajawali Citra Televisi (RCTI) in 2006-2010 and General Manager of PT CTPI in 2004-2005. She
started her career in SCTV in various positions in programming division in 1997-2004.
Director: Imam Sudjarwo
Mr Imam Sudjarwo was born in 1955 in Kendal, Central Java. He has been serving as the
Company’s Director since 2015. Previously, he served as the President Director of PT Indosiar
Visual Mandiri in 2014. In December 2013, he held the position of Inspector of General
Supervision in the National Police (Inspektur Pengawasan Umum Polri), previously he was the
Head of Security Intelligence of the National Police (Kepala Badan Intelijen Keamanan Polri), Head
of National Police Security (Badan Pemeliharaan Keamanan Polri – Kabaharkam Polri), Head of
National Police Educational Institution (Lembaga Pendidikan Polri ), Head of Mobile Brigade Corps
of National Police (Kepala Korps Brimob Polri) and Chief of Regional Police of Bangka Belitung
Islands. He obtained his Bachelor’s Degree from Perguruan Tinggi Ilmu Kepolisian (PTIK) and his
Master of Science Degree from the University of Indonesia.
Director: Rusmiyati Djajaseputra
Mrs Rusmiyati Djajaseputra was born in 1978 in Jakarta. She has been serving as the Company’s
Director since 2015. Previously, she served as the Finance Director of PT Surya Citra Televisi (SCTV)
and PT Indosiar Visual Mandiri (Indosiar). She started her career as an auditor at Public Accounting
Firm of Prasetio Utomo & Co in 2000, before joining Public Accounting Firm of Prasetio, Sarwoko
& Sandjaja (Ernst & Young) in 2002. In 2005, she continued her career at Public Accounting Firm of
Haryanto Sahari & Rekan (PricewaterhouseCoopers). In 2006, she continued her career at PT
Johnson Home Hygiene Products (member of SC Johnson Group). She graduated from
Tarumanagara University with a Bachelor’s Degree in Accounting and owned CPA Indonesia
certificate.
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Famous TV shows/drama currently played on SCTV
Super Puber: Indonesian locally made drama that tells a story about Joned, an 8th
grade teenager
who is in his puberty.
D’Hijabers: Indonesian locally produced drama that tells a story about Kantini, a solehah Muslim
woman who is always terrorized by her mother to get married but always avoids her whenever the
question came. This drama airs every day at 18.00.
Romeo and Juminten: Indonesian locally made drama that tells a love story of Romeo and
Juminten who happens to know each other from their parents’ relationship. This drama airs
Monday to Friday at 19:00.
Mermaid in love: Indonesian locally produced drama that tells a story about two mermaids who
fell in love after meeting two handsome guys at the beach. The program airs every Monday-
Friday at 20:15.
Surga yang ke 2 (or ‘The second paradise’ in English): Indonesian drama that tells a story about
three comrades who are trapped in a love triangle, airs every day at 21:15.
Figure 36. D’Hijabers Figure 37. Mermaid in love
Source: Internet, Daewoo Securities Research
Source: Internet, Daewoo Securities Research
Figure 38. SCTV’s audience share began to rebound due to Mermaid in Love
Source: Nielsen, Daewoo Securities Research
0
5
10
15
20
25
30
35
1/15 2/15 3/15 4/15 5/15 6/15 7/15 8/15 9/15 10/15 11/15 12/15 1/16 2/16 3/16 4/16 5/16 6/16
SCTV RCTI IVM TPI/ MNCTV TRANS7 GTV ANTV(%)
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Famous TV shows/drama that is currently playing on Indosiar
SCMA has changed its strategy in the prime time program by moving out of drama series and into
variety and entertainment shows. SCMA’s audience share improved after the D’Academy- a reality
show or the first largest dangdut singer talent show in Indonesia. This event first began on
Monday, February 3, 2014 for the first season. The second season started on February 8, 2015,
which was followed by the third season which aired on January 24, 2016. In addition, Indosiar also
launched D’Academy Asia which was aired in November and December of 2015, bringing together
contestants from Singapore, Malaysia, Brunei and Indonesia. D’Academy was nominated by
Panasonic Gobal Awards for Talent and Best Reality Show in 2015. Indosiar ranked first spot in
prime time in Feb-May 2015, bringing its audience share as number 2 in 2015’s prime time.
Figure 39. SCMA GPM always peak in 2nd
quarter due to Indosiar’s great seasonality
performance
Source: Company data, Daewoo Securities Research
Going forward, we believe that due to its strong performance in talent shows, Indosiar will be able
to gain higher margins since its talent shows are studio based which do not require higher
programing costs (e.g., hiring actors/actresses and filming outside of the studio). We also
highlight that Indosiar achieved 67.8% of gross margins in 1Q16 compared to SCTV’s 57.0%.
Figure 40. Indosiar’s audience share peaked on April 2015 due to D’Academy
Source: Nielsen, Daewoo Securities Research
18.920.5
21.9
18.1
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
SCTV
RCTI
Indosiar
60.7%
70.9%
57.9%
62.9%
59.5%
65.8%
61.8%
68.1%
63.8%
50.0%
55.0%
60.0%
65.0%
70.0%
75.0%
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16
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SCMA investment in iflix
SCMA has investments in iflix amounting to IDR98.6bn in 1Q16, which is SCMA’s first technology
related investment.
iflix is Southeast Asia’s version of Netflix, which is Southeast Asia’s leading Internet TV service or a
subscription video on demand (SVOD) platform based in Kuala Lumpur. The company owns library
of the world’s top TV shows and movies in the region, with over tens of thousands of hours of
popular comedies, drama, K-drama and cartoons plus movies from Hollywood, UK, Asia and more.
iflix was founded by Patrick Grove (CEO of Malaysia based Catcha Group), Mark Britt and Evolution
Media Capital (EMC), a merchant bank focused on the media, sports, and entertainment industries.
iflix (available in Malaysia, Thailand, and the Philippines) will use the funds for expansion into new
markets on the back of strong demand for the service. Rupert Murdoch’s, European broadcaster
Sky has also invested USD45mn into iflix.
We believe SCMA’s investment into iflix is positive for SCMA as the company can monetize its
content library which is produced under IEG. Moreover, this investment should benefit SCMA in
the longer term on the back of Indonesia’s expansive internet penetration.
We also think that this SVOD (subscription video on demand) business is very attractive, as people
can be more flexible in downloading movies instead of following the given movie schedules. If we
benchmark the service to Netflix users in the United States, there were several reasons why Netflix
subscribers in the USA subscribed to Netflix (as of January 2015). According to our findings, 82%
of respondents signed up for Netlfix due to the convenience of on-demand streaming, 67% said it
was cost effective, and around 23% said they subscribed to watch Netflix’s original programs.
Having said that, we believe the prospect of SVOD business is bright for Indonesia. The digital
subscription video-on-demand viewer penetration in the U.S. is expected to grow from 23.5
percent in 2015 to 30.1 percent in 2020. Rentals or subscription-based services (SVoD) such as
Netflix, Hulu and Amazon Prime Instant Video are expected to account for 30 percent of this total,
with forecasted revenue of around USD15bn by 2020. About half of this total revenue is projected
to be generated in the US, one of the biggest SVoD markets in the world.
Figure 41. iflix layout Figure 42. SVoD penetration in USA
Source: Internet, Daewoo Securities Research
Source: Statista, Daewoo Securities Research
30%
15%
17%
19%
21%
23%
25%
27%
29%
31%
2014 2015 2016 2017 2018 2019 2020
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Analyzing the Sports content
SCMA aired the Champions League for the last three seasons (usual schedule: August to May)
from 2012~ 2013 season, 2013~ 2014 season and 2014~ 2015 season, after it bought the rights
from Orange TV for a limited Free-to-Air rights (limited meaning only 3 matches per weekend).
Moreover, SCMA also aired the Barclays Premier League (also called Premier League and English
Premier League) in 2013~ 2014, 2014~ 2015, and 2015~ 2016 seasons (usual schedule: August to
May). Currently, the contract has been expired.
Observing SCMA’s historical gross profit margin during 2013~ 2015, we notice that the trough of
the cycle was at 4Q13. We suspect that the decline was mainly due to the introduction of more
soccer programs that include the Barclays Premier League (BPL) since 3Q13, whereby the expenses
were USD-denominated and thus was negatively impacted by a weaker rupiah. SCMA’s gross
profit margin recovered to 68.1% in 4Q15 due to the expiry of the Champions League Football
contract in June 2015.
SCMA is looking to buy BPL (Barclays Premier League) from BEIN (Aljazeera Qatar news channel),
however, SCMA is mulling at the price tag, which we suspect is quite expensive (and denominated
in USD). Furthermore, the matches are usually aired after midnight.
Figure 43. SCMA historical GPM
Source: Company data, Daewoo Securities Research
Currently, both SCTV and Indosiar take turns to air the Indonesian Torabika Soccer Championship
(rupiah denominated expense), which began since April 29, 2016 (it has 2 matches every Friday,
Saturday and Sunday).
Post the suspension of the Indonesian Super Leagued (ISL) by Minister for Youth and Sports
Affairs, Imam Nahrawi, on April 17, 2015, FIFA then froze the membership of the PSSI, resulting in
the suspension of the Indonesian Football Association. The 2015~ 2016 season of the Indonesia
Super League (ISL) was originally scheduled to begin from October 25, 2015 and end in August
2016. However, various constraints have thwarted the plan, including the use of the name
‘Indonesia Super League’ which was the property of PSSI. Finally PT Liga and Indonesian football
clubs agreed not to use the ISL name for the upcoming long-term tournament.
The Indonesia Soccer Championship or more widely known as Torabika Soccer Championship
(which is a professional soccer competition in Indonesia) replaced the temporarily-suspended
Indonesia Super League (ISL). As such, we are projecting flat number of GPM throughout the
coming years. Over the past 2~ 3 years, there has been no domestic league (Indonesia Super
League - ISL) aired by SCMA. SCMA hopes that there will be another next year, once PSSI is
reformed and FIFA once again accredits Indonesian soccer (currently banned by FIFA). Under such
conditions, we see the likelihood of SCMA bidding for the deal.
51.5%
57.9%
68.1%
50.0%
55.0%
60.0%
65.0%
70.0%
75.0%
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16
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Figure 44. Torabika Soccer Championship 2016
Source: Internet, Daewoo Securities Research
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Investment thesis on SCMA
Highest EBITDA margin compared to peers
SCMA has the highest EBITDA margin compared to peers. We believe its high margin is supported
by Indosiar’s prudency in replacing some of its expensive drama during prime time with in-house
produced talent, variety and entertainment shows. In-house production shows bear significantly
low cost base. Moreover, for SCTV’s locally produced dramas, 90% of contents are produced in-
house which is created under Screenplay production house (51% owned by SCMA) which was
bought from PT Elang Mahkota Teknologi, Tbk (EMTK) for IDR242.25bn, and also PT Amanah
Surga which is owned through PT IEG (IEG owns 70% of the outstanding shares).
Figure 45. EBITDA margin (as of 1Q16)
Source: Company data, Daewoo Securities Research
Through SCMA’s in-house production joint venture, SCTV has been able to produce some of the
great high-rating drama series, for instance, Ganteng- Ganteng Serigala which was the top ranking
show back in 2014. We believe Screenplay has been supporting SCMA’s great performance given
much lower cost and good quality dramas. Screenplay and Amanah Surga (for SCTV) film on
location, while PT IEP (99% owned by IEG) and PT IES (90% owned by IEG) film inside studios (for
Indosiar).
Consistently pay large dividend amount
SCMA has maintained its high dividend payout ratio (an average of 87% in the past 3 years), which
enables the company to sustain its top-notch ROE (average of 47% through the years). We model
in a dividend payout ratio of 70% going forward as we believe SCMA 1) has solid balance sheet
(net cash position), 2) is consistently generating positive operating cash flow of above IDR1tr, and
3) has moderately low capital expenditure (c. 5% of revenue).
0%
10%
20%
30%
40%
50%
60%
TV18 IN ABS PM BMTR IJ ENIL IN MNCN IJ BEC TB SCMA IJ
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Figure 46. SCMA has the highest ROE among peers
Source: Company data, Daewoo Securities Research
SCTV’s audience share started to recover
SCMA has launched several new dramas to fill in their prime time slots, such as Mermaid in Love
(began airing on May 2, 2016) and Surga yang ke 2 (started airing on April 18, 2016), in an
attempt to increase its audience shares. We expect the company to be successful in its new drama
releases, evidenced by its improvement in audience share in May 2016.
Figure 47. SCTV’s audience share started to improve since May 2016
Source: Company data, Daewoo Securities Research
-5
0
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15
20
25
30
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40
45
50
SXL AU 511 HK 2008 HK 4676 JP 9409 JP TV18 IN 037560 KS 9404 JP 9413 JP 000665 CH ABS PM SKT NZ ENIL IN MNCN IJ 053210 KS MDIA IJ BEC TB SCMA IJ
7
8
9
10
11
12
13
14
15
Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16
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SCMA’s revenue gap is narrowing with MNCN
We like SCMA due to its solid balance sheet (large cash, better capex utilization) and better
monetization of its audience shares, as seen from the stable growing revenue that it has
generated over the past years even when its audience shares were not at the top (see figure 49
and figure 50). In 1Q16, SCMA was able to grow its revenue by 13% vs MNCN of a mere 1.6%,
which has caused the revenue gap to narrow.
Figure 48. MNCN revenue vs SCMA revenue
Source: Company data, Daewoo Securities Research
Figure 49. SCMA vs MNCN revenue growth (year on year)
Source: Company data, Daewoo Securities Research
37.1%
43.9%
30%
40%
50%
60%
70%
80%
90%
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16
MNCN
SCMA
MNCN %premium toSCMA
(IDRbn)
-5%
0%
5%
10%
15%
20%
25%
30%
Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015 Q3 2015 Q1 2016
SCMA MNCN
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Figure 50. SCTV vs RCTI prime time audience share
Source: Company data, Daewoo Securities Research
Better working capital management
We believe SCMA has higher turnover since SCMA’s days of inventory in stock stood at an
average of 92 days over the past 5 years, comparable to MNCN’s which stood at an average of
162 days. Moreover, SCMA’s average receivable days stood at an average of 102 days during the
same time frame, while MNCN recorded an average of 150 days. However, both MNCN and SCMA
were able to maintain its payable days low at a similar level. SCMA’s average of payable
outstanding was 62 days, while MNCN’s was 63 days over the past 5 years. SCMA has a lower
average of cash conversion cycle of 132 days compared to MNCN’s 250 days.
Figure 51. Days of inventory Figure 52. Days of receivables
Source: Company data, Daewoo Securities Research
Source: Company data, Daewoo Securities Research
0
5
10
15
20
25
30
35
Q1 2010 Q3 2010 Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015 Q3 2015 Q1 2016
SCTV RCTI
(%)
60
80
100
120
140
160
180
2009 2010 2011 2012 2013 2014 2015
MNCN Days ofsales outstanding
SCMA Days ofsales outstanding
(days)
0
50
100
150
200
250
2009 2010 2011 2012 2013 2014 2015
MNCN Days ofinventory on hand
SCMA Days ofinventory on hand
(days)
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Figure 53. Days of payables Figure 54. Cash conversion cycle
Source: Company data, Daewoo Securities Research
Source: Company data, Daewoo Securities Research
SCMA invests for the future
We think that SCMA is ready for the development of online advertising since it has made
investments in iflix. We believe iflix is going to fuel one of the most talked-about global media
trend – especially among millennial consumers. Bear in mind that due to the rising internet
connectivity and advancement of technology, consumers’ media screening habits have radically
evolved – especially in terms of how they access traditional home entertainment media, including
TV, print, and radio. Currently, we think some of the challenges of iflix are:
Lack of/limited live video streaming, such as live streaming of sports matches
Internet speed issues
Unavailability of certain movies
Payment method - Low penetration of credit card usage
In addition, the Screenplay production contents are also sold to websites and cinemas. These
websites are www.vidio.com, www.bintang.com, www.bola.com, www.liputan.com (all owned by
EMTK). On the other hand, name of the movies in cinemas produced by Screenplay are Magic
Hour (aired in 3Q15), London Loves Story (aired in 1Q16), ILY from 38.000 ft (aired in 2Q16).
Figure 55. Magic Hour movie
Source: Internet, Daewoo Securities Research
35
45
55
65
75
85
95
105
115
2009 2010 2011 2012 2013 2014 2015
MNCN Days ofpayables payment
SCMA Days ofpayables payment
(days)
-
50
100
150
200
250
300
350
2009 2010 2011 2012 2013 2014 2015
MNCN CashConversionCycle
SCMA CashConversionCycle
(days)
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Figure 56. London Love Story movie Figure 57. ILY from 38.000 ft movie
Source: Internet, Daewoo Securities Research
Source: Internet, Daewoo Securities Research
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Surya Citra Media (Valuations)
We initiate our coverage on SCMA with an overweight recommendation and present a blended
target price of IDR3,870, implying a 34.7x P/E to our 2016F EPS estimates. We think the premium
valuation on SCMA is justified, given SCMA has strong track record and strong balance sheet. Our
target price of IDR3,870 was derived by using a blended calculation of target P/E of 35x and
Discounted Cash Flow (DCF) method with 10-year time span.
Our WACC assumption of 11.2% is derived by our assumptions on risk free (Rf) rate of 7%, market
risk premium (MRP) of 5%, terminal growth rate of 3% and equity beta of 0.9x. We believe the
reduction in cost of capital tracks the decline in Indonesian bond yields which further supports our
DCF target price.
We like SCMA on the back of its 1) low gearing and high free cash flow (FCF), 2) high ROE,
preferably above market average, and 3) high EBITDA margin.
Table 1. DFC assumption table
Item Details
Cost of Equity 12%
Risk free rate 7.0%
Beta 0.90
Equity risk premium 5%
WACC 11.2%
Terminal growth rate 3%
After tax Cost of Debt 6.67%
Total PV of FCF 23,371
PV of TV 31,556
Total PV of FCF and TV 54,927
Cash 2013 1,596
Debt 2013 434
Equity value (in bn) 56,088
Equity value/share 3,836
Source: Daewoo Securities Research
Figure 58. SCMA Forward P/E Band
Source: Daewoo Securities Research
-1 Std Dev
Avg PER
+1 Std Dev
-2 Std Dev
+2 Std Dev
10
15
20
25
30
35
40
45
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16
( x )
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Surya Citra Media (Ticker SCMA IJ/ Buy/ TP: IDR3,870)
Table 2. Forecast and valuations
2014 2015 2016F 2017F
Revenue (IDRbn) 4,075 4,238 4,663 5,417
EBITDA (IDRbn) 2,029 2,135 2,323 2,699
Net profit (IDRbn) 1,458 1,522 1,630 1,934
EPS (IDR/share) 100 104 111 132
DPS (IDR/share) 51 125 73 78
ROE (%) 42.2% 48.4% 43.9% 42.8%
Dividend yield (%) 1.5% 3.8% 2.2% 2.4%
P/E ratio (x) 33.1 31.7 29.6 25.0
P/BV ratio (x) 14.0 15.3 13.0 10.7
EV/EBITDA (x) 23.2 22.1 20.3 17.4
Source: Daewoo Securities Research
Table 3. Income Statement projection
IDRbn 2014 2015 2016F 2017F
Revenue 4,075 4,238 4,663 5,417
Broadcasting expenses (1,484) (1,526) (1,711) (1,988)
Gross Profit 2,591 2,712 2,951 3,428
Opex (672) (711) (776) (901)
Operating Profit 1,928 2,015 2,191 2,545
Other income/(expenses) 10 14 16 18
Profit before income tax 1,927 2,038 2,178 2,585
Income tax expenses (469) (513) (549) (651)
Minority interest - - - -
Net profit 1,458 1,522 1,630 1,934
EBITDA 2,029 2,135 2,323 2,699
Source: Daewoo Securities Research
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Table 4. Balance sheet projection
IDR bn 2014 2015 2016F 2017F
Assets
Cash and equivalents 1,249 686 1,596 2,044
Receivables 1,292 1,412 1,339 1,557
Inventories 464 533 446 518
Others 201 213 220 261
Total current assets 3,205 2,843 3,600 4,380
Fixed assets - net 764 962 1,059 1,194
Long term investments 24 24 24 24
Others 757 736 800 853
Total non-current assets 1,545 1,722 1,883 2,072
Total assets 4,749 4,566 5,484 6,452
Liabilities and equity
Short-term bank loans and current
maturities
102 150 116 155
Trade payables 333 260 447 453
Others current liabilities 384 451 494 570
Total current liabilities 818 860 1,058 1,178
Long term debt 350 207 318 319
Others 94 85 108 102
Total non-current liabilities 444 292 426 421
Total liabilities 1,262 1,152 1,484 1,599
Minority interests 32 267 286 339
Shareholders' equity 3,456 3,146 3,714 4,514
Source: Daewoo Securities Research
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Table 5. Cash flow statement projection
IDRbn 2014 2015 2016F 2017F
CF from operation
Net profit 1,458 1,522 1,630 1,934
Depreciation/amortization 55 12 64 51
Change in working capitals (328) (252) 326 (297)
Others (40) 45 58 47
CF from operation 1,145 1,327 2,077 1,735
CF from Investments
Net capex (96) (199) (182) (190)
Others (41) 9 (42) (50)
CF from investments (137) (190) (224) (240)
CF from financing activity
Increase/(decrease) in debt (55) (95) 78 41
Increase/(decrease) in equity - (4) - -
Dividend payments (746) (1,828) (1,065) (1,141)
Others (1) 225 45 53
CF from financing activity (802) (1,701) (942) (1,047)
Net changes in cash 205 (565) 910 448
Source: Daewoo Securities Research
Table 6. Key Ratio
2014 2015 2016F 2017F
Growth (%)
Revenue 10.3% 4.0% 10.0% 16.2%
EBITDA 9.0% 5.2% 8.8% 16.2%
Net profit 13.4% 4.4% 7.1% 18.7%
Profitability (%)
Gross margin 63.6% 64.0% 63.3% 63.3%
Operating margin 47.3% 47.5% 47.0% 47.0%
EBITDA margin 49.8% 50.4% 49.8% 49.8%
Net margin 35.8% 35.9% 34.9% 35.7%
ROE 47.2% 46.1% 47.5% 47.0%
ROA 33.2% 32.7% 32.4% 32.4%
Leverage (X)
Current ratio 3.9 3.3 3.4 3.7
Quick ratio 3.4 2.7 3.0 3.3
Debt to equity 0.03 0.05 0.03 0.03
Net debt to equity net cash net cash net cash net cash
Interest coverage 28.3 46.8 41.8 44.4
Source: Daewoo Securities Research
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Media Nusantara Citra (MNCN IJ)
Waiting for the real stars to show
Company Background
PT Media Nusantara Citra Tbk was established in June 1997. It currently operates four out of
Indonesia’s total eleven free-to-air (FTA) TV stations. The company was listed since June 2007
with ticker code MNCN. Not only does MNCN own FTA-TV stations such as RCTI, MNCTV,
GlobalTV, and iNewsTV, but also owns 22 pay-tv channels. The company is diversified into
additional businesses in television contents production and delivery. MNCN has been able to
maintain its top ranking in audience shares.
MNCN has integrated studio facilities
MNCN is the only TV operator that has integrated studio facilities located in one area (Kebon
Jeruk, namely MNC studio complex). The construction began in 2014 where MNCN utilized
USD250mn loans to build the four buildings. The new MNC studio complex started
functioning in July 2016, which means it is at the end of its large 3 year-capex period. MNCN
is guiding its 2016F capex for buildings and maintenance of USD60-70mn, and 2017F of
USD10-20mn. The integrated new studio complex which has four new buildings with a total of
28 new studios and also equipped with HD rating equipment is believed to enhance the on-
screen quality (better lightning, audio sharpness, etc.) and have more production capacity.
MNCN expects new studios will help actors and actresses to with easier shooting with close
proximity compared to scattered studios.
Initiate with a BUY (TP IDR2,700)
We initiate our coverage on MNCN with a trading buy rating and a target price of IDR2,700,
implying 27.5x 2016F P/E. Our target price of IDR2,700 was derived using a blended
calculation of target P/E at 28x and Discounted Cash Flow (DCF) method with 10-year time
span.
Our WACC assumption of 10.5% is derived from our estimates on risk free rate (Rf) of 7%,
market risk premium (MRP) of 5%, a terminal growth rate of 3% and equity beta of 1.0x. We
believe the reduction in cost of capital tracks the decline in Indonesian bond yields which
further support our DCF target price.
Media
(Initiate) Buy
Target Price (12M,
IDR) 2,700
Share Price (7/28/16, IDR) 2,200
Expected Return 22.7%
OP (16F, IDRbn) 2,465
Consensus OP (16F, IDRbn) 2,628
EPS Growth (16F, %) 18.1
Market EPS Growth
(16F, %) 24.7
P/E (16F, x) 22.4
Market P/E (16F, x) 17.7
JCI (7/28/2016) 5,299.2
Market Cap (IDRbn) 31,407.4
Shares Outstanding
(mn) 14,276
Free Float (%) 25.3
Foreign Ownership (%) 12.78
Beta (5Y) 1
52-Week Low (IDR) 1,185
52-Week High (IDR) 2,415
(%) 1M 6M 12M
Absolute 2.33 15.79 7.32
Relative -6.22 3.83 -5.08
FY (Dec.) 12/13 12/14 12/15 12/16F 12/17F
Revenue (IDRbn) 6,522 6,666 6,445 7,015 7,925
Gross profit (IDRbn) 3,672 3,853 3,584 3,978 4,494
Operating profit (IDRbn) 2,560 2,602 2,194 2,465 2,785
NP (IDRbn) 1,691 1,761 1,186 1,401 1,760
EPS (IDR) 120 123 83 98 123
BPS (IDR) 524.11 632.34 635.90 701.94 751.53
P/E (x) 18.3 17.8 26.5 22.4 17.8
ROE (%) 22.9% 19.7% 13.2% 14.2% 16.6%
ROA (%) 17.6% 12.9% 8.2% 8.9% 10.5%
Note: NP refers to net profit attributable to controlling interests
Source: Company data, Daewoo Securities Indonesia Research estimates
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Media Nusantara Citra
Company Background
PT Media Nusantara Citra Tbk was established in June 1997 and currently operates four out of
Indonesia’s total eleven free-to-air (FTA) TV stations. The company was listed since June 2007 with
ticker code MNCN. Not only does MNCN own FTA-TV stations such as RCTI, MNCTV, GlobalTV,
and iNewsTV, but also owns 22 pay-tv channels. The company is diversified into additional
businesses in television contents production and delivery.
MNCN has been able to maintain its top ranking in audience shares. Moreover, MNCN also owns
radio, print media, talent management and TV production companies which support MNC’s core
business areas.
Figure 59. Company’s business line structure (2015)
Source: Company data, Daewoo Securities Indonesia
Figure 60. Integrated end-to-end programing strategy
Source: Company data, Daewoo Securities Indonesia
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MNCN’s local content
MNC produces over 15,000 hours of in-house contents every year or 41 hours/ day. Currently,
MNCN has a library of 270,000 hours of local contents which makes up 40% of the total contents
available in Indonesia.
MNCN purchases some external contents other production houses in Indonesia such as SineMart
and MD Entertainment to produce superior dramas. Quality contents provided by external
production houses enable the company to reach large audiences as broadcasting high-quality
programs continue to be the core pillar of MNCN.
In addition, through in-house production facilities such as MNC Pictures, as well as MNC’s talent
management company, namely Star Media Nusantara, the company delivers diverse and high-
quality programs that appeal to mass audiences.
We believe MNCN’s content library will be able to be monetized in the future once the broadband
infrastructure is available throughout Indonesia. Hence, MNCN will be able to sell its contents to
third party pay-tvs such as Nexmedia and/ or SVOD entities, such as iflix, etc.
MNC Pictures
Figure 61.
Source: Internet, Daewoo Securities Research
MNC Pictures was established in 2005. Since then, the company has produced diverse programs
comprising both drama and non-drama genres, including movies (“Di Balik 98, 3 Dara, SkakMat”),
movies for television, drama series, variety shows, reality shows, music, and documentaries for all 3
MNC’s FTA TV stations.
The programs produced by MNC Pictures have won several awards as well as produced several
genuine local movies, for instance:
In 2009, H. Eddie Riwanto won the Most Commended Director category at the Bandung Film
Festival 2009, for DIMAS dan RAKA drama series
In 2010, Oka Antara, won the Best Male Actor category at the Indonesian Movie Award 2010,
for the film Hari Untuk Amanda; Fanny Fabriana, in the Most Commended Actress category at
the Bandung Film Festival 2010, for the film Hari Untuk Amanda
In 2011 Eriz Rizly won the Most Commended Editor at the Bandung Film Festival 2011 for the
series namely Udin Bui.
In 2012, MNC Pictures won 8 nominations for the TV movie titled “Cinta Momo dan Tejo Di
Antara Angkringan” and “Cinta Pengamen Badut” during the inauguration of the Indonesian
Film Festival 2012 at the Metropole XXI, Jakarta.
In 2014, MNC Pictures produced the film “7/24” which was launched in late November 2014
and managed to become one of the top 10 films of 2014, with a total audience of 375,000
people.
In 2015 MNC Picture Soap Opera production titled “Preman Pensiun” triumphs as the “Most
Admirable Soap Opera” in its category at the Bandung Film Festival 2015
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Talent management
We believe the most expensive programming costs are talent-related, which is part of the
company’s direct costs. This is the interesting part of MNCN because the company can maintain
its local programing expenses below 40%. MNCN currently owns a talent management company,
Star Media Nusantara, home to more than 400 artists, including singers, bands, magicians, and
models – the largest such agency in Indonesia.
The company has been able to monetize its efforts by constantly developing new talents and
therefore keeping costs deflated. Due to the huge talent acquisition efforts, talent expenses have
dropped significantly. Moreover, well-known TV music show Dahsyat now has 20 hosts, which
enables the company to become less dependent on single host for making the show popular
(hosts alternate every day).
Figure 62. Star Media Nusantara’s artists (singers, bands, magicians, models)
Source: Company data, Daewoo Securities Research
MNC Channels
MNC Channels is one of MNCs contents ownership businesses. During 2014, MNC channels
managed to launch 2 channels, such as MNC Home & Living and MNC Health & Beauty.
Exploiting MNCs large contents library, MNC has added another five branded channels in 2015.
These new channels add to the total number of channels (currently 22).
The other 20 channels include MNC News, MNC Business, MNC Infotainment, MNC Muslim, MNC
Entertainment, MNC International, MNC Music, MNC Movie, MNC Drama, MNC Comedy, MNC
Lifestyle, MNC Fashion, MNC Food & Travel, MNC Kids, MNC Sports 1, MNC Sports 2 , Golf
Channel, etc.
These channels are aired exclusively through pay-tv platforms owned by MSKY, namely Indovision,
TopTV and Okevision. Furthermore, MNCN also sells its local contents to overseas destinations
such as Malaysia, Brunei, Singapore, etc.
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Figure 63. Most comprehensive Pay-tv channel in
Indonesia Figure 64. MNCN’s list of pay-tv channels
Source: Company data, Daewoo Securities Research
Source: Company data, Daewoo Securities Research
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MNC’s management team
Board of Commissioners
Independent commissioner: Irman Gusman
Born in West Sumatera, Mr. Gusman graduated from Universitas Kristen Indonesia in 1985 and
earned his Master of Business Administration (MBA) in 1987 from University of Bridgeport, USA.
Pursuant to the decision of the shareholders last 19 April 2007, the Deed of Statement of
Shareholders Resolution No. 163 named Mr. Irman Gusman is an Independent Commissioner and
also Chairman of MNCN’s Audit Committee.
As a Chairman of the Regional Representative Council (DPD RI), Mr. Gusman has a distinguished
career in public office. His tenure in political affairs and appointment to several prominent local
and international organizations include: Vice Chairman of the Regional Representative Council
(FUD) from 2004-2009, member of the Regional Representative Council from 2002-2004,
Chairman of the Indonesian Regional Investment Forum (IRIF) from 2006-2008, and Advisory
Board member of the 5th World Islamic Economic Forum (WIEF) in 2009. On 4 July 2009, he
received an Outstanding Leadership Achievement award from the United States government for
his role in the Regional Representatives Council of Indonesia. He further received one of
Indonesia’s highest commendations, the Adipradana Mahaputera Star. The President of the
Republic of Indonesia presented him this medal on 13 August 2010 during ceremonies
commemorating Indonesia’s 65th independence.
Commissioner: B.Rudijanto Tanoesoedibjo
Mr B.Rudijanto Tanoesoedibjo was born in Jakarta, Indonesia. Mr. Barack graduated in 1979 from
Waseda University based in Tokyo, Japan. He has served as President Commissioner for PT Global
Mediacom Tbk (MCOM) since 1998 and also currently sits on the Board of Directors for several
other companies affiliated with MCOM. He is also PT Plaza Indonesia Realty’s President Director, a
position he has held since 2000.
Commissioner: Adam Chesnoff
Mr. Chesnoff is a graduate of UCLA’s Anderson School of Business (MBA, 1994). He has served as
Commissioner since 12 December 2011, according to decision of Extraordinary General
Shareholder Meeting dated 12 December 2011 and stated through Deed of Statement of Meeting
No. 49 issued 12 December 2011. As the President and Chief Operating Officer of Saban Capital
Group, Inc., Mr. Adam Chesnoff is responsible for overseeing the company’s investment and
business activities, including private equity and public market investments.
Mr. Chesnoff is Chairman of the Board of Directors of Partner Communications, a leading
telecommunications company in the Middle East. He is also a member of the Board of Directors of
Univision, the largest Spanish-language media company in the United States, and Chairman of the
Board of Directors of Celestial Tiger Entertainment, owner and operator of pay television channels
across Asia. He concurrently sits as member of the Board of Commissioners of MNCN, Indonesia’s
largest and only vertically-integrated media company. In addition, Mr. Chesnoff co-formed and
directed the investment group that acquired a controlling stake in ProSiebenSat.1 Media AG,
Germany’s largest television group.
He served as Vice-Chairman of the Board of Directors of ProSiebenSat.1 from August 2003 until
March 2007. In 2005-2010, Mr. Chesnoff served on the Board of Directors of Bezeq, a leading
incumbent telecommunications company in the Middle East. Prior to becoming President and
COO of Saban Capital Group, Mr. Chesnoff spent 5 years at Fox Family Worldwide (FFWW) where
he oversaw business development across all global divisions, including television channels,
programming, production, international distribution and merchandising. In 1994 to 1995, Mr.
Chesnoff worked in the Business Affairs and Corporate Development groups at Sony Pictures
Entertainment and Columbia Pictures, where he focused on strategic planning, financial analysis,
deal structuring and new business development in the Motion Picture and Television divisions. In
1991, Mr. Chesnoff worked in the Far East where he oversaw the establishment of a garment
factory network for export to the United States.
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President commissioner: Rosano Barack
Mr Rosano Barack was born in Jakarta, Indonesia. Mr. Barack graduated in 1979 from Waseda
University based in Tokyo, Japan. He has served as President Commissioner for PT Global
Mediacom Tbk (MCOM) since 1998 and also currently sits on the Board of Directors for several
other companies affiliated with MCOM. He is also PT Plaza Indonesia Realty’s President Director, a
position he has held since 2000.
Independent Commissioner: Drs. Sutanto
Drs. Sutanto was born in Pemalang, he graduated from the Republic of Indonesia’s National Police
Academy, AKABRI (1973), Perguruan Tinggi Ilmu Kepolisian (1983), Sus Jur Pa Rengar Hankam in
Bandung (1986), Sespimpol, Lembang in Bandung (1990), and Lemhannas (2000).
Drs. Sutanto has served as Independent Commissioner since 12 December 2011 following the
decision of the Extraordinary General Meeting of Shareholders and Deed of Statement of Meeting
Resolution No. 49, December 12, 2011. He also has a highly illustrious career in public service,
having served as Chief of Police for the Republic of Indonesia from 2005 to 2008 and Head of the
State Intelligence Agency (BIN) from 2009-2010.
Board of Directors
President director: Hary Tanoesoedibjo
Mr Hary Tanoesoedibjo was born in Surabaya, Indonesia. His duties and responsibilities as
President Director are listed in the GCG chapter of the Board of Directors section. Hary
Tanoesoedibjo serves as President Director of both PT Media Nusantara Citra (MNCN) and PT
Global Mediacom Tbk (BMTR), a position he has held since 25 March 2004 and 2002 respectively.
He founded PT MNC Investama Tbk in 1989, and became its President Director until 2002 and
once again in 2009. He continues to hold this post up to the present. Hary Tanoesoedibjo is also
President Director of RCTI since 2003, since 2006, he has also taken the role of President
Commissioner for PT MNC Sky Vision Tbk (MSKY).
As the founder of MNC Group, he has transformed BMTR and MNCN to become Indonesia’s top
media companies by directly overseeing and developing strategies of the holding company and
its subsidiaries. Tanoesoedibjo holds a Bachelor of Commerce (Honours) degree from Carleton
University (1988) and a Master of Business Administration degree from Ottawa University (1989).
Both universities are based in Ottawa, Canada.
He actively participates as speaker at various local and international media events, and teaches
corporate finance, investment and management strategies in post-graduate programs of several
universities.
Director: Kanti Mirdiati Imansyah
Mrs Kanti Mirdiati Imansyah was born in Palembang, Indonesia, she graduated from IFS San Diego,
USA with an Associate Degree in Fashion Merchandising in 1989. In that same year, she finished
her Bachelor’s Degree in Science at La Jolla Academy of Advertising Arts also in San Diego, USA.
The General Meeting of Shareholders appointed Mrs. Kanti Mirdiati Imansyah as Director through
deed No. 139 dated 29 April 2013. She started her career way back in 1990. Post serving as Sales
Group Head at RCTI in 2000, she moved to Trans TV handling the same position. In 2002, she
briefly returned to RCTI as Head of Acquisitions and a year later, transferred to TV7 as AVP for
Sales and Marketing. Her career in Indonesia’s television industry also brought her to MNCTV
where she became Director of Sales and Marketing from 2006 until 2010. The duties and
responsibilities of Mrs. Imansyah as Director are enumerated in the GCG chapter of the Board of
Directors section.
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Director: Diana Airin
Mrs. Airin was born in Jakarta, Indonesia. She obtained her bachelor’s degree in Economic
Management from Tarumanegara University in 1995.
Mrs. Diana Airin has been serving as Director by virtue of deed No. 106, April 29, 2014 issued
during the General Meeting of Shareholders last 29 April 2014. Her career in the media industry
extends beyond 15 years with experience ranging from sales and marketing to executive positions.
Her previous appointments include: President Director of PT. Media Nusantara Informasi in 2013,
PT. MNC Networks (Radio) in 2013 and PT. Cross Media International in 2013; Managing Director
of PT. Media Nusantara Informasi in 2012; Director of Sales Marketing at Seputar Indonesia, SUN
TV, High End & High End Teen and Network Magazine in 2010; Deputy Director of Sales and
Marketing at Koran Sindo in 2009; General Manager for Sales and Marketing at Media Indonesia
and Metro TV in 2001; Vice General Manager for Sales and Marketing at KOMPAS in 2000;
Assistant Manager at HSBC Bank in 1998; Sales Manager at PT Hasta Nusa Perkasa in 1996; and
Account Executive at FIF Astra Group in 1995.
The duties and responsibilities of Mrs. Diana Airin are enumerated in the GCG chapter of the
Board of Directors section.
Director: Faisal Dharma Setiawan
Mr Faisal Dharma Setiawan was born in Bogor, Indonesia. Mr. Setiawan completed his Master of
Management degree in International Business from the Post-Graduate School of Management at
Prasetya Mulya in 2003. He also holds a bachelor’s degree in Civil Engineering from Universitas
Katolik Parahyangan where he graduated in 1990.
The Extraordinary General Meeting of Shareholders, held last 30 October 2014, appointed Mr.
Faisal Dharma Setiawan as Director through deed No. 126, October 30,
2014. His extensive experience in business and finance comes from several executive positions he
held within the manufacturing, pension fund, banking and life insurance sectors. His previous
designations include: Assistant General Manager at PT Indo Kordsa Tbk from 2000 to 2009;
Director of Pension Funds at Indo Kordsa from 1996-2009; Vice
Chief Finance Officer for Strategy and Finance at PT Bank CIMB Niaga Tbk in 2009-2012;
Commissioner at PT Asuransi CIGNA in 2009-2011 and at PT CIMB Sunlife in 2009-2012; and Chief
Executive Officer at PT Asuransi Jiwa Adisarana Wana Artha from 2012 to 2013. The duties and
responsibilities of Mr. Faisal Dharma Setiawan as Director are enumerated in the GCG chapter of
the Board of Directors section.
Director: Ella Kartika
Mrs. Kartika was born in Palembang, Indonesia. She received her Master of Management degree
in Banking and Finance from the University of Indonesia in 2000.
On 30 October 2014, the Extraordinary General Meeting of Shareholders adopted a resolution
appointing Mrs. Ella Kartika as Director through deed No. 126, October 30,
2014. Her career in the industry has focused on senior roles in television programming and
production, as well sales and marketing.
In 2008, she was Sales and Marketing Director for PT Global Informasi Bermutu. Two years later,
she became the same company’s Programming and Production Director. Then in 2011, under a
similar role, she moved to PT Rajawali Citra Televisi Indonesia. She returned to PT Global Informasi
Bermutu handling the top post of Managing Director in 2013. Nowdays, she also serves as
Commissioner in RCTI and GlobalTV. The duties and responsibilities of Mrs. Ella Kartika as Director
are enumerated in the GCG chapter of the Board of Directors section.
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Director: Gwenarty Setiadi
Mrs. Gwenarty Setiadi was born in Jakarta, Indonesia. Mrs. Setiadi graduated from the University
of Satya Wacana with a bachelor’s degree in agriculture in 1982.
Mrs. Gwenarty Setiadi’s distinguished career covers prominent human resources roles in major
companies, most notable of which was her stint at Citibank wherein she was VP Head of
Outsourcing Management (2004), VP Head of Direct Sales Training Academy and HRRM (2005),
and VP Human Resources and General Services (2007). In 2008, she joined MNCN as General
Manager of Human Resources and General Services and then a year later rose to the position of
Director of Human Resources and General Services at MSKY. She was appointed Director following
a decision by the Extraordinary General Meeting of Shareholders which issued deed No. 126 dated
30 October 2014.
The duties and responsibilities of Mrs. Gwenarty Setiadi as Director are enumerated in the GCG
chapter of the Board of Directors section.
Director: Arya Mahendra Sinulingga
He has served as Director of MNC since 27 July 2015, as decided by Extraordinary General
Shareholders Meeting dated 27 July 2015 and stated through a Deed of Statement of Meeting No.
93 issued 27 July 2015. Mr. Arya Mahendra Sinulingga serves multiple concurrent roles: Deputy
CEO of iNewsTV, Director at MNC Investama, Chief Editor of MNC Group, News Director and
Corporate Secretary of GlobalTV, President Commissioner of Sindo Weekly, and Director at MCI.
He previously served as a drainage and marine consultant in Singapore in 1995 and six years later,
became a consultant of city planning in North Sumatra. During his four year tenure in North
Sumatra, he also acted as Chairman of the Provincial Council. In 2004, he became a member of the
Indonesian Broadcasting Commission for North Sumatera.
He moved to Jakarta in 2008 to take on various high profile posts: President Director of PT Hikmat
Makna Aksara (Sindo Weekly) in 2008-2014, Corporate Secretary of PT Global Mediacom (2008-
2014), Corporate Secretary of PT Media Nusantara Citra Tbk (2010-2014), and Chief Editor of
Global TV (2011-2014).
Mr. Sinulingga graduated from the Bandung Institute of Technology (ITB) with a bachelor’s degree
in Civil Engineering in 1995. He was born in Kabanjahe, Indonesia.
The duties and responsibilities of Mr. Arya Sinulingga as Director are enumerated in the GCG
chapter of the Board of Directors section.
Independent director: Charlie Kasim
Mr. Kasim comes from Jakarta and he obtained his MBA in Finance from the University of Houston,
USA in 1997. Mr. Charlie Kasim moulded his senior role in finance and operations starting with real
estate company PT. Bakrie Swasakti Utama wherein he was appointed Commissioner in 2003. Two
years later, he became Operational Director at the coal mining company PT. Fajar Bumi Sakti. In
2007, he shifted to PT. Lativi Media Karya (TVOne) as Finance Director and Head of Procurement.
In that same year, he took on the role of Chief Finance Officer at PT. Visi Media Asia Tbk (VIVA). In
2011, he expanded his responsibilities in PT Cakrawala Andalas Televisi (ANTV) by becoming its
Finance Director, Technical Director, Operational Director and Head of Procurement. Then in 2013,
he jumped to PT Rajawali Citra Televisi Indonesia as its Deputy Finance and Technical Director.
Mr. Kasim has served as Independent Director by virtue of deed No. 126, October 30, 2014 issued
during the General Meeting of Shareholders held on 30 October 2014. The duties and
responsibilities of Mr. Charlie Kasim as Director are enumerated in the GCG chapter of the Board
of Directors section.
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MNC’s FTA stations appeal to different audience segments
MNC’s Free-to-air TV (especially RCTI) is the most watched TV which Indonesian people stick to
the most, thanks to the quality and variety of the programs.
RCTI presents viewers with several popular dramas such as Anak Jalanan, Tukang Bubur
Naik Haji, etc.
MNC TV offers multiple variety programs such as animation movies and dramas. Initially,
PT Cipta TPI received television broadcasting permission on August 1, 1990, and was the
first television station that received national broadcasting license. TPI began commercial
operation since January 23, 1991. In July 2006, Media Nusantara Citra (MNC) acquired 75%
stake of TPI and since then TPI officially merged into one run television under MNC.
MNC TV name has been used since October 20, 2010.
Global Tv focuses on niche kids and young adults with foreign animation programs
(nickelodeon), and Hollywood blockbuster movie during prime time.
iNewsTV is a national network with a focus on news, infotainment and sports.
Famous dramas currently played on RCTI
(Anak Jalanan) or Street Kids in English is Indonesian drama aired in RCTI. This drama began
airing since October 12, 2015. The soap opera airs every Monday-Saturday 18.00-19.15.
(Tukang Ojek Pengkolan) or Ojek at the intersection in English is Indonesian comedy soap opera,
aired by RCTI and produced by MNC Pictures. The soap opera airs every Monday-Saturday 17:30.
Figure 65. Anak Jalanan drama Figure 66. Ojek Pengkolan drama
Source: Internet, Daewoo Securities Research
Source: Internet, Daewoo Securities Research
RCTI also airs famous TV show, namely Dahsyat, which is not simply serving the most popular
music charts and video clips, but funny and hilarious-style hosts also strike the audiences. The
show airs every Thursday-Friday at 09.00am and Saturday at 08:30am. Dahsyat now has 20 hosts
to alternate on every show.
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Figure 67. Dahsyat TV show
Source: Internet, Daewoo Securities Research
Famous dramas that are currently played on GlobalTV
(Awas Ada Sule) or Watch out, there’s Sule in English is a comedy drama airing every Monday-
Friday at 19.00. The sitcom began in 2009, ended in 2010 and is now replayed every day at
03.00am. In this sitcom, Sule acts as a maid in a family. Target audiences are Muslims who eat
during sahur time.
Global TV also has a famous infotainment programs such as Obsesi, Fokus Selebriti and Eksis
which aris the latest information about actor and actresses’ life. Targeted audiences are women,
generally, housewives.
Figure 68. Obsesi Figure 69. Fokus Selebriti
Source: Internet, Daewoo Securities Research
Source: Internet, Daewoo Securities Research
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Famous dramas that are currently played on MNC TV
(Super Dede 2) – After the success of its first season, the comedy drama kicked off its second
season since April 4, 2016 at 17.00. Target audiences are mid-to-low income households.
Figure 70. Super Dede season 2
Source: Internet, Daewoo Securities Research
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MNCN charges more premium advertising cost through its quality contents
MNCN has achieved industry leading audience share and revenue, especially RCTI. Established in
1989, RCTI is currently the most watched FTA TV station in Indonesia which has been maintained
its number one audience market share in 18 out of 24 years of operation. In addition, MNCN ’s
revenue is always the highest compared to its competitors even when their audience share stood
at second place, thanks to its premium channel, RCTI. We believe MNCN’s creation to some
successful dramas and its combination of in-house production and third party partnerships (with
SineMart and MD Entertainment) has enabled the company to offer better original contents than
its competitors. Currently, the highest cost for production comes from drama series which is
around IDR250-300mn per episode.
Figure 71. MNCN vs SCMA advertising revenue
Source: Daewoo Securities Research
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16
MNCN
SCMA
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Investment thesis on MNCN
Strong audience viewers’ performance
MNCN has recorded very strong audience share over the past couple of years (see figure 72),
which led the company to its premium rate card.
Figure 72. RCTI’s audience share has always been astonishing
Source: Nielsen, Daewoo Securities Research
RCTI has the highest power ratio
RCTI has the highest power ratio at 1.4x among all 11 nationwide FTA TV stations as of FY14.
Power ratio shows how well a media company converts ratings to revenue. Power ratio is used to
measure the companies’ revenue performance of a media company in comparison to the share of
audience that it controls. The three variables that are used to calculate include total market
revenue, the revenue of the media company itself, and % of audience share.
A higher power ratio is preferable because it indicates greater amount of revenue received from
the company's audience share. A low power ratio indicates that the company underutilizes its
capacity and there is more room for growth.
Figure 73. Power ratio of 11 nationwide FTA TV stations (as of FY 2014)
Source: Company data, Daewoo Securities Research
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
21.4
16.8
20.3
29.63
0
5
10
15
20
25
30
35
2013 average 2014 average 2015 average Average YT June 2016
SCTV
RCTI
IVM
MNCTV
GTV
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MNCN has integrated studio facilities
MNCN is the only TV operator that has integrated studio facilities located in one area (Kebon
Jeruk, namely MNC studio complex). The construction began in 2014 where MNCN utilized
USD250mn loans to build the four buildings. The new MNC studio complex started functioning in
July 2016, which means it is at the end of its large 3 year-capex period. MNCN is guiding its 2016F
capex for buildings and maintenance of USD60-70mn, and 2017F of USD10-20mn.
The integrated new studio complex which has four new buildings with a total of 28 new studios
and also equipped with HD rating equipment is believed to enhance the on-screen quality (better
lightning, audio sharpness, etc.) and have more production capacity. MNCN expects new studios
will help actors and actresses to with easier shooting with close proximity compared to scattered
studios.
Figure 74. MNC’s lightning equipment
Source: Daewoo Securities Research
Figure 75. MNC studio complex Figure 76. MNC studio
Source: Daewoo Securities Research
Source: Daewoo Securities Research
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Figure 77. MNC studio Figure 78. MNC studio
Source: Daewoo Securities Research
Source: Daewoo Securities Research
Figure 79. MNC studio Figure 80. MNC studio
Source: Daewoo Securities Research
Source: Daewoo Securities Research
More clarity on PT Berkah’s dispute
The dispute over PT Berkah and Ibu Tutut has been the noise over MNCN’s stock price throughout
2014-2015. Yet, in April 2016, the Supreme Court (MA) finally issued a ruling regarding the dispute
between PT Berkah Karya Bersama (PT Berkah) and Siti Hardiyanti Rukmana. The Supreme Court
ruled that Harry Tanoesoedibyo’s Berkah Karya Bersama as the rightful owner of 75% stake in
MNC TV (previously TPI). While Ibu Tutut’s legal team states that there is no verdict on the appeal.
We believe the overhang of the dispute has faded and the ruling is finally in favor of MNC.
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Media Nusantara Citra (Valuations)
We initiate our coverage on MNCN with a trading buy rating and a target price of IDR2,700,
implying 27.5x 2016F P/E. Our target price of IDR2,700 was derived using a blended calculation of
target P/E at 28x and Discounted Cash Flow (DCF) method with 10-year time span.
Our WACC assumption of 10.5% is derived from our estimates on risk free rate (Rf) of 7%, market
risk premium (MRP) of 5%, a terminal growth rate of 3% and equity beta of 1.0x. We believe the
reduction in cost of capital tracks the decline in Indonesian bond yields which further support our
DCF target price.
We like MNCN on the back of its: 1) Strong audience viewers’ performance, 2) lower capex as
MNCN has completed the construction of its integrated studio facilities 3) premium rate card
charged on the back of its high audience share.
Table 7. DCF Assumption Table
Item Details
Cost of Equity 12%
Risk free rate 7.0%
Beta 1.00
Equity risk premium 5%
WACC 10.5%
Terminal growth rate 3%
After tax Cost of Debt 6.84%
Total PV of FCF 16,348
PV of TV 22,160
Total PV of FCF and TV 38,508
Cash 2013 1,967
Debt 2013 3,866
Equity value (in IDRbn) 37,770
Equity value/share 2,646
Source: Daewoo Securities Research
Figure 81. MNCN PE Band
Source: Daewoo Securities Research
-1 Std Dev
Avg PER
+1 Std Dev
-2 Std Dev
+2 Std Dev
10
12
14
16
18
20
22
24
26
28
30
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16
( x )
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Media Nusantara Citra (Ticker MNCN IJ/ Buy/ TP: IDR2,700)
Table 8. Forecast and valuations
2014 2015 2016F 2017F
Revenue (IDRbn) 6,666 6,445 7,015 7,925
EBITDA (IDRbn) 2,772 2,447 2,739 3,087
Net profit (IDRbn) 1,761 1,186 1,401 1,760
EPS (IDR/share) 123 83 98 123
DPS (IDR/share) 35 62 42 49
ROE (%) 19.7% 13.2% 14.2% 16.6%
Dividend yield (%) 1.6% 2.8% 1.9% 2.2%
P/E ratio (x) 17.8 26.5 22.4 17.8
P/BV ratio (x) 3.5 3.5 3.1 2.9
EV/EBITDA (x) 11.3 12.7 11.4 10.1
Source: Daewoo Securities Research
Table 9. Income statement projection
2014 2015 2016F 2017F
Revenue 6,666 6,445 7,015 7,925
COGS (2,813) (2,861) (3,037) (3,431)
Gross Profit 3,853 3,584 3,978 4,494
Opex (1,251) (1,390) (1,513) (1,709)
Operating Profit 2,602 2,194 2,465 2,785
Other income/(expenses) (54) (506) (492) (340)
Profit before income tax 2,542 1,681 1,965 2,437
Income tax expenses (660) (404) (472) (585)
Minority interest (121) (91) (91) (91)
Net profit 1,761 1,186 1,401 1,760
EBITDA 2,772 2,447 2,739 3,087
Source: Daewoo Securities Research
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Table 10. Balance sheet projection
IDR bn 2014 2015 2016F 2017F
Assets
Cash and equivalents 3,019 1,525 3,128 3,184
Receivables 2,994 3,020 2,907 3,330
Inventories 1,635 1,593 1,447 1,721
Others 1,022 1,588 995 1,263
Total current assets 8,670 7,727 8,476 9,498
Fixed assets - net 2,659 4,145 4,799 4,762
Long term investments 1,165 1,144 1,144 1,144
Others 701 1,017 816 839
Total non-current assets 4,940 6,748 7,200 7,186
Total assets 13,610 14,475 15,676 16,684
Liabilities and equity
Short-term bank loans and
current maturities
55 117 117 117
Trade payables 403 511 570 629
Others current liabilities 434 412 514 568
Total current liabilities 892 1,040 1,201 1,313
Long term debt 3,135 3,649 3,749 3,949
Others 182 219 229 225
Total non-current liabilities 3,318 3,868 3,978 4,174
Total liabilities 4,210 4,908 5,178 5,487
Minority interests 485 601 601 601
Shareholders' equity 8,916 8,966 9,897 10,596
Source: Daewoo Securities Research
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Table 11. Cash flow statement projection
IDRbn 2014 2015 2016F 2017F
CF from operation
Net profit 1,761 1,186 1,401 1,760
Depreciation/amortization 170 253 274 302
Change in working capitals (812) 123 319 (639)
Others (376) (588) 695 (214)
CF from operation 743 974 2,690 1,209
CF from Investments
Net capex (1,743) (979) (961) (300)
Others (1,018) (321) 201 (23)
CF from investments (2,761) (1,300) (760) (322)
CF from financing activity
Increase/(decrease) in debt 2,667 575 100 200
Increase/(decrease) in equity 368 (3) - -
Dividend payments (497) (888) (593) (701)
Others 30 (109) 132 (364)
CF from financing activity 2,568 (425) (361) (865)
Net changes in cash 551 (752) 1,568 22
Source: Daewoo Securities Research
Table 12. Key Ratios
2014 2015 2016F 2017F
Growth (%)
Revenue 2.2% -3.3% 8.8% 13.0%
EBITDA 2.3% -11.7% 11.9% 12.7%
Net profit 4.1% -32.7% 18.2% 25.6%
Profitability (%)
Gross margin 57.8% 55.6% 56.7% 56.7%
Operating margin 39.0% 34.0% 35.1% 35.1%
EBITDA margin 41.6% 38.0% 39.0% 39.0%
Net margin 26.4% 18.4% 20.0% 22.2%
ROE 19.7% 13.2% 14.2% 16.6%
ROA 12.9% 8.2% 8.9% 10.5%
Leverage (X)
Current ratio 9.7 7.4 7.1 7.2
Quick ratio 6.7 4.4 5.0 5.0
Debt to equity 0.4 0.4 0.4 0.4
Net debt to equity 0.0 0.2 0.1 0.1
Interest coverage 44.7 11.2 8.3 9.0 Source: Daewoo Securities Research
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Risks to our call
The emergence of online advertisement. We believe growing internet penetration trend will
determine the growth of digital advertisement, which would be the main competitor for FTA TV.
However, we think the digital advertising trend will not be an immediate risk for TV operators
given that Indonesia is still lack of the broadband infrastructure.
Unexpected regulatory risks. Investors may have to anticipate unexpected risks such as
restrictions on broadcasting operations, licenses, transition to digital TV, etc.
Government’s stance on tobacco control. We think that government’s regulation on cigarettes
advertisement is quite a huge risk for TV companies as they contribute sizeable portion of TV
companies’ revenue. For example, broadcasting tobacco advertising on television is only allowed
from 9:30pm until 5:00am, and smoking warnings are also shown at the end of the advertisement,
such as "Smoking can cause mouth cancer, heart attack, impotency and pregnancy and fetal
disorders". Since 2014, the Indonesian government halted the branding of cigarettes as "light" or
"mild" on smoking packages and decided to place graphic images of the adverse long-term
effects of excessive smoking. Currently, tobacco advertising is still allowed, but showing the
cigarette packaging is forbidden.
Global and macroeconomic factors. As TV companies generate revenue from FMCG companies,
there are several factors that would determine how they spend their A&P expense. Economic
growth, commodity prices, inflation rate, Federal Reserve’s policy rate as well as the rupiah
exchange rate are key determinants to the FMCG’s S&P spending. We believe any significant
changes to the macroeconomic backdrop may significantly alter the strategies of FMCG
companies A&P spending.
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APPENDIX 1
Important Disclosures & Disclaimers
Analyst Certification
The research analysts who prepared this report (the “Analysts”) are registered with and are subject to Indonesian securities regulations. They are neither
registered as research analysts in any other jurisdiction nor subject to the laws and regulations thereof. Opinions expressed in this publication about the
subject securities and companies accurately reflect the personal views of the Analysts primarily responsible for this report. PT Daewoo Securities Indonesia
policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst’s area of coverage, and the Analysts do
not serve as an officer, director or advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received
any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this
report. No part of the compensation of the Analysts was, is, or will be directly or indirectly related to the specific recommendations or views contained in
this report but, like all employees of PT Daewoo Securities Indonesia, the Analysts receive compensation that is impacted by overall firm profitability, which
includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading and private client division. At the
time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or PT Daewoo
Securities Indonesia except as otherwise stated herein.
Disclaimers
This report is published by PT Daewoo Securities Indonesia (“Daewoo”), a broker-dealer registered in the Republic of Indonesia and a member of the
Indonesian Stock Exchange. Information and opinions contained herein have been compiled from sources believed to be reliable and in good faith, but such
information has not been independently verified and Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness,
accuracy, completeness or correctness of the information and opinions contained herein or of any translation into English from the Indonesian language. If
this report is an English translation of a report prepared in the Indonesian language, the original Indonesian language report may have been made available
to investors in advance of this report. Daewoo, its affiliates and their directors, officers, employees and agents do not accept any liability for any loss arising
from the use hereof. This report is for general information purposes only and it is not and should not be construed as an offer or a solicitation of an offer to
effect transactions in any securities or other financial instruments. The intended recipients of this report are sophisticated institutional investors who have
substantial knowledge of the local business environment, its common practices, laws and accounting principles and no person whose receipt or use of this
report would violate any laws and regulations or subject Daewoo and its affiliates to registration or licensing requirements in any jurisdiction should receive
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companies to provide investment banking, market-making or other financial services as are permitted under applicable laws and regulations. The price and
value of the investments referred to in this report and the income from them may go down as well as up, and investors may realize losses on any
investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur
Distribution
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Stock Ratings Industry Ratings
Buy : Relative performance of 20% or greater Overweight : Fundamentals are favorable or improving
Trading Buy : Relative performance of 10% or greater, but with volatility Neutral : Fundamentals are steady without any material changes
Hold : Relative performance of -10% and 10% Underweight : Fundamentals are unfavorable or worsening
Sell : Relative performance of -10%
* Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months.
* Although it is not part of the official ratings at Daewoo Securities, we may call a trading opportunity in case there is a technical or short-term material
development.
* The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of
future earnings.
* The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic
conditions.
Disclosures
As of the publication date, PT Daewoo Securities Indonesia and/or its affiliates do not have any special interest with the subject company and do not own
1% or more of the subject company's shares outstanding.
Media
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July 29, 2016
Daewoo Securities Research
Daewoo Securities Research
Daewoo Securities International Network
PT. Daewoo Securities Indonesia Daewoo Securities (Hong Kong) Ltd. Daewoo Securities (America) Inc.
Equity Tower Building Lt.50
Sudirman Central Business District Jl.
Jendral Sudirman Kav. 52-53, Jakarta Selatan
Indonesia 12190
Two International Finance Centre
Suites 2005-2012
8 Finance Street, Central
Hong Kong, China
320 Park Avenue
31st Floor
New York, NY 10022
United States
Tel: 62-21-515-1140 Tel: 85-2-2845-6332 Tel: 1-212-407-1000
Daewoo Securities (Europe) Ltd. Daewoo Securities (Singapore) Pte. Ltd. Tokyo Branch
41st Floor, Tower 42
25 Old Broad St.
London EC2N 1HQ
United Kingdom
Six Battery Road #11-01
Singapore, 049909
7th Floor, Yusen Building
2-3-2 Marunouchi, Chiyoda-ku
Tokyo 100-0005
Japan
Tel: 44-20-7982-8000 Tel: 65-6671-9845 Tel: 81-3- 3211-5511
Beijing Representative Office Shanghai Representative Office Ho Chi Minh Representative Office
2401A, 24th Floor, East Tower, Twin Towers
B-12 Jianguomenwai Avenue
Chaoyang District, Beijing 100022
China
Room 38T31, 38F SWFC
100 Century Avenue
Pudong New Area, Shanghai 200120
China
Suite 2103, Saigon Trade Center
37 Ton Duc Thang St,
Dist. 1, Ho Chi Minh City,
Vietnam
Tel: 86-10-6567-9299 Tel: 86-21-5013-6392 Tel: 84-8-3910-6000
Daewoo Investment Advisory (Beijing) Co.,
Ltd. Daewoo Securities (Mongolia) LLC Daewoo Securities Co. Ltd. (Seoul)
2401B, 24th Floor, East Tower, Twin Towers
B-12 Jianguomenwai Avenue,
Chaoyang District, Beijing 100022
China
#406, Blue Sky Tower, Peace Avenue 17
1 Khoroo, Sukhbaatar District
Ulaanbaatar 14240
Mongolia
Head Office
34-3 Yeouido-dong, Yeongdeungpo-gu
Seoul 150-716
Korea
Tel: 86-10-6567-9699 Tel: 976-7011-0807 Tel: 82-2-768-3026