Indonesia Industry Focus
Indonesia Media
Refer to important disclosures at the end of this report
25 Jun 2018
Seizing the opportunity JCI : 5,821.81 Current share price has yet to price in potential upside Analyst from higher advertising expenditure (adex) growth David Arie Hartono +62 2130034936 We forecast 10% adex growth in FY18F from potential [email protected] consumption pick-up in pre-election year, and two major sporting events (World Cup and Asian Games)
Initiate Indonesia Media Sector with OVERWEIGHT We prefer SCMA as a potential beneficiary of adex STOCKS recovery, while MNCN is our second pick for its cheap 12-mth valuation Price Mkt Cap Target Price Performance (%) Rp US$m Rp 3 mth 12 mth Rating
Laggard sector with potential upside. The Indonesian media sector has notably underperformed the JCI in FY17 on Surya Citra Media 2,100 2,181 2,600 (22.5) (19.2) BUY Media Nusantara 975 954 1,300 (28.6) (48.6) BUY the back of muted advertising spending (ad spend) by FMCG companies due to political uncertainties and stagnant private Source: DBSVI, Bloomberg Finance L.P. consumption. We think that the current share price level has Closing price as of 22 Jun 2018 not priced in the potential higher adex growth in FY18F due to (i) potential pick-up in household consumption in a pre-election year which would help boost advertising spending (ad spend), Surya Citra Media : Surya Citra Media (SCMA) focusses on national and (ii) two major sporting events that would boost adex free to air (FTA) TV broadcasting. Through its station SCTV and growth. Currently, both SCMA and MNCN are trading at - Indosiar. SCMA controls c. 31.0% of Indonesia's FTA TV audience 1SD/-2SD of their historical 8-year average), which provides a shares (all time) as of April 2018 and ranked first on the metric. good entry point in the event of a pick-up in adex growth. Media Nusantara Citra : Media Nusantara Citra (MNCN) is one of South East Asia's largest and most integrated media companies, controlled by media mogul, Hary Tanoesoedibjo, with a focus on Two major election events will take Election year is coming. national free to air (FTA) television broadcasting. MNCN controlled place in June 2018 and April 2019, i.e. the regional PILKADA and 32.8% of all time Presidential elections respectively. We think that both events will help boost private household consumption. In the past, MNCN and SCMA share price movement household expenditure has increased by 300-400bps in the year prior to Indonesian elections. This is because the government 5,000
needs to deliver economic growth to increase the electability of 4,000 the incumbent or ruling party. The pre-election consumption boost will also bode well for consumer stocks; which will directly 3,000 translate into a better performance for media companies from higher advertising spending by FMCG companies. 2,000
1,000 SCMA is our top pick in the sector. Even though we have BUY calls on SCMA and MNCN, we prefer the former to the 0 latter. Under our base-case scenario of higher adex growth for this year at 10%, we believe that SCMA is better positioned to 2/1/2013 5/1/2013 8/1/2013 2/1/2014 5/1/2014 8/1/2014 2/1/2015 5/1/2015 8/1/2015 2/1/2016 5/1/2016 8/1/2016 2/1/2017 5/1/2017 8/1/2017 2/1/2018 5/1/2018 monetise higher adex growth due to its improvement in 11/1/2013 11/1/2014 11/1/2015 11/1/2016 11/1/2017 MNCN SCMA audience share (in prime time (PT) and all time (AT)). Furthermore, SCMA will also broadcast the Asian Games which Source: Bloomberg Finance L.P. would enable it to have a high audience share number and additional revenue streams from sponsorships.
ed: CK / sa:MA, PY, CS
Industry Focus
Indonesia Media
Table of Contents
Investment Thesis 3
Advertising revenue is positively correlated with economic conditions 5
Growth is driven by FMCG advertising budget, and audience share which 6
Special events to support adex growth in FY18F 11
Company Guide – Initiation 13
Surya Citra Media 14
Media Nusantara Citra 31
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Industry Focus
Indonesia Media
Investment Thesis As the media sector is at a discount to consumer names, expect We initiate the media sector with an Overweight call, and we the discount to narrow on the back of potential adex recovery. prefer Surya Citra Media (SCMA) to Media Nusantara Citra The underperformance was due to company-specific problems. (MNCN). Our Overweight call on the sector is premised on the SCMA’s underperformance can be attributed to (i) weak topline following: performance due to soft audience share numbers in FY17, (ii) higher cost of programming from the acquisition of a - We expect a recovery in advertising expenditure (adex) production house, Sinemart in early FY17 – which resulted in a growth in FY18F. We estimate a 10% adex growth in weaker EBITDA margin, and (iii) weak net income in FY17. FY18F which is based on (i) rate card improvement, (ii) Meanwhile, MNCN’s underperformance was due to (i) the fact potential higher advertising spending by FMCG that higher audience share number did not translate into a very companies and also technology companies, and (iii) strong topline growth in FY17, and (ii) some overhangs arising two major sports events this year which could boost from debt refinancing at the parent level. Thus, currently the adex this year media stock is trading at a 37% discount to consumer PE - The sector has been underperformed the JCI in FY17 multiple (the historical 3-year mean discount is at 28%). due to weak adex growth. But we think that the current share prices of SCMA and MNCN have only Media vs consumer PE ratio (x) priced in adex growth of 4-5% and the market has yet 40.0 to really price in the potential recovery of adex growth 35.0 - The media sector’s PE is now at a huge discount to 30.0 consumer names – higher than the historical average 25.0 discount 20.0 - Undemanding valuations – As SCMA/MNCN are 15.0 trading at -1SD/-2SD of their 8-year means at the 10.0 moment, we believe that their valuations are attractive 5.0 0.0 Laggard sector, with potential recovery in FY18F. Total adex growth in Indonesia decelerated to 8% y-o-y (bringing adex 2/1/2013 7/1/2013 5/1/2014 3/1/2015 8/1/2015 1/1/2016 6/1/2016 4/1/2017 9/1/2017 2/1/2018 value to Rp145.5tr) in FY17 vs. 14% y-o-y in the previous year. 12/1/2013 10/1/2014 11/1/2016 The softer adex growth was due to: (i) stagnant private Media PE Consumer PE consumption which resulted in a decrease in the sales volume of Source: Bloomberg Finance L.P. FMCG companies and thus prompting FMCG companies cut Note: Media companies average only include MNCN and SCMA their adex budget in 2017, and (ii) political instability in 2H17. Consumer companies are UNVR, INDF, ICBP, MYOR, KLBF, HMSP, GGRM Total advertising spending on TV and print (Rptr) 160.0 16% 134.8 145.5 140.0 14% 118.0 14.2% 120.0 109.8 12% 101.7 100.0 10%
80.0 7.9% 8% 8.0% 60.0 7.5% 6%
40.0 4%
20.0 2%
- 0% 2013 2014 2015 2016 2017
Advertising spending (Rptn) y-o-y growth (%)
Source: Nielsen Note: Commercial product ad spending on TV and print based on gross rate card (does not include discount, promo, and bonus)
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Industry Focus
Indonesia Media
Relative PE between media and consumer is currently trading at Undemanding valuations, especially if adex rebounds. Trading at -1SD. Revenue for most Indonesian media companies is highly -1SD and -2SD or below relative to the historical level, we correlated to spending on advertising and promotion by FMCG believe that SCMA and MNCN’s valuations are attractive, (more than 70%). We believe that the investors could view especially if advertising spending recovers. We think at the media stocks as a cheaper play on an improving domestic current share price levels for SCMA and MNCN, the market is consumption story than consumer names. Relative PE between pricing at 4-5% TV adex growth in FY18F (vs. our estimate of media and consumer sectors are currently trading at -1SD below 10%). We believe that both stocks offer an attractive risk- the historical 3-year mean of 0.72x. With our positive view on reward profile at current valuations. Thus, we initiate the media TV adex growth, we believe that current valuations offer an sector with an Overweight call, and BUY calls on SCMA and attractive entry point into the media sector. MNCN.
Media PE relative to consumer PE Even though we have BUY calls on SCMA and MNCN, we prefer 1.00 the former to the latter. Under our base-case scenario of higher
0.90 adex growth for this year at 10%, we believe that SCMA is better positioned to monetise higher adex growth due to its 0.80 improvement in audience share (in prime time (PT) and all time 0.70 (AT)). Furthermore, SCMA will also broadcast the Asian Games 0.60 which would enable it to have a high audience share number 0.50 and additional revenue streams from sponsorships. Meanwhile,
0.40 we think that MNCN will see a slower multiple expansion, as it is facing weaker audience share in YTD 2018.
PE Average +1SDEV -1SDEV +2SDEV -2SDEV
Source: Bloomberg Finance L.P.
Peers comparison P/E (X) EV/ EBITDA (X) EPS (Fully Diluted) BVPS Price/ BVPS (X)
FY2017 FY2018 FY2019 FY2017 FY2018 FY2019 FY2017 FY2018 FY2019 FY2017 FY2018 FY2019 FY2017 FY2018 FY2019 Indonesia Media Surya Citra Media SCMA IJ EQUITY 24.4x 21.9x 19.8x 16.6x 14.8x 13.1x 91.1 101.5 112.2 266.81 317.62 372.48 8.3x 7.0x 6.0x Media Nusantara Citra MNCN IJ EQUITY 10.5x 9.4x 7.9x 6.1x 5.6x 4.8x 101.8 113.5 135.2 632.15 703.57 793.34 1.7x 1.5x 1.3x
Regional Media BEC World PCL BEC TB Equity nm nm 77.0x nm 15.1x 7.4x (0.6) (0.0) 0.0 0.69 0.67 0.67 0.7x 0.8x 0.8x Astro Malaysia ASTRO MK EQUITY 13.9x 11.3x 13.4x 7.0x 7.8x 6.7x 0.1 0.1 0.1 0.12 0.13 0.15 13.9x 13.3x 11.5x Media Prima MPR MK Equity nm nm 77.0x nm 15.1x 7.4x (0.6) (0.0) 0.0 0.69 0.67 0.67 0.7x 0.8x 0.8x Sun TV SUNTV IN Equity nm nm 77.0x nm 15.1x 7.4x (0.6) (0.0) 0.0 0.69 0.67 0.67 0.7x 0.8x 0.8x TV18 TV18 IN Equity nm nm 77.0x nm 15.1x 7.4x (0.6) (0.0) 0.0 0.69 0.67 0.67 0.7x 0.8x 0.8x
Indonesia Consumer Unilever Indonesia UNVR IJ EQUITY 48.2x 43.1x 39.2x 33.8x 30.1x 27.4x 918.0 1,027.0 1,129.9 678.03 787.02 889.95 65.3x 56.3x 49.8x Indofood Sukses Makmur INDF IJ EQUITY 14.1x 13.5x 12.7x 7.4x 7.1x 6.9x 474.7 497.4 528.4 3,550.95 3,810.93 4,075.13 1.9x 1.8x 1.6x Indofood CBP Sukses Makmur ICBP IJ Equity 26.4x 22.7x 20.6x 15.6x 13.8x 12.4x 325.6 378.1 418.2 1,677.57 1,892.89 2,122.05 5.1x 4.5x 4.1x Mayora Indah MYOR IJ EQUITY 50.2x 42.5x 37.0x 25.2x 22.1x 19.6x 59.2 69.8 80.3 311.95 360.83 417.06 9.8x 8.5x 7.3x Kalbe Farma KLBF IJ EQUITY 25.5x 23.1x 20.9x 16.2x 14.7x 13.1x 51.6 56.8 63.0 287.90 319.14 353.81 4.6x 4.1x 3.7x
Indonesia Retail Ace Hardware Indonesia ACES IJ EQUITY 33.0x 32.8x 32.5x 21.6x 21.0x 20.6x 39.1 39.3 39.7 211.84 239.01 266.47 6.1x 5.4x 4.8x Matahari Department Store LPPF IJ EQUITY 13.5x 12.4x 11.5x 9.1x 8.0x 7.1x 653.6 710.9 768.7 797.82 1,051.26 1,322.28 11.1x 8.4x 6.7x Matahari Putra Prima MPPA IJ EQUITY nm 103.0x 43.3x nm 4.5x 3.5x (231.2) 2.6 6.3 218.32 272.08 278.36 1.2x 1.0x 1.0x Ramayana Lestari RALS IJ EQUITY 24.4x 21.9x 19.8x 16.6x 14.8x 13.1x 91.1 101.5 112.2 266.81 317.62 372.48 8.3x 7.0x 6.0x Source: Bloomberg Finance L.P., and DBSVI
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Industry Focus
Indonesia Media
Advertising revenue is positively correlated with economic Indonesia real GDP vs SCMA and MNCN’s revenue conditions growth (%) 45.0% 7.0% The revenue of Indonesian media companies is generally 40.0% correlated with: 35.0% 6.5% 30.0% 25.0% 6.0% - spending on advertising and promotion (A&P) by FMCG 20.0% 5.5% companies, as this contributes more than 70% of 15.0% 10.0% 5.0% media companies’ revenue. 5.0% - economic conditions, albeit indirectly; softer economy 0.0% 4.5% ‐5.0% conditions (soft GDP growth) would lead to FMCG ‐10.0% 4.0% companies cutting down their advertising on TV. 2010 2011 2012 2013 2014 2015 2016 2017 SCMA revenue growth MNCN revenue growth GDP
In our view, adex growth is a function of economic growth, Source: World Bank, companies during periods of economic boom, with the adex/nominal GDP growth multiplier rising to close to 2x. Meanwhile, during periods of economic downturns, the multiplier has softened to below 1x of nominal GDP.
We are more optimistic about achieving higher adex growth in 2018 in view of three upcoming major events: (i) World Cup (WC), (ii) Asian Games, and (iii) regional PILKADA elections. We believe that 2018 growth would be supported by the growth from special events. But we think that organic growth would remain a challenge for the media players, as we think that the trend of organic adex growth would enter a slow decline. In our view, long-term catalysts would emerge from the content business.
We forecast TV adex growth to grow at 10% in FY18F or at 1.08x multiplier to nominal GDP in FY18F. Our 1.08x assumption for adex/nominal GDP is based on our view of: (i) rising competition in the advertising business (from digital advertising platforms, like Youtube, Facebook and Google, (ii) social media advertising also posing as a threat to traditional advertising, and (iii) FMCG companies being more selective when spending their advertising budget.
Adex/nominal GDP growth multiplier (x)
2.50
2.00 1.89 1.91 1.87
1.50
1.00 0.82 0.84 0.74
0.50
- 2012 2013 2014 2015 2016 2017 Adex to nominal GDP
Source: World Bank, DBSVI
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Industry Focus
Indonesia Media
TV still dominates ad spend. Based on MPA estimates, Growth is driven by (i) FMCG advertising budget, and (ii) Indonesia has approximately 42m TV households (TVHHs) audience share which translates into higher rate card wherein ~80% have access to FTA. FTA channels are the most viewed on all platforms, with an estimated total TV audience FMCG companies’ advertising spending will be higher in FY18F, share in excess of 90% Thus, FTA advertising remains strong thus supporting the growth. The market will likely regain some with a total advertising market share of ~60%, dominated confidence in 2018, as major advertisers have indicated their primarily by popular local content, such as dramas and intention to increase their total budgets for TV advertising sinetrons. FTA advertising is projected to grow to US$1.5bn at spending in 2018 by up to 7-8%. Based on the 1Q18 data for a CAGR of 3.1% over 2017-2022. consumer and cigarette companies’ advertising and promotion expenses, we gather that Unilever, Mayora, and Indofood have MPA estimates Internet advertising to post growth of up to increased their advertising spending budget. 35% in 2017. This specific media platform has shown a remarkably steep growth curve, driven primarily by online On the other hand, tobacco players have not increased their videos as well as the surging popularity of e-commerce and advertising spending budget for this year. We noticed that digital services. Among online video platforms, YouTube still cigarette companies have allocated more advertising spending to dominates despite last year’s launch of several legal video music events. However, we expect an increase in their platforms and sites offering ads-supported videos. Internet advertising spending in 2H18 due to the World Cup and Asian advertising is expected to expand from US$368m to US$848m Games events. over a five-year period starting 2017.
Indonesia advertising share by media (2017) Quarterly consumer advertising spending (Rpbn)
1,400.0 1.8% 1.2% 0.4% 1,200.0
1,000.0 18.0% 800.0
600.0
400.0 17.5% 61.1% 200.0
0.0 UNVR INDF ICBP KLBF MYOR
‐200.0 1Q17 2Q17 3Q17 4Q17 1Q18 TV Internet Print OOH Radio Cinema Source: companies
Source: Media Partner Asia
Quarterly cigarette advertising spending (Rpbn)
Indonesia advertising share by media (2022F) 1,000.0
900.0 1.0% 1.6% 0.3% 800.0
700.0
12.3% 600.0 500.0
400.0
300.0
200.0
100.0 54.1% 30.7% 0.0 GGRM HMSP RMBA 1Q17 2Q17 3Q17 4Q17 1Q18 Source: companies
TV Internet Print OOH Radio Cinema
Source: Media Partner Asia Technology companies will continue to rely on TV advertising. Technology companies are still trying to establish a foothold in the Indonesian market and are now advertising heavily on
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Industry Focus
Indonesia Media
traditional media, like TV. Based on the data from Nielsen, Prime time (PT) audience share as of May 2018 per TV technology companies consistently rank among the top 10 station advertisers on the main TV channels. RCTI SCTV IVM TRANS MNCTV TRANS7 GTV ANTV TV ONE METRO TVRM Jan-17 26.9 11.4 12.5 6.9 10.1 6.0 4.6 14.7 3.5 2.0 1.1 Feb-17 24.9 16.0 13.7 5.2 7.9 5.9 5.2 14.2 3.4 2.1 1.1 Mar-17 23.8 22.9 11.2 5.6 7.6 5.6 5.3 12.1 2.8 1.8 1.1 Top 10 product adex (Rpbn) Apr-17 21.7 21.4 12.6 4.6 8.7 6.1 7.3 9.5 4.9 1.9 1.0 Top 10 product TV and print Adex 2017 Adex 2016 May-17 23.0 17.9 12.4 4.4 9.2 6.8 6.8 9.6 6.5 2.1 0.9 Jun-17 24.0 15.9 9.9 4.1 9.4 5.7 7.7 14.4 5.9 1.8 0.9 Meikarta 1,539.5 - Jul-17 20.9 14.5 13.4 4.7 10.7 5.3 5.4 16.9 5.7 1.5 0.7 Traveloka.com 1,136.7 65% Aug-17 21.6 14.5 12.2 3.9 10.4 6.5 5.8 16.0 6.0 1.7 1.2 Indomie 981.5 25% Sep-17 20.6 12.7 12.7 4.0 12.7 6.8 5.2 16.0 6.5 1.6 0.9 Oct-17 19.2 13.2 12.3 4.6 11.4 6.5 5.6 18.6 6.1 1.4 0.9 Vivo smartphone 823.5 577% Nov-17 18.6 16.1 14.0 4.8 9.2 7.3 4.8 17.0 5.4 1.4 1.0 Clear shampoo 795.5 40% Dec-17 16.8 18.8 17.6 5.2 9.3 6.3 5.2 15.0 3.4 1.3 0.9 SGM exksplor 769.9 38% Jan-18 15.3 20.4 15.6 4.4 11.3 5.3 6.5 16.3 2.6 1.2 0.8 Feb-18 14.5 20.5 15.0 4.6 11.2 5.5 7.4 16.3 2.8 1.2 0.7 Kementrian Kesehatan 702.2 23% Mar-18 15.6 20.2 14.1 4.7 10.3 5.9 7.3 17.2 2.5 1.1 0.7 Samsung smartphone 640.0 28% Apr-18 15.2 21.0 14.2 5.6 9.8 5.4 7.2 16.9 2.6 1.1 0.7 Dove 610.3 788% May-18 16.4 17.9 15.1 4.6 10.8 6.1 6.7 16.8 2.9 1.4 1.1 Source: Nielsen Cap bango 589.7 36%
Source: Nielsen Prime time (PT) audience share as of May 2018 per group Audience share is key for rate card improvement. For FMCG MNCN SCMA TRANS VIVA companies that would like to advertise their products on TV J an-17 41.6 23.9 12.9 18.2 stations, they would like to see high and stable audience share Feb-17 38.0 29.7 11.1 17.6 numbers. A higher audience share number means that the Mar-17 36.7 34.1 11.2 14.9 probability of their products become well-known would be Apr-17 37.7 34.0 10.7 14.4 May-17 39.0 30.3 11.2 16.1 higher. The audience share is calculated by dividing the J un-17 41.1 25.8 9.8 20.3 average number of audience by total TV audience share. The J ul-17 37.0 27.9 10.0 22.6 average rate card in the Indonesian media industry stands at Aug-17 37.8 26.7 10.4 22.0 Sep-17 38.5 25.4 10.8 22.5 US$5,000/30seconds and it could go higher, subject to the Oct-17 36.2 25.5 11.1 24.7 audience share number. Nov-17 32.6 30.1 12.1 22.4 Dec-17 31.3 36.4 11.5 18.4 MNCN regained its pole position in May 2018 audience share J an-18 33.1 36.0 9.7 18.9 Feb-18 33.1 35.5 10.1 19.1 number. Based on Nielsen data for May audience share Mar-18 33.2 34.3 10.6 19.7 numbers, MNCN has successfully won back its first position in Apr-18 32.2 35.2 11.0 19.5 all time (AT) audience share by 32.8% (+2.1ppts m-o-m), and May-18 33.9 33.0 10.7 19.7 Source: NIelsen prime time (PT) audience share by 33.9% (+1.7ppts m-o-m).
We think the increase of audience share in May 2018 was due to its strong Ramadhan programme line-up. RCTI has secured All time (AT) audience share as of May 2018 per TV station a leading audience share (23.7%) in Suhoor prime time RCTI SCTV IVM TRANS M NCTV TRANS7 GTV ANTV TV ONE M ETRO TVRI1 LocalTV Jan-17 19.3 12.6 11.4 6.9 11.2 7.1 5.0 19.4 3.7 2.0 1.2 0.2 between 2am and 6am. In the Ramadhan festive period, there Feb-17 17.8 14.6 12.7 6.3 9.6 7.1 5.2 19.4 3.7 2.2 1.2 0.2 Mar-17 17.2 18.1 11.0 6.7 10.3 7.6 5.7 16.9 3.3 1.8 1.2 0.2 were other prime time slots being allocated in the morning; Apr-17 16.4 17.4 12.4 6.6 10.6 8.0 6.5 14.5 4.3 2.0 1.0 0.3 May-17 17.7 16.0 12.1 6.2 11.1 8.4 6.7 13.4 4.9 2.1 1.1 0.3 while under normal circumstances, these will be considered as Jun-17 18.9 14.5 11.0 5.6 10.9 7.5 7.1 17.5 4.0 1.7 1.0 0.3 non-prime time slots. VIVA group occupies the third position Jul-17 16.2 13.3 13.6 6.5 12.0 7.6 5.5 17.9 4.5 1.6 0.9 0.1 Aug-17 16.6 13.2 13.5 5.9 11.4 7.9 5.6 17.6 5.2 1.8 1.2 0.1 with 19.7% share (+0.2ppt m-o-m) of prime time (PT) and Sep-17 15.7 12.6 15.0 6.2 12.4 8.2 5.3 16.3 5.5 1.7 1.1 0.0 Oct-17 15.3 13.1 14.9 6.8 11.4 7.9 5.4 17.2 5.2 1.5 1.0 0.3 21.3% share (+0.9ppt m-o-m) of all time (AT) as of May 2018. Nov-17 15.3 13.9 15.2 7.0 10.4 8.5 5.2 16.7 4.9 1.6 1.0 0.9 Dec-17 14.5 15.5 16.3 7.1 10.3 7.3 6.7 16.2 3.6 1.4 0.9 0.2 Jan-18 13.1 17.2 15.6 6.6 11.5 6.6 7.3 16.8 2.9 1.3 0.9 0.2 Feb-18 12.1 17.5 15.2 6.7 11.6 6.6 8.1 16.7 3.1 1.3 0.8 0.3 Mar-18 12.7 17.8 14.6 6.5 10.7 6.7 7.7 18.5 2.7 1.1 0.8 0.2 Apr-18 13.0 18.7 14.7 7.0 10.0 6.4 7.7 17.5 2.9 1.2 0.8 0.1 May-18 15.1 16.5 14.5 6.1 10.3 6.2 7.4 18.1 3.2 1.4 1.1 0.1 Source: NIelsen
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Industry Focus
Indonesia Media
All time (AT) audience share as of May 2018 per group MNCN: Correlation between last year’s audience share and revenue growth MNCN SCMA TRANS VIVA 50.0 6.0% J an-17 35.5 24.0 14.0 23.1 45.0 5.0% Feb-17 32.6 27.3 13.4 23.1 40.0 4.0% Mar-17 33.2 29.1 14.3 20.2 35.0 3.0% Apr-17 33.5 29.8 14.6 18.8 30.0 2.0% May-17 35.5 28.1 14.6 18.3 25.0 1.0% J un-17 36.9 25.5 13.1 21.5 20.0 0.0% J ul-17 33.7 26.9 14.1 22.4 15.0 ‐1.0% Aug-17 33.6 26.7 13.8 22.8 10.0 ‐2.0% Sep-17 33.4 27.6 14.4 21.8 5.0 ‐3.0% Oct-17 32.1 28.0 14.7 22.4 0.0 ‐4.0% Nov-17 30.9 29.1 15.5 21.6 2013 2014 2015 2016 2017 Dec-17 31.5 31.8 14.4 19.8 MNCN PT audience share MNCN revenue growth J an-18 31.9 32.8 13.2 19.7 Feb-18 31.8 32.7 13.3 19.8 Source: Nielsen, companies Mar-18 31.1 32.4 13.2 21.2
Apr-18 30.7 33.4 13.4 20.4 May-18 32.8 31.0 12.3 21.3
Source: NIelsen
Correlation between audience share and advertising revenue of each TV player. Based on our analysis, we gather that there is some correlation between media advertising revenue growth and last year’s audience share number. This indicates that, if the audience share of one TV media company fell – it would have an impact on next year’s revenue growth. We believe that the advertisers will ask for adjustments in the rate card, depending on the audience share.
SCMA: Correlation between last year’s audience share and revenue growth
35.0 14.0% 12.0% 30.0 10.0% 25.0 8.0% 20.0 6.0%
15.0 4.0% 2.0% 10.0 0.0% 5.0 ‐2.0% 0.0 ‐4.0% 2013 2014 2015 2016 2017
SCMA PT audience share SCMA revenue growth Source: Nielsen, companies
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Industry Focus
Indonesia Media
Who are the players in Indonesia’s media industry? There are Indonesia’s TV stations some groups that owned a number of national free to air TV stations in Indonesia: Owner Group TV station
- MNC Group, which is owned by Hary Tanoesoedibjo, has three national TV stations (RCTI, MNCTV, and GTV) and regional TV stations under i-News TV Hary Tanoesoedibjo MNC Group
- Emtek Group, which is owned by Eddy Sariaatmadja, has two national TV stations (SCTV and Indosiar)
- VIVA Group, which is owned by Bakrie group, has two national TV stations (ANTV and TV One) - Trans Group, which is owned by Chairul Tanjung, has Eddy Sariaatmadja Emtek Group two national TV stations (Trans TV and Trans 7)
- Media Group, which is owned by Surya Paloh, has one TV station (Metro TV)
- Government of Indonesia also owns one national TV station (TVRI) Bakrie Group Bakrie Group
Chairul Tanjung Trans Group
Sury a Paloh Media Group
Kompas Gramedia Kompas Gramedia
Wishnutama and Agus Indika Group Lasmono
Government of Government of Indonesia Indonesia
Rajawali Corpora Rajawali Corpora
Source: company
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Industry Focus
Indonesia Media
Content essential to drive audience share. In general, PT Indonesia Entertainmen Group (IEG) content revenue Indonesians prefer to watch local content, which tend to and EBITDA (Rpbn) feature live recording, soap operas (sinetron), and variety 1,600 shows. The preference for local content is due to language 1,360 barriers, and the lack of education in some parts of Indonesia. 1,400 1,200 1,010 Surya Citra Media (SCMA), Media Nusantara Citra (MNCN), 1,000 and Visi Media Asia (VIVA) are fighting for the top spot in 800 prime time audience share. Last year, MNCN was able to grab the pole position for prime time audience share with 37.3% 600 market share on the back of its hugely popular local drama 400 called “Dunia Terbalik”. Meanwhile, SCMA was able to 200 93 111 improve its PT audience share number to 29.2% (+4.1ppts m- 0 o-m) thanks to its Sinemart production unit, which produced 2016 2017 dramas like “Anak Langit”, and the famous music show called Revenue (Rpbn) EBITDA (Rpbn)
“D’Academy” that aired on Indosiar TV station. Source: SCMA company presentation
Indonesia TV programmes Media Nusantara Citra (MNCN) content revenue (Rpbn) 1,600 1,466 1,400
1,200 1,001 1,000
800
600
400
200
0 2016 2017
Revenue (Rpbn)
Source: MNCN company presentation
Source: Nielsen,companies Content monetisation would be the next growth driver, in our view. Based on our discussions with SCMA and MNCN, they stated their intention to expand their content business via IEG and MNC Pictures, respectively, in the past few years. However, at this moment, more of the content sales are going to internal parties (i.e. for their own TV stations). Nonetheless, they are also trying to increase their third-party sales (outside of their affiliated companies), for example by selling content to video on demand services such as Netflix or iflix. We believe that the higher content sales going forward would be able to offset the downtrend in advertising revenue for TV stations.
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Industry Focus
Indonesia Media
Special events to support adex growth in FY18F believe it would directly compete with the prime time shows offered by SCMA and MNCN, and also VIVA. If we look back at Special events to support adex growth in FY18F. In 2018, there the previous WC in 2014 that was broadcasted by the VIVA are a few major events that we believe could help boost the adex group, the event helped it gain at least 8% of audience share growth of media players. The events are: (i) World Cup (WC), during that time (from a rough average share of 6% in the first and (ii) Asian Games. For WC, based on the past experience, five months of 2014 to 13%-15% during WC 2014). We think cigarette, telecommunication, and health drink players will spend that the audience share of MNCN, SCMA, and VIVA will decline a substantial part of their advertising budgets on TV by in June and July 2018, and Trans Group will benefit from sponsoring WC-related programmes. improving audience share numbers.
Top product category for TV advertisements during WC Will Trans Group be able to monetise the WC momentum to 2010 create some pressure on the Big 3? In our view, the strategy to broadcast WC 2018 would enable it to significantly improve its audience share numbers. But most importantly, there are also opportunities for TV programmes preceding WC 2018 matches to shine and grab the attention of a huge audience. If we look back at VIVA group via ANTV, prior to the screening of WC 2014 matches, its audience share in prime time (PT) slots was actually quite low. Post WC 2014, ANTV managed to successfully monetise its association with the event by clinching higher viewership for its drama series as well as improving its long-term
Source: Nielsen audience share.
Top products that were advertised during WC 2010 ANTV’s audience share pre- and post-WC 2014
20.0
18.0
16.0 World Cup 2014 boost ANTV audience share
14.0
12.0
Pre World Cup 2014, 10.0 the audience share was quite low 8.0
Post World Cup 2014, ANTV has been able to improve 6.0 the audience share. Since the other programs also been shining and able to post a good audience share number up to now 4.0 2.0 Source: Nielsen 0.0
About 3,000 spots were aired during WC. During WC events, Source: Nielsen audience share will typically surge and this will lead to media players increasing their rate card. Besides a higher rate card, we Regional PILKADA election in 2H18 and Presidential election next believe the TV programmes that are aired prior to WC games year will improve private consumption – leading to higher would benefit as well. If we assume that there are 3,000 advertising spending by FMCG companies. We believe that two available spots for WC events and a rate card of major election events will happen in June 2018 and April 2019. Rp70m/30seconds, we believe that WC could generate We are of the opinion that such events will help boost private advertising revenue of at least Rp200bn over one month. household consumption. In the past, household expenditure has increased by 300-400bps in the year prior to Indonesian With the World Cup being broadcasted by Trans Group, will this elections. This is because the government needs to deliver have an impact on SCMA and MNCN? Trans Group (privately economic growth to increase the electability of the incumbent or owned) and the 4th largest TV group in Indonesia has secured the ruling party. The pre-election consumption boost will also bode broadcast rights for WC 2018, which will start on 14 June 2018 well for consumer stocks; which will directly translate into a and end on 15 July 2018. WC 2018 will be hosted in Russia better performance for media companies from higher advertising (whose time zone is four hours ahead of Indonesia’s) and the spending by FMCG companies. matches will be broadcast at 7pm to 1am in Indonesia. We
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Industry Focus
Indonesia Media
Household expenditure growth (%)
6.0% 5.3% 5.5% 5.4% 5.1% 5.1% 5.0% 4.9% 5.0% 5.0% 4.9% 5.0% 4.7%
4.0% 3.2% 3.0%
2.0%
1.0%
0.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Household consumption
Source: World Bank
Page 12
Industry Focus
Indonesia Media
Company Initiations
Page 13
Indonesia Company Focus Surya Citra Media
Bloomberg: SCMA IJ | Reuters: SCMA.IJ Refer to important disclosures at the end of this report
DBS Group Research . Equity 25 Jun 2018
More exciting outlook BUY Revenue growth driven by higher rate card due to audience (Initiating Coverage) share improvement and Asian Games Last Traded Price ( 22 Jun 2018): Rp2,100 (JCI : 5,821.81) The acquisition of another TV station would make SCMA the Price Target 12-mth: Rp2,600 (24% upside) biggest TV station, thus boosting its revenue growth
Higher content sold to third parties would be the next Potential Catalyst: Asian Games could further spur revenue growth growth catalyst this year, Ramadhan, and acceleration of Media adex to benefit SCMA Initiate SCMA with BUY call and TP of Rp2,600/share Analyst We estimate SCMA to post 9% y-o-y growth in David Arie Hartono +62 2130034936 [email protected] Promising outlook. FY18F (vs. -1.6% y-o-y in FY17), due to (i) better ad spend outlook in FY18F, (ii) recovery in audience share, which translates into a higher rate card, and (iii) additional revenue streams from Asian Games Price Relative events in August 2018. We assume earnings CAGR of 10.8% over Rp Relative Index FY17-20F on the back of higher gross margin of 59.8% in FY18F (vs. 222 4,255.0 202 58.6% in FY17). 182 3,755.0 162 Are M&As on the table? SCMA has received the approval for its 3,255.0 142 122 rights issue of 1.46bn new shares at Rp2,446/share that will raise 2,755.0 102 Rp3.6tr. The company plans to use the proceeds (currently unused) 82 2,255.0 62 for working capital and business expansion. In our view, the proceeds 1,755.0 42 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 could be used to expand its business by either (i) acquiring another TV
Surya Citra Media (LHS) Relative JCI (RHS) station, or (ii) venturing into online/digital media platforms. The
acquisition of another TV station would be positive for SCMA, thus Forecasts and Valuation FY Dec (Rpbn) 2016A 2017A 2018F 2019F making it the biggest TV player in Indonesia and boosting its revenue Revenue 4,524 4,454 4,854 5,222 growth. EBITDA 2,140 1,970 2,184 2,411 Pre-tax Profit 2,024 1,782 1,999 2,210 Where we differ. We are more conservative than consensus as we Net Profit 1,501 1,331 1,484 1,641 assume lower media industry adex of 10% in FY18F and as a result, Net Pft (Pre Ex.) 1,501 1,331 1,484 1,641 our revenue growth is 5% below consensus. Furthermore, we assume EPS (Rp) 103 91.1 101 112 EPS Pre Ex. (Rp) 103 91.1 101 112 a higher cost of programming, which will lead to a lower GPM. Thus, EPS Gth (%) (1) (11) 11 11 our FY18 earnings forecast is 14% below consensus. At the end of EPS Gth Pre Ex (%) (1) (11) 11 11 the day, we have a lower TP vs consensus. Diluted EPS (Rp) 103 91.1 101 112 Net DPS (Rp) 0.0 0.0 0.0 0.0 Valuation: BV Per Share (Rp) 234 267 318 372 Our DCF-based TP of Rp2,600/share for SCMA assumes a WACC of PE (X) 20.5 23.1 20.7 18.7 9% and terminal growth of 3%. Our TP implies 25.6x FY18F PE. PE Pre Ex. (X) 20.5 23.1 20.7 18.7 P/Cash Flow (X) 22.2 24.6 20.2 18.1 Currently, the stock is trading at 17.9x FY18F PE, which is -1SD of its EV/EBITDA (X) 14.3 15.7 13.9 12.4 8-year mean. Net Div Yield (%) 0.0 0.0 0.0 0.0 P/Book Value (X) 9.0 7.9 6.6 5.6 Key Risks to Our View: Net Debt/Equity (X) CASH CASH CASH CASH Slower ad spend by FMCG companies, decline in audience share, ROAE (%) 45.7 36.3 34.7 32.5 competition from digital advertising, and digitalisation of Consensus EPS (Rp): N/A N/A N/A transmission. Other Broker Recs: B: 13 S: 0 H: 3 At A Glance ICB Industry : Consumer Services Issued Capital (m shrs) 14,622 ICB Sector: Media Mkt. Cap (Rpbn/US$m) 30,705 / 2,181 Principal Business: Surya Citra Media (SCMA) focusses on national Major Shareholders (%) free to air (FTA) TV broadcasting. Through its station SCTV and PT Elang Mahkota Teknologi 60.83% Indosiar. SCMA controls c. 31.0% of Indonesia's FTA TV audience Free Float (%) 39.1% shares (all time) as of April 2018 and ranked first on the metric. 3m Avg. Daily Val (US$m) 1.9 Source of all data on this page: Company, DBSVI, Bloomberg Finance L.P.
ed: CK / MA, PY, CS
Company Focus
Surya Citra Media
Table of Contents SWOT analysis 16 Investment summary 17 Company background 19 Key management team 19 Competitive strengths 20 Growth strategies 20 Key risks 21 Critical data points to watch 22 Key assumption 25 Income statement 26 Quarterly/interim income statement 27 Balance sheet 28 Cash flow statement 29 Valuation 30
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Company Focus
Surya Citra Media
SWOT Analysis
Strengths Weakness SCMA has solid prime time and non-prime time audience Highly dependent on FMCG companies (70% of share numbers revenue), since they contribute the bulk of the company’s Strong production house revenue Healthy balance sheet and minimum USD exposure Higher FCF vis-à-vis peers Has the highest net margin in the industry of 29.9% and ROE of 36.3% as of 2017
Opportunities Threats Potential higher revenue growth in FY18F from the Asian Softer advertising spending (ad spend) by FMCG Games event, whose broadcasting licence is owned by SCTV companies would impact its revenue growth Potential acquisition of another TV station. Such move Fierce competition in audience share will also pose a would make SCMA the largest TV company in terms of threat to the company audience share in Indonesia Competition from digital advertising Switch to digital from analog
Source: DBSVI
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Company Focus
Surya Citra Media
Investment Summary
Initiate coverage of SCMA with BUY call and TP of Forecast SCTV revenue CAGR of 5% over FY17-20F. We Rp2,600/share. Our optimism is based on the following: assume that SCTV’s prime time audience share to remain in the range of 18.5-19.5% over FY18F-20F and assume 5% - Improvement in SCTV audience share in YTD 2018, which enables the company to increase its rate card rate card improvement p.a. As a result, we assume revenue in FY18F to grow at a CAGR of 5% over FY17-20F. This has already pencilled in softer advertising expenditure (adex) going - Asian Games would give another boost to the forward due to more competition from digital advertising. company’s revenue stream in FY18F
- Indosiar’s audience share remains stable and at a high level, which we believe it would enable a higher SCTV revenue (Rpbn – LHS) and PT audience share (% - sponsorship payment RHS) 3,100.0 25.0 - We estimate a stabilisation of SCMA’s margin in FY18F to 59.8%. In FY17, gross margin fell 3,000.0 20.0 significantly to 58.6% due to higher cost of 2,900.0 programming after acquiring SinemArt 15.0 2,800.0 - Healthy balance sheet with minimum USD exposure, 2,700.0 and the company offers a good ROE of 34.7% in 10.0
FY18F – which is the highest among the media 2,600.0 industry 5.0 2,500.0 - SCMA is currently trading at 17.9x PE FY18F, 2,400.0 0.0 -1SD of its historical 8-year mean of 21.2x. We 2014 2015 2016 2017 2018F 2019F 2020F
believe that the current share price has priced in the SCTV revenue SCTV PT audience share bad news, coupled with the failure to reflect any potential upside Source: Nielsen, company, DBSVI
SCTV’s improvement in audience share to drive revenue Indosiar to continue delivering good growth. Indosiar has growth in FY18F. In the past three years, SCTV has been successfully transformed its programming since 2012, with under pressure to deliver a strong and stable audience share the TV station now delivering good audience share numbers number, which resulted in soft revenue growth. However, we – thanks to its music shows like D’Academy. Indosiar’s foresee that SCTV’s audience share has shown a recovery revenue grew at a CAGR of 9% in FY14-17 due to the since end of 2017, and it has continued to improve up till improvement in audience share number. We forecast 10% April 2018. We believe the improvement in audience share revenue CAGR over FY17-20F for Indosiar TV station on the would boost its rate card in FY18F. Furthermore, we also see back of potentially stable audience share numbers. Several additional revenue streams for SCTV from Asian Games, as new programmes have emerged to maintain its audience SCTV owns the broadcasting licence for Asian Games. We share number in FY18F, e.g. LIDA (Liga Dangdut Indonesia). estimate an additional revenue of at least Rp200bn (assuming The show has received more sponsorship revenue from 3,000 time slots available for Asian Games and a rate card FMCG companies but it entails higher programming costs. between of Rp65m and Rp70m per 30seconds).
SCTV prime time (PT) audience share (%) (RHS) and SCTV Indosiar’s revenue (Rpbn – LHS) and PT’s audience share revenue (Rpbn) (LHS) (%) (RHS) 2,000.0 18.0 2,740.0 20.0 1,800.0 16.0 2,720.0 18.0 1,600.0 14.0 2,700.0 16.0 1,400.0 12.0 2,680.0 14.0 1,200.0 10.0 2,660.0 12.0 1,000.0 8.0 2,640.0 10.0 800.0 2,620.0 8.0 6.0 600.0 2,600.0 6.0 400.0 4.0 2,580.0 4.0 200.0 2.0 2,560.0 2.0 0.0 0.0 2,540.0 0.0 2014 2015 2016 2017 2014 2015 2016 2017 Indosiar revenue Indosiar PT audience share SCTV revenue SCTV PT audience share
Source: Nielsen, company Source: Nielsen, company
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Company Focus
Surya Citra Media
Indosiar’s revenue (Rpbn – LHS) and PT’s audience share Indosiar’s all time (AT) audience share (%) (%) (RHS) 19.0 3,000.0 18.0 17.0 16.0 2,500.0 15.0 14.0 13.0 2,000.0 12.0
10.0 11.0 1,500.0 8.0 9.0
1,000.0 6.0 7.0
4.0 5.0 500.0 14 15 16 17 14 15 16 17 18 14 15 16 17 18 14 15 16 17 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 2.0 ‐ Jul Jul Jul Jul Jan Jan Jan Jan Jan Oct Oct Oct Oct Apr Apr Apr Apr 0.0 0.0 Apr 2014 2015 2016 2017 2018F 2019F 2020F Indosiar AT audience share Indosiar revenue Indosiar PT audience share Source: Nielsen Source: Nielsen, company, DBSVI
Rights issue to raise Rp3.6tr. SCMA has obtained Quality content has improved Indosiar’s audience share in FY17. Indosiar has a relatively different positioning from shareholder approval for its rights issue of 1.46bn new shares SCTV whose focus lies with entertainment programmes at Rp2,446/share, which will raise Rp3.6tr. The company produced in-house by IEP (Indonesia Entertainmen Produksi) plans to use the proceeds for working capital and business in 2017 – in Prime Time while FTV Drama Keluarga (Family expansion. As the company is in net cash position and there Soap Opera) in Non-Prime Time. The improvement of quality is no urgent need for any substantial capex at the moment in content execution and breakthrough was carried out to (given that the media industry has softened in the past few elevate Indosiar’s performance. Overall, Indosiar succeeded in years), we don’t think that SCMA requires working capital for improving its audience share by +0.7ppt, from 12.5% in traditional TV business expansion. 2016 to 13.2% in 2017. Meanwhile, a drop in day part Prime Time was compensated by its performance improvement in In our view, the proceeds of the huge capital raising exercise Non-Prime Time. can be used to (i) venture into online/digital platforms, and (ii) pursue potential M&As, such as acquiring another TV station, Indosiar’s leading talent search programmes, that well to increase its audience share and revenue growth. received by viewers in 2017, include D’Academy 4, D’Academy Celebrity 2, Aksi Asia, Bintang Pantura 4, Golden If we incorporate the rights issue proceeds of Rp3.6tr into our Memories Vol.2, Stand Up Comedy Academy 3, and FY18F balance sheet and increase its outstanding shares by D’Academy Asia 3. 1.46bn to 16.1bn, a lower EPS may arise in FY18F (assuming that we do not make any changes to revenue and earnings). With a lower EPS, our TP could appear expensive at 28.5x Indosiar’s prime time (PT) audience share (%) FY18F PE compared to 25x FY18F PE pre-rights issue.
25.0 However, at the moment, we have yet to get any clear information on the company’s utilisation plan for the rights 20.0 issue proceeds.
15.0
10.0
5.0
0.0
Indosiar PT audience share Source: Nielsen
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Company Focus
Surya Citra Media
Company Background
Corporate History. Surya Citra Media (SCMA) was of December 2016, SCMA took over SinemArt (production established on 29 January 1999 to focus on national free to house company). SCMA’s parent company is the Emtek air (FTA) TV broadcasting. SCMA owns two national FTA TV Group, which is controlled by the Sariaatmadja family. stations, i.e. SCTV and Indosiar (IVM). SCTV commenced its Currently, SCMA controls c.31.0% of Indonesia FTA TV commercial broadcast in 1990, covering the city of Surabaya, audience share (all time) as of May 2018 and ranked second and began operating nationwide in 1993. In early 2013, PT on the metric. Indosiar Karya Media Tbk merged into SCMA. And at the end
Sales Trend Profitability Trend Rp bn Rp bn 10.0% 5,000 2,131 9.0% 2,031 8.0% 4,000 7.0% 1,931 3,000 6.0% 1,831 5.0% 1,731 2,000 4.0% 3.0% 1,631 1,000 2.0% 1,531
1.0% 1,431 0 0.0% 2015A 2016A 2017A 2018F 2019F 1,331 2015A 2016A 2017A 2018F 2019F
Total Revenue Revenue Growth (%) (YoY) Operating EBIT Pre tax Profit Net Profit
Source: Company, DBSVI
Key Management Team
Mr Sutanto Hartono was born in 1967. He was appointed as a President Director of the company in 2013. Prior to this appointment from 2011-2013, Sutanto Hartono President Director he serv ed as the President Director of SCTV , a role which he was re-apointed in 2015. Previously, he was the Country General Manager of PT Microsoft Indonesia. He hold MBA from University of California, Berkeley.
Mrs Harsiwi Achmad was born in 1966. She was appointed as a Director of the company since 2013. Previously, she held the position of Programming Harsiwi Achmad Director Director of PT Surya Citra Televisi (SCTV) from 2010-2013, and Director of PT Rajawali Citra Televisi (RCTI) from 2006-2010. She hold Master Degree from Monash University.
Mr Imam Sudjarwo was born in 1955. He was appointed as a Director of the company since 2015 and he still serv es as the President Director of PT Indosiar Imam Sudjarwo Director Visual Mandiri since 2014. Previously, he was the Head of Security Intelligence of National Police. He hold Master of Science Degree from University of Indonesia.
Mrs Rusmiyati Djajaseputra was born in 1978. She was appointed as a Director of the company since 2015. Previously, she served as Finance Rusmiyati Djajaseputra Director Director at PT Surya Citra Televisi (SCTV) and PT Indosiar Visual Mandiri. She graduated from Tarumanegara University with a Bachelor Degree of Accounting and possessed CPA Indonesia Certificate.
Mrs Mutia Nandika was born in 1980. She was appointed as an Independent Director of the company since 2016. Previously, she served as Country Mutia Nandika Independent Director Industry Head of Google Indonesia since March 2013-October 2015. She obtained her Bachelor Degree in Politic and Social Sciences from Catholic University of Parahyangan. Source: Company
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Company Focus
Surya Citra Media
Competitive Strengths Growth Strategies
One of the leaders in prime time (PT) and all time (AT) SCTV’s audience share has improved. In 2017, SCTV audience share. As of May 2018, SCMA controls market prime time (PT) and all time (AT) audience share have shares of 33.0% and 31.0% of PT and AT, respectively. In improved significantly. SCTV AT and PT increased by 1.8ppts YTD 2018, SCMA has showed a significant improvement in and 5.0ppts, respectively in 2017. The improvement of terms of audience share for both TV stations, SCTV and audience share was due to its soap opera (Sinetron) Indosiar; through their new programs in both TV stations. programmes that were produced by PT SinemArt Indonesia Currently, SCMA is the second largest market share behind (which was acquired in FY17). Several programmes like MNCN. “Siapa Takut Jatuh Cinta”, “Anak Langit”, “Berkah Cinta”, “Anak Sekolahan”, and “Boy” helped to improve SCTV’s PT All time (AT) audience share per group (%) audience share number in 2017.
MNCN SCMA TRANS VIVA Jan-17 35.5 24.0 14.0 23.1 SCTV’s PT audience share showed an improvement YTD Feb-17 32.6 27.3 13.4 23.1 (%) Mar-17 33.2 29.1 14.3 20.2 Apr-17 33.5 29.8 14.6 18.8 25.0 May-17 35.5 28.1 14.6 18.3 Jun-17 36.9 25.5 13.1 21.5 20.0 Jul-17 33.7 26.9 14.1 22.4 15.0 Aug-17 33.6 26.7 13.8 22.8 Sep-17 33.4 27.6 14.4 21.8 10.0 Oct-17 32.1 28.0 14.7 22.4
Nov-17 30.9 29.1 15.5 21.6 5.0 Dec-17 31.5 31.8 14.4 19.8 Jan-18 31.9 32.8 13.2 19.7 0.0 -14 -15 -16 -17
Feb-18 31.8 32.7 13.3 19.8 -14 -16 -17 y y y y p p p Jul-14 Jul-15 Jul-16 Jul-17 Jan-14 Jan-15 Jan-17 Jan-18 Jan-16 Se Sep-15 Se Se Nov-14 Nov-16 Nov-17 Nov-15 Mar-14 Mar-15 Mar-17 Mar-18 Mar-16 Ma Ma Ma Mar-18 31.1 32.4 13.2 21.2 Ma Apr-18 30.7 33.4 13.4 20.4 SCTV PT audience share May-18 32.8 31.0 12.3 21.3 Source: Nielsen Source: Nielsen
Prime time (PT) audience share per group (%) MNCN SCMA TRANS VIVA SCTV’s AT audience share showed an improvement YTD Jan-17 41.6 23.9 12.9 18.2 (%) Feb-17 38.0 29.7 11.1 17.6 Mar-17 36.7 34.1 11.2 14.9 20.0 Apr-17 37.7 34.0 10.7 14.4 19.0 May-17 39.0 30.3 11.2 16.1 18.0 17.0 Jun-17 41.1 25.8 9.8 20.3 16.0 Jul-17 37.0 27.9 10.0 22.6 15.0 Aug-17 37.8 26.7 10.4 22.0 14.0 Sep-17 38.5 25.4 10.8 22.5 13.0 Oct-17 36.2 25.5 11.1 24.7 12.0 Nov-17 32.6 30.1 12.1 22.4 11.0 Dec-17 31.3 36.4 11.5 18.4 10.0 14 15 16 17 14 15 16 17 18 14 15 16 17 18 14 15 16 17 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ Jan-18 33.1 36.0 9.7 18.9 ‐ Jul Jul Jul Jul Jan Jan Jan Jan Jan Oct Oct Oct Oct Apr Apr Apr Apr Feb-18 33.1 35.5 10.1 19.1 Apr Mar-18 33.2 34.3 10.6 19.7 SCTV all time audience share Apr-18 32.2 35.2 11.0 19.5 May-18 33.9 33.0 10.7 19.7 Source: Nielsen
Source: Nielsen
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Company Focus
Surya Citra Media
Key Risks SCTV vs RCTI’s prime time audience share (%) Soft advertising spending (ad spend) growth. Ad spend 35.0 30.0 growth is positively correlated to the GDP of Indonesia. In our
25.0 base case, we assume 1.08x multiplier between ad spend and
20.0 nominal GDP. Our multiplier is based on the assumption of a
15.0 household consumption recovery due to 2018 being an
10.0 election year. However, if the household consumption
5.0 recovery trails our expectation, then the risks of lower ad 0.0 spend growth and lower revenue growth for TV players could -14 -15 -16 -17 -14 -16 -17 y y y y p p p emerge in FY18F. Jul-14 Jul-15 Jul-16 Jul-17 Jan-14 Jan-15 Jan-17 Jan-18 Jan-16 Se Sep-15 Se Se Nov-14 Nov-16 Nov-17 Nov-15 Mar-14 Mar-15 Mar-17 Mar-18 Mar-16 Ma Ma Ma Ma SCTV PT audience share RCTI PT audience share
Sensitivity analysis on advertising spending Source: Nielsen 2015 2016 2017 2018F BEAR BASE BULL
SCMA 4.5% 6.8% -1.6% 9.0% 6.0% 9.0% 12.0% Asian Games will provide additional revenue for SCMA. MNCN -3.3% 4.4% 4.8% 6.0% 4.0% 6.0% 8.0% The Asian Games, which will be held in Jakarta and Palembang, is expected to be a momentous national event Ads spend average growth 7.5% 14.2% 7.9% 10.0% 7.2% 10.0% 12.0% that will grab the attention of Indonesians. All eyes will be on Indonesia nominal GDP 9.1% 7.6% 9.5% 9.3% 9.0% 9.3% 10.0% the second largest sporting event in the world, and the x GDP 0.82 1.87 0.84 1.08 0.80 1.08 1.20 excitement is further underpinned by the fact it is the first time that Indonesia has hosted the Asian Games since 1962. Source: World Bank, Nielsen, companies, DBSVI
The appointment of SCTV as the official media to cover the Weaker audience share. Ad spend growth is one of the 2018 Asian Games in Jakarta and Palembang will certainly key drivers for the media industry’s growth. The other factor improve SCMA’s potential to boost its audience share. is audience share, which would impact the rate card of media
players. Normally, advertisers prefer to advertise their Content is the next growth driver. Online video products on TV stations that have a strong and stable streaming platforms have been expanding into emerging audience share. If SCMAs fail to maintain its strong audience markets like Indonesia with localised content. Falling share, its rate card could head south and this could result in smartphone prices and improved 4G coverage have also lower revenue growth in FY18F. contributed to smartphone penetration rising to 43% and the
proliferation of subscription video on demand (SVoD) Rights issue to raise Rp3.6tr. SCMA has obtained services. shareholder approval for its rights issue of 1.46bn new shares
at Rp2,446/share, which will raise Rp3.6tr. The company Netflix, iflix and Hooq are a few examples of SVoD players in plans to use the proceeds for working capital and business Indonesia. Most of the SVoD players provide localised content expansion. We think that investors will wait for more clarity which they bought from SCMA or MNCN – thus providing a on the utilisation plan of its capital raising exercise ( which new revenue stream to offset the potential decline of entails a potential dilution). The right investments could boost advertising revenue in the future. investor confidence.
SCMA’s production house team and flow of content sales Massive growth of online media. The massive growth of online media remains a challenge for the media industry’s ad spend growth going forward.
Digitalisation regulation. Furthermore, the plan to introduce new broadcasting laws in relation to the migration of analogue to digital transmission, also poses another Content Distribution
TV shows (drama, FTV, variety show) challenge for the media industry. Online (Iflix, Netflix, Vidio, Smartphones) Cinema (Indonesia Box Office)
VIP - Online Video Content production house Source: company
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Company Focus
Surya Citra Media
SCTV Revenue (Rpbn) CRITICAL DATA POINTS TO WATCH 2860 2888.9 2705 2730 2611 2600 Critical Factors 2476.2 2063.5
Advertising revenue is positively correlated with GDP 1650.8
1238.1 In our view, adex growth is a function of economic growth, during 825.4 periods of economic boom, with the adex/nominal GDP growth 412.7 multiplier rising to close to 2x. Meanwhile, during periods of 0.0 economic downturns, the multiplier has softened to below 1x of 2015A 2016A 2017A 2018F 2019F nominal GDP. Indosiar Revenue (Rpbn) Media players are a proxy to consumer demand and trading at a 2257.2 2213 1988 discount 1881 1805.8 1731 1485 Media player’s revenues are highly correlated to spending by FMCG 1354.3 companies on advertising and promotions. Currently, the media 902.9 sector is trading at 16.2x FY18F PE vs. 32.7x FY18F PE for the consumer sector – we note that the media sector has been trading 451.4 at a huge discount to consumer names. With the potential recovery 0.0 of industry adex in FY18F, we believe that the media sector’s PE 2015A 2016A 2017A 2018F 2019F discount to consumer names will narrow going forward. Others (content revenue -Rpbn)
Correlation between audience share and advertising revenue of 151.56 149 135 each TV player 123 121.25
Based on our analysis, we gather that there is some correlation 90.94 between media advertising revenue growth and last year’s 60.62 audience share number. This indicates that, if the audience share of 48.8 32.2 one TV media company fell – it would have an impact on next 30.31 year’s revenue growth. We believe that the advertisers will ask for adjustments in the rate card, depending on the audience share. 0.00 2015A 2016A 2017A 2018F 2019F
Source: company, DBSVI
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Company Focus
Surya Citra Media
Appendix 1: A look at Company's listed history – what drives its share price?
Media players revenue vs GDP growth
50.0% 7.0%
40.0% 6.5%
30.0% 6.0%
20.0% 5.5%
10.0% 5.0%
0.0% 4.5%
‐10.0% 4.0% 2010 2011 2012 2013 2014 2015 2016 2017 SCMA revenue growth MNCN revenue growth GDP
Source: Bloomberg Finance L.P., company, DBSVI
SCMA: Correlation between last year’s audience share and revenue growth 35.0 16.0%
30.0 12.0% 25.0
8.0% 20.0
15.0 4.0% 10.0 0.0% 5.0
0.0 -4.0% 2013 2014 2015 2016 2017
SCMA PT audience share SCMA revenue growth
Source: Bloomberg Finance L.P., company, DBSVI
Media vs consumer PE ratio (x)
Source: Bloomberg Finance L.P., company, DBSVI
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Company Focus
Surya Citra Media
Balance Sheet: Leverage & Asset Turnover (x) Solid balance sheet. Surya Citra Media (SCMA) has a solid balance 0.05 1.0 0.05 1.0 sheet. The company does not have any bank borrowings and has 0.04 0.04 always been in a net cash position. As of end-December 2017, the 0.9 company’s cash position stood at Rp233.5bn. 0.03 0.03 0.9 0.02 0.8 ROA fell in 2017 due to acquisition of SinemArt. In the past three 0.02 0.01 years, SCMA’s ROA stabilised at 32-33% between FY14 and FY16. 0.8 0.01 However, in FY17, SCMA’s ROA fell to 26.1% due to higher 0.00 0.7 intangible assets in the wake of the acquisition of SinemArt in 2017 2015A 2016A 2017A 2018F 2019F Gross Debt to Equity (LHS) Asset Turnover (RHS) that involved Rp716bn. Capital Expenditure Rpbn Rpm Softer earnings lead to lower ROE. Due to the softer industry 350.0 growth, SCMA faced a number of challenges in the past few years 300.0 arising from (i) weak audience share number, and (ii) higher cost of 250.0 programming incurred to quickly boost the audience share number. 200.0
This has resulted in a lacklustre earnings performance in the past 150.0 few years, with ROE falling to 36.3% in FY17 from 45.7% in FY16. 100.0 50.0 0.0 Share Price Drivers: 2015A 2016A 2017A 2018F 2019F Higher ad spend by FMCG companies. The market will likely regain Capital Expenditure (-) some confidence in 2018, as major advertisers have indicated their plans to increase their total budgets on TV ad spend in 2018 by up ROE (%) to 7-8%. This is also supported by MPA’s latest data that the FTA 45.0% 40.0% advertising market will grow by 6.7% in 2018. 35.0%
30.0%
Improvement in audience share. A high and stable audience share 25.0% is essential for media players, as this would enable them to charge 20.0% advertisers a higher rate card. 15.0% 10.0% 5.0%
Key Risks: 0.0% Weakening adex growth. Our 10% adex growth is based on our 2015A 2016A 2017A 2018F 2019F assumption of higher ad spend by FMCG companies. If adex growth is only at 7%, then our revenue growth and PE multiple will Forward PE Band (x) (x) be lower. 42.5
Weaker audience share number. If its audience share fall and 37.5 +2sd: 38x +1sd: 33.6x SCMA concedes market share to its competitors, this will translate 32.5 into potentially lower rate card charges and weak revenue growth Avg: 29.2x in FY18F. 27.5 ‐1sd: 24.9x 22.5 Rights issue could become an overhang. SCMA has obtained ‐2sd: 20.5x 17.5 shareholder approval at its EGM to raise new capital of Rp3.6tr (at Jun-14 Jun-15 Jun-16 Jun-17 Rp2,446/share). Based on the Indonesia’s securities regulations, the approval would be valid for two years, i.e. until 2020. In our view, PB Band (x) (x) this could present an overhang risk for SCMA’s share price, as 18.4 investors could be concerned about the potential dilution effect. 16.4 +2sd: 16.53x
14.4 +1sd: 14.23x
Company Background 12.4 Surya Citra Media (SCMA) focusses on national free to air (FTA) TV Avg: 11.93x broadcasting. Through its station SCTV and Indosiar. SCMA 10.4 ‐1sd: 9.63x controls c. 31.0% of Indonesia's FTA TV audience shares (all time) 8.4 as of April 2018 and ranked first on the metric. ‐2sd: 7.33x 6.4 Dec-14 Dec-15 Dec-16 Dec-17 Source: Company, DBSVI
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Company Focus
Surya Citra Media
Key Assumptions FY Dec 2014A 2015A 2016A 2017A 2018F 2019F
SCTV Revenue 2,717 2,705 2,611 2,600 2,730 2,860
Indosiar Revenue 1,319 1,485 1,881 1,731 1,988 2,213
Others (content revenue) 19.6 48.8 32.3 123 135 149
Segmental Breakdown FY Dec 2014A 2015A 2016A 2017A 2018F 2019F
Revenues (Rpbn) Advertising Revenue 4,036 4,189 4,492 4,331 4,718 5,073
Others 19.6 48.8 32.3 123 135 149 Total 4,056 4,238 4,524 4,454 4,854 5,222
Source: company, DBSVI
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Company Focus
Surya Citra Media
Income Statement (Rpbn) Margins Trend FY Dec 2014A 2015A 2016A 2017A 2018F 2019F 48.0% Revenue 4,056 4,238 4,524 4,454 4,854 5,222 Cost of Goods Sold (1,475) (1,522) (1,782) (1,842) (1,950) (2,038) 43.0% Gross Profit 2,580 2,715 2,742 2,612 2,904 3,184 38.0% Other Opng (Exp)/Inc (664) (701) (738) (840) (915) (985) Operating Profit 1,917 2,015 2,003 1,772 1,989 2,200 33.0%
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 0.0 28.0% 2015A 2016A 2017A 2018F 2019F Associates & JV Inc 0.0 (0.2) 1.85 11.0 0.0 0.0 Operating Margin % Net Income Margin % Net Interest (Exp)/Inc 0.22 24.1 18.4 (1.1) 10.3 10.6 Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0 0.0 Pre-tax Profit 1,917 2,038 2,024 1,782 1,999 2,210 Tax (469) (517) (512) (464) (500) (553) Minority Interest 5.37 1.94 (10.2) 13.7 (15.4) (17.0) Preference Dividend 0.0 0.0 0.0 0.0 0.0 0.0 Net Profit 1,454 1,524 1,501 1,331 1,484 1,641 Net Profit before Except. 1,454 1,524 1,501 1,331 1,484 1,641 EBITDA 2,026 2,142 2,140 1,970 2,184 2,411
Growth Revenue Gth (%) 9.8 4.5 6.8 (1.6) 9.0 7.6 EBITDA Gth (%) 8.8 5.7 (0.1) (8.0) 10.9 10.4 Opg Profit Gth (%) 9.0 5.1 (0.6) (11.5) 12.2 10.6 Net Profit Gth (Pre-ex) (%) 13.6 4.8 (1.5) (11.3) 11.4 10.6
Margins & Ratio Gross Margins (%) 63.6 64.1 60.6 58.6 59.8 61.0 Opg Profit Margin (%) 47.3 47.5 44.3 39.8 41.0 42.1 Net Profit Margin (%) 35.8 35.9 33.2 29.9 30.6 31.4 ROAE (%) N/A 46.2 45.7 36.3 34.7 32.5 ROA (%) N/A 32.8 32.0 26.1 25.7 25.0 ROCE (%) N/A 39.5 39.7 30.9 29.7 28.4 Div Payout Ratio (%) 51.3 120.0 80.9 63.7 50.7 51.1 Net Interest Cover (x) NM NM NM 1,652.8 NM NM
Source: company, DBSVI
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Company Focus
Surya Citra Media
Quarterly / Interim Income Statement (Rpbn) Revenue Trend FY Dec 4Q2016 1Q2017 2Q2017 3Q2017 4Q2017 1Q2018 1,600 50% 1,400 40% 30% Revenue 1,105 1,005 1,410 1,010 1,029 1,157 1,200 20% 1,000 Cost of Goods Sold (456) (408) (458) (485) (484) (484) 10% 800 0% Gross Profit 649 598 952 525 545 673 600 -10% 400 Other Oper. (Exp)/Inc (193) (193) (215) (176) (256) (204) -20% 200 Operating Profit 456 405 737 349 288 469 -30% 0 -40% Other Non Opg (Exp)/Inc 1.71 (2.2) 3.21 1.45 (9.7) 3.84 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 3Q2017 4Q2017 1Q2018 Associates & JV Inc 0.81 0.0 0.0 (0.5) 11.5 4.83 Revenue Revenue Growth % (QoQ) Net Interest (Exp)/Inc 7.59 (3.2) (2.1) (0.3) 4.61 1.63 Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0 0.0 Revenue grew by 12.4% y-o- Pre-tax Profit 466 400 738 350 295 479 y due to audience share improvement, which Tax (126) (96.6) (195) (96.0) (76.7) (119) translated into a higher rate Minority Interest 4.65 (1.9) (5.1) 0.83 19.8 (0.6) card Net Profit 345 301 538 255 238 359 Net profit bef Except. 345 301 538 255 238 359 EBITDA 493 438 776 386 332 515
Growth Revenue Gth (%) 2.5 (9.0) 40.2 (28.4) 1.9 12.4 EBITDA Gth (%) 5.1 (11.2) 77.0 (50.2) (13.9) 54.9 Opg Profit Gth (%) 3.8 (11.2) 81.9 (52.6) (17.5) 62.6 Net Profit Gth (Pre-ex) (%) 8.4 (12.8) 78.6 (52.6) (6.7) 51.1
Margins Gross Margins (%) 58.8 59.4 67.5 52.0 52.9 58.2 Opg Profit Margins (%) 41.3 40.3 52.3 34.6 28.0 40.5 Gross margin fell y-o-y on the Net Profit Margins (%) 31.2 29.9 38.1 25.2 23.1 31.1 back of higher cost of programming
Source: company, DBSVI
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Company Focus
Surya Citra Media
Balance Sheet (Rpbn) Asset Breakdown FY Dec 2014A 2015A 2016A 2017A 2018F 2019F Net Fixed Assets - Net Fixed Assets 762 962 967 1,029 1,013 982 28.4% Debtors - Invts in Associates & JVs 24.1 24.3 26.2 37.3 37.3 37.3 43.0% Other LT Assets 745 736 875 1,611 1,643 1,672 Assocs'/JVs - Cash & ST Invts 1,246 686 455 234 765 1,448 1.0% Inventory 462 533 689 766 770 805 Debtors 1,291 1,412 1,534 1,556 1,684 1,811 Bank, Cash Other Current Assets 198 213 275 153 233 251 and Liquid Inventory - Assets - Total Assets 4,728 4,566 4,821 5,386 6,145 7,006 21.1% 6.4%
Other LT assets due to ST Debt 0.0 0.0 0.0 0.0 0.0 0.0 higher intangible assets
Creditor 335 260 385 437 435 455 from acquisition of SinemArt at Rp716bn Other Current Liab 484 601 605 306 304 322 LT Debt 0.0 0.0 0.0 0.0 0.0 0.0 Other LT Liabilities 431 292 125 237 241 245 Shareholder’s Equity 3,446 3,146 3,427 3,901 4,644 5,446 Minority Interests 32.4 267 279 504 520 537
Total Cap. & Liab. 4,728 4,566 4,821 5,386 6,145 7,006
Non-Cash Wkg. Capital 1,133 1,297 1,507 1,732 1,947 2,089 Net Cash/(Debt) 1,246 686 455 234 765 1,448 Debtors Turn (avg days) N/A 116.4 118.8 126.6 121.8 122.1 Creditors Turn (avg days) N/A 77.8 71.5 90.7 90.8 89.0 Inventory Turn (avg days) N/A 130.2 135.4 160.5 159.8 157.4
Asset Turnover (x) NM 0.9 1.0 0.9 0.8 0.8 Current Ratio (x) 3.9 3.3 3.0 3.6 4.7 5.6 Quick Ratio (x) 3.1 2.4 2.0 2.4 3.3 4.2 Net Debt/Equity (X) CASH CASH CASH CASH CASH CASH Net Debt/Equity ex MI (X) CASH CASH CASH CASH CASH CASH Capex to Debt (%) N/A N/A N/A N/A N/A N/A
Source: company, DBSVI
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Company Focus
Surya Citra Media
Cash Flow Statement (Rpbn) Capital Expenditure 2014A FY Dec 2015A 2016A 2017A 2018F 2019F Rpm 350.0
Pre-Tax Profit 1,917 2,038 2,024 1,782 1,999 2,210 300.0 Dep. & Amort. 109 127 135 187 195 212 250.0 Tax Paid (469) (517) (512) (464) (500) (553) 200.0 150.0 Assoc. & JV Inc/(loss) 0.0 0.0 0.0 0.0 0.0 0.0 100.0 Chg in Wkg.Cap. (384) (453) (434) (110) (120) (143) 50.0
Other Operating CF 4.89 311 172 (144) (50.8) (28.6) 0.0 2015A 2016A 2017A 2018F 2019F Net Operating CF 1,179 1,507 1,385 1,251 1,524 1,698 Capital Expenditure (-) Capital Exp.(net) (152) (322) (144) (253) (179) (180) Other Invts.(net) 0.0 0.0 0.0 0.0 0.0 0.0
Invts in Assoc. & JV (24.1) (0.3) (1.9) (11.0) 0.0 0.0 Div from Assoc & JV 0.0 0.0 0.0 0.0 0.0 0.0
Other Investing CF (10.4) 210 (105) (263) 0.0 0.0
Net Investing CF (187) (112) (250) (526) (179) (180) Div Paid (746) (1,828) (1,214) (848) (752) (838) Chg in Gross Debt 37.1 84.5 35.5 (165) (65.0) 0.0
Capital Issues 0.0 (3.6) 0.33 0.0 0.0 0.0 Other Financing CF (80.5) (211) (188) 13.2 4.02 4.12
Net Financing CF (789) (1,958) (1,365) (1,000) (813) (834) Currency Adjustments 0.0 0.0 0.0 0.0 0.0 0.0 Chg in Cash 203 (563) (231) (276) 531 683 Opg CFPS (Rp) 107 134 124 93.1 112 126 Free CFPS (Rp) 70.2 81.0 84.9 68.2 92.0 104
Source: Company, DBSVI
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Company Focus
Surya Citra Media
Valuation
Initiate coverage: BUY, TP Rp2,600. Our DCF-based TP 5%, and equity beta of 0.8. Our TP implies 25.6x FY18F PE of Rp2,600/share for SCMA assumes a WACC of 9% and which is above its historical 8-year mean. Currently, the terminal growth of 3%, with cash flow discounted back stock is trading at 17.9x FY18F PE (-1SD of its historical 8- from FY25F to the present. To arrive at our WACC of 9%, year mean of 21.2x). we assume a risk-free rate of 8%, market risk premium of
SCMA’s forward PE band
45.0
40.0
35.0 P/E 30.0 MEAN 25.0 +1 STDEV 20.0 +2 STDEV 15.0 ‐1 STDEV
10.0 ‐2 STDEV
5.0
‐ Jan‐10 Jan‐11 Jan‐12 Jan‐13 Jan‐14 Jan‐15 Jan‐16 Jan‐17 Jan‐18
Source: Bloomberg Finance LP Data as of 20 June 2018
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Indonesia Company Focus Media Nusantara Citra
Bloomberg: MNCN IJ | Reuters: MNCN.IJ Refer to important disclosures at the end of this report
DBS Group Research . Equity 25 Jun 2018
Too cheap to ignore BUY Revenue growth driven by higher rate cards of MNCTV and GTV (Initiating Coverage) Last Traded Price ( 22 Jun 2018): Rp975 (JCI : 5,821.81) Estimate 12.3% earnings CAGR between FY17-20F with Price Target 12-mth: Rp1,300 (33% upside) better gross margin Higher content sold to third parties would be the next growth driver Potential Catalyst: Acceleration of media advertising ependiture (adex), Initiate MNCN with a BUY call and TP of Rp1,300/share and Ramadhan season
Attractive entry point. Currently, the stock is trading at 8.8x FY18F Analyst David Arie Hartono +62 2130034936 [email protected] PE or trading at -2SD (below its historical 8 years mean of 17.4x). We believe that the market has over punished the stock due to weak advertising expenditure (adex) growth environment in the past few Price Relative years. However, we believe that the stock has not priced in the Rp Relative Index potential upsides from; (i) improvement in Media Nusantara Citra TV 3,377.5 207 (MNCTV) and GTV (formerly Global TV) audience shares could be the 187 2,877.5 167 growth drivers in FY18F; (ii) potential higher revenue contribution 147 2,377.5 127 from its content business and; (iii) potential higher gross margin in 107 1,877.5 87 FY18F of 62% vs SCMA of 59.8% in FY18F. 1,377.5 67 47 Even though MNCN 877.5 27 Assume 12.3% earnings CAGR for FY17-20F. Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 did not have the rights to broadcast special events in FY18, we
Media Nusantara Citra (LHS) Relative JCI (RHS) believe that MNCN would benefit from a potential acceleration of adex growth in 2H18 and the Lebaran season in 2Q18. We assume a Forecasts and Valuation FY Dec (Rpbn) 2016A 2017A 2018F 2019F revenue growth of 6%/6.3% in FY18F/19F respectively from higher Revenue 6,730 7,053 7,474 7,945 rate card in MNCTV and GTV. Meanwhile, we assume a stable and EBITDA 2,582 3,113 3,293 3,612 high gross margin at 62% in FY18F due to more local content. Thus, Pre-tax Profit 2,153 2,416 2,482 2,746 Net Profit 1,369 1,453 1,620 1,930 we estimate an earnings growth of 23.9%/7.2% in FY18F/19F Net Pft (Pre Ex.) 1,369 1,453 1,620 1,930 respectively. EPS (Rp) 95.9 102 113 135 EPS Pre Ex. (Rp) 95.9 102 113 135 Where we differ. Our revenue and earnings are in line with street EPS Gth (%) 15 6 11 19 estimates for this year. We differ from the streets is on gross margin; EPS Gth Pre Ex (%) 15 6 11 19 we assume a gross margin of 62% vs streets of 61.2%. Diluted EPS (Rp) 95.9 102 113 135 Net DPS (Rp) 0.0 0.0 0.0 0.0 Valuation: BV Per Share (Rp) 618 632 704 793 Our DCF-based TP of Rp1,300/share for MNCN assumes a WACC of PE (X) 10.2 9.6 8.6 7.2 12.2% and terminal growth of 3%. Our TP implies 11.5x FY18F PE. PE Pre Ex. (X) 10.2 9.6 8.6 7.2 P/Cash Flow (X) 7.1 6.3 7.1 5.9 Currently, the stock is trading at 8.8x FY18F PE, which is -2SD of its 8- EV/EBITDA (X) 5.6 5.7 5.2 4.5 year mean. Net Div Yield (%) 0.0 0.0 0.0 0.0 P/Book Value (X) 1.6 1.5 1.4 1.2 Key Risks to Our View: Net Debt/Equity (X) CASH 0.3 0.2 0.1 Slower ad spend from FMCG companies; decline in audience shares; ROAE (%) 15.4 16.3 17.0 18.1 competition from digital advertising; and digitalisation.
Consensus EPS (Rp): N/A N/A N/A Other Broker Recs: B: S: H: At A Glance ICB Industry : Consumer Services Issued Capital (m shrs) ICB Sector: Media Mkt. Cap (Rpbn/US$m) 17,488 / 954 Principal Business: Media Nusantara Citra (MNCN) is one of South Major Shareholders (%) East Asia's largest and most integrated media companies, controlled Global Mediacom Tbk 59.16% by media mogul, Hary Tanoesoedibjo, with a focus on national free Free Float (%) 40.8% to air (FTA) television broadcasting. MNCN controlled 32.8% of all 3m Avg. Daily Val (US$m) 1.6 time audience share. Source of all data on this page: company, DBSVI, Bloomberg Finance L.P.
ed: KK / MA, PY, CS
Company Focus
Media Nusantara Citra
Table of Contents
SWOT analysis 33 Investment summary 34 Company background 37 Key management team 38 Competitive strengths 39 Growth strategies 39 Key risks 39 Critical data points to watch 40 Key assumption 42 Income statement 43 Quarterly/interim income statement 44 Balance sheet 45 Cash flow statement 46 Valuation 47
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Company Focus
Media Nusantara Citra
SWOT Analysis
Strengths Weakness One of the leaders in prime time (PT) and all time (AT) Highly dependent on FMCG companies (70% of revenue) audience share that contribute the bulk of the company’s revenue RCTI has a good audience share USD/IDR depreciation would pressure the company’s net profit Strong in-house production team
Opportunities Threats Potential higher revenue growth from a potential Softer advertising spending (ad spend) by FMCG acceleration of media advertising expenditure (adex) in FY18F companies would impact its revenue growth Higher content sales to third parties which would enable the Fierce competition in audience share would also pose a company to book higher revenue growth threat to the company
Competition from digital advertising Switch from analog to digital
Source: DBSVI
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Company Focus
Media Nusantara Citra
Investment Summary
Initiate coverage of MNCN with a BUY call and TP of RCTI prime time (PT) faces more competition (%) Rp1,300/share, based on the following reasons: 35.0 - Estimate more contribution from MNCTV and GTV in FY18F from an improvement in audience 30.0 share 25.0 20.0 - We estimate a higher gross margin of 62% in FY18F compare to SCMA of 59.8% in FY18F 15.0 which would drive the earnings of MNCN in 10.0
FY18F 5.0 - Higher earnings growth of 12.3% CAGR 0.0 17 16 15 14 18 17 16 15 14 18 17 16 15 14 17 16 15 14 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ between FY17-20F vs peers ‐ Jul Jul Jul Jul Jan Jan Jan Jan Jan Oct Oct Oct Oct Apr Apr Apr Apr Apr - MNCN is currently trading at 8.8x PE FY18F, - RCTI SCTV ANTV 2SD below its historical mean of 17.4x. We believe that the current share price has priced in Source: Nielsen the bad news, and we believe that the share price has not priced in the potential upside More stable MNCTV audience share. In 2018, MNCTV will Flattish revenue growth from RCTI. One of its national TV continue to focus on the middle class segment, with programs stations RCTI saw its prime time (PT) audience share slip to ranging from game shows, animation, family drama, and local 16.4% as of May 2018 (-6.6ppts y-o-y) on the back of stronger music variety shows. YTD 2018, MNCTV prime time (PT) competition in the drama series category from SCTV and ANTV. audience share has stabilised to 10.7% as of May 2018 vs 9.7% As a result, we assume that RCTI revenue weighting to MNCN in FY17. As a result, we assume higher revenue contribution total advertising revenue to decline to 52%/50% in from MNCTV stations to 27%/28% in FY18F/FY19F respectively, FY18F/FY19F, respectively from 55% in FY17. or we assume a 9.2% revenue growth CAGR between FY17- 19F on the back of higher rate card from an improvement in audience share.
MNCN advertising revenue weighting per TV stations MNCTV revenue growth assumptions (Rpbn)
60% 2,100.0 55.0% 52.0% 9.2% revenue growth 50.0% 2,000.0 CAGR between FY17-19F 1,980.9 50%
1,900.0 1,849.9 40% 1,800.0 28.0% 30% 27.0% 25.0% 1,700.0 1,659.8
20% 17.0% 15.0%16.0% 1,600.0
10% 1,500.0 5.0% 5.0% 5.0%
0% 1,400.0 2017 2018F 2019F RCTI MNCTV Global TV I News TV 2017 2018F 2019F Source: company, and DBSVI Source: company and DBSVI
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Company Focus
Media Nusantara Citra
MNCTV prime time (PT) audience share (%) Global TV (GTV) prime time (PT) audience share (%)
16.0 10.0 9.0 14.0 8.0 12.0 7.0 10.0 6.0 8.0 5.0 4.0 6.0 3.0 4.0 2.0 2.0 1.0 0.0 0.0 17 16 15 14 18 17 16 15 14 18 17 16 15 14 17 16 15 14 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 17 16 15 14 18 17 16 15 14 18 17 16 15 14 17 16 15 14 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ Jul Jul Jul Jul Jan Jan Jan Jan Jan Oct Oct Oct Oct Apr Apr Apr Apr Apr Jul Jul Jul Jul Jan Jan Jan Jan Jan Oct Oct Oct Oct Apr Apr Apr Apr Apr Source: Nielsen Source: Nielsen
Global TV (GTV) transformation in progress. Formerly known as Boost from higher in-house production. MNCN managed to Global TV, it rebranded its station to GTV in December 2017. It increase local content production throughout its stations to an has also repositioned as a national free-to-air (FTA) network impressive 90% rate, due largely to the company’s in-house targeting a modern and young family demographic. In mid- production unit, MNC Pictures. Currently, MNCN has a 2017, GTV reduced its foreign content and targeted young and staggering content library of more than 300,000 hours and this modern family demographics. GTV is focusing on more local is continuously increasing. MNCN is monetising its existing content such as talent search programs, talk shows and reality library by creating 20 local Pay-TV channels and digital platform shows, all of which were produced by its in-house production licensing. team. Gross margin has improved significantly. In the past, MNCN has In 2017, GTV’s average all-time audience share was 5.8%. As of been trading at a discount compare to SCMA. One of the 5M18, the prime time (PT) audience share has improved to 7% reasons was its lower gross margin vs its peers. However, in vs 5.8% in 5M17. We believe the improvement of audience FY17, MNCN improved its gross margin significantly to 62.1% share would enable the company to charge a higher rate card. vs 57.3% in FY16 (higher than its peers’ 58.6% in FY17), We assume a 9.9% revenue growth CAGR between FY17-19F. thanks to in-house content that reduced cost of programming. We believe that gross margin will continue to improve going forward; we assume a gross margin of 62% in FY18F.
Global TV (GTV) revenue growth assumptions (Rpbn) MNCN vs SCMA gross margin (%)
1,800.0 80.0% 9.9% revenue growth CAGR 1,600.0 between FY17-19F 70.0% 1,400.0 1,202.7 60.0% 1,200.0 1,096.2 995.9 50.0% 1,000.0 40.0% 800.0
600.0 30.0%
400.0 20.0%
200.0 10.0% - 0.0% 2017 2018F 2019F 2012 2013 2014 2015 2016 2017 MNCN gross margin (%) SCMA gross margin (%) Source: company, DBSVI
Source: company, DBSVI
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Company Focus
Media Nusantara Citra
Higher earnings growth. Due to improvement of gross margin, RCTI and improved audience share from MNCTV and GTV. As a we estimate that MNCN would be able to post 12.3% earnings result, we estimate revenue to grow at 6% in FY18F and 11.5% CAGR between FY17-20F vs SCMA’s 10.8% CAGR between net income growth in FY18F. Our TP is at Rp1,300/share in our FY17-20F. base case scenario.
MNCN vs SCMA net income (Rpbn) In our bear case scenario, we assume; (i) media industry ad spend at 7.2% and; (ii) assume RCTI audience share slipping 2,500.0 due to more competition from other TV stations and flattish audience share from MNCTV and GTV. Revenue growth 2,000.0 assumption at 4%, net income to grow at 9% and TP of Rp1,000/share in our bear case scenario.
1,500.0 In our bull case scenario, we assume; (i) media industry ad spend at 12% and; (ii) improved RCTI, MNCTV, and GTV 1,000.0 audience share. Revenue growth assumption at 8%, net income to grow at 14% and TP of Rp1,500/share in our bull case 500.0 scenario.
- 2015 2016 2017 2018F 2019F Bull and bear analysis
MNCN net income (Rpbn) SCMA net income (Rpbn) 1,600.0 16.0% IDR 1,500 1,400.0 IDR 1,300 14.0% Source: company, DBSVI 14.0% 1,200.0 12.0% IDR 1,000 1,000.0 11.5% 10.0% Online content is the next growth driver. Online video streaming platforms have been expanding into emerging 800.0 9.0% 8.0% 8.0% markets like Indonesia with localised content. Falling 600.0 6.0% 6.0% smartphone prices and improved 4G coverage have also 400.0 4.0% 4.0% contributed to smartphone penetration rising to 43% and the 200.0 2.0% proliferation of subscription video on demand (SVoD) services. 0.0 0.0% Bear Base Bull Target Price Revenue growth (%) Net Income growth (%) Netflix, Iflix and Hooq are a few examples of SVoD players in Indonesia. Most of the SVoD players provide localised content Source: DBSVI bought from SCMA or MNCN, providing new revenue streams to offset the potential decline of advertising revenue in the future.
Our sensitivity analysis. In our base case, we assume; (i) media industry ad spend at 10% and; (ii) a stable audience share from
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Company Focus
Media Nusantara Citra
Company Background
Corporate History. Media Nusantara Citra (MNCN) is one 2018 through its 3 TV channels - RCTI, MNCTV, and Global of Southeast Asia’s largest and most integrated media TV (GTV). MNCN also has a solid presence in content and companies, controlled by media mogul Hary Tanoesoedibjo. It production house businesses through its PT MNC Studios focuses on National Free to Air (FTA) broadcasting. MNCN International (MSIN). controlled 32.8% of all time (AT) audience share as of May
Sales Trend Profitability Trend Rp bn Rp bn 2,985 8,000 10.0% 2,785 7,000 9.0% 8.0% 2,585 6,000 7.0% 2,385 5,000 6.0% 2,185 4,000 5.0% 1,985 3,000 4.0% 3.0% 1,785 2,000 2.0% 1,585 1,000 1.0% 1,385 0 0.0% 2015A 2016A 2017A 2018F 2019F 1,185 2015A 2016A 2017A 2018F 2019F
Total Revenue Revenue Growth (%) (YoY) Operating EBIT Pre tax Profit Net Profit
Source: company, DBSVI
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Company Focus
Media Nusantara Citra
Key Management Team David Fernando Audy President Director Mr David Fernando Audy was born in 1979. He was appointed as a President Director of the company in September 2016. Prior to this appointment, he served numerous executive positions namely President Director of PT MNC Pictures (2017), President Director of PT Linktone Indonesia (2011-2015), and VP of PT Media Nusantara Citra (2009-2012). He obtained a Master of Commerce degree in Accounting from University of New South Wales, Australia.
Kanti Mirdiati Imansyah Director Mrs Kanti Mirdiati Imansyah was born in 1966. She was appointed as a Director of the company in 2013. Previously, she was Vice President of RCTI since 2012. She completed her Bachelor of Science Degree at La Jolla Academy of Advertising Arts, San Diego, USA.
Faisal Dharma Setiawan Director Mr Faisal Dharma Setiawan was born in 1966. He was appointed as a Director of the company in October 2014. Prior to this appointment, he served as Vice Chief Finance Officer for Strategy and Finance at PT Bank CIMB Niaga. He obtained a Master of Management degree in Accounting from Prasetya Mulya University.
Ella Kartika Director Mrs Ella Kartika was born in 1969. She was appointed as a Director of the company in October 2014. She joined the company in 2008 and has held senior roles in television programming and production, as well as sales and marketing within the company's subsidiaries. She received her Master of Management degree in Banking and Finance from University of Indonesia.
Arya Mahendra Sinulingga Director Mr Arya Mahendra Sinulingga was born in 1971. He was appointed as a Director of the company in July 2015. He was a member of the Indonesian Broadcasting Commission for North Sumatera and joined the company in 2008, taking on various executive positions. He graduated from Bandung Institute of Technology with a Bachelor degree of Civil Engineering.
Angela Herliani Director Mrs Angela Herliani Tanoesoedibjo was born in 1987. She was appointed as a Tanoesoedibjo Director of the company in September 2016. She previously occupied several executive positions, namely Director at PT MNI Entertainment (2011-2017), Deputy Director of MNC Channels (2013-2014), and Corporate Finance and Business Development Associate of PT Media Nusantara Citra (2010-2013). She completed her Master of Commerce degree in Finance from The University of New South Wales, Australia.
Gwenarty Setiadi Independent Director Mrs Gwenarty Setiadi was born in 1962. She was appointed as an Independent Director of the company in September 2016. Previously, she served multiple roles at Citibank between1998-2008 as Head of Recruitment and Training. She graduated from University of Satya Wacana with a Bachelor Degree of Agriculture. Source: company
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Company Focus
Media Nusantara Citra
Competitive Strengths Growth Strategies
Prime time (PT) and all time (AT) audience shares. As of Boosting audience share. The improvement of MNCTV May 2018, MNCN controls market shares of 33.9% and and GTV’s audience shares would remain a key growth area 32.8% of PT and AT respectively. MNCN has the biggest for MNCN in the next few years. The improvement in market share in AT and PT through their three TV stations - audience share would translate into a higher rate card. RCTI, MNCTV and GTV. Online content providers. Netflix, Iflix and Hooq are a few examples of SVoD players in Indonesia. Most of the SVoD All time (AT) audience share per group players provide localised content bought from SCMA or MNCN SCMA TRANS VIVA MNCN, providing new revenue streams to offset the potential Jan-17 35.5 24.0 14.0 23.1 decline of advertising revenue in the future. Feb-17 32.6 27.3 13.4 23.1 Mar-17 33.2 29.1 14.3 20.2 Apr-17 33.5 29.8 14.6 18.8 Key Risks May-17 35.5 28.1 14.6 18.3 Soft ad spend growth. Ad spend growth is positively Jun-17 36.9 25.5 13.1 21.5 Jul-17 33.7 26.9 14.1 22.4 correlated to the GDP of Indonesia. In our base case, we Aug-17 33.6 26.7 13.8 22.8 assume 1.08x multiplier between ad spend/nominal GDP. Our Sep-17 33.4 27.6 14.4 21.8 multiplier is based on the assumption of the recovery of Oct-17 32.1 28.0 14.7 22.4 household consumption due to the election year. However, if Nov-17 30.9 29.1 15.5 21.6 household consumption does not recover as expected, there Dec-17 31.5 31.8 14.4 19.8 would be a risk of lower ad spend growth and TV players’ Jan-18 31.9 32.8 13.2 19.7 revenue growth in FY18F. Feb-18 31.8 32.7 13.3 19.8 Mar-18 31.1 32.4 13.2 21.2 Apr-18 30.7 33.4 13.4 20.4 Sensitivity analysis on advertising spending (ad spend) May-18 32.8 31.0 12.3 21.3 2015 2016 2017 2018F BEAR BASE BULL SCMA 4.5% 6.8% -1.6% 9.0% 6.0% 9.0% 12.0% Source: Nielsen MNCN -3.3% 4.4% 4.8% 6.0% 4.0% 6.0% 8.0% Ads spend average growth 7.5% 14.2% 7.9% 10.0% 7.2% 10.0% 12.0% Prime time (PT) audience share per group Indonesia nominal GDP 9.1% 7.6% 9.5% 9.3% 9.0% 9.3% 10.0% MNCN SCMA TRANS VIVA x GDP 0.82 1.87 0.84 1.08 0.80 1.08 1.20 Jan-17 41.6 23.9 12.9 18.2 Feb-17 38.0 29.7 11.1 17.6 Source: World Bank, Nielsen, Companies, and DBSVI Mar-17 36.7 34.1 11.2 14.9 Apr-17 37.7 34.0 10.7 14.4 May-17 39.0 30.3 11.2 16.1 Weaker audience share. Ad spend growth is one of the Jun-17 41.1 25.8 9.8 20.3 key factors for the media industry’s growth. The other factor Jul-17 37.0 27.9 10.0 22.6 is audience share, as it impacts the rate card of media players. Aug-17 37.8 26.7 10.4 22.0 Normally, advertisers prefer to advertise their products on TV Sep-17 38.5 25.4 10.8 22.5 stations with strong and stable audience share. If SCMA fails Oct-17 36.2 25.5 11.1 24.7 to maintain its strong audience share, there is a possibility of Nov-17 32.6 30.1 12.1 22.4 a lower rate card and resulting in a lower revenue growth in Dec-17 31.3 36.4 11.5 18.4 Jan-18 33.1 36.0 9.7 18.9 FY18F. Feb-18 33.1 35.5 10.1 19.1 Massive growth of online media. The massive growth of Mar-18 33.2 34.3 10.6 19.7 online media continues to become a challenge to traditional Apr-18 32.2 35.2 11.0 19.5 media industry’s ad spend growth going forward. May-18 33.9 33.0 10.7 19.7 Digitalisation laws. Plans for new broadcasting laws Source: Nielsen related to analog-to-digital migration may also pose challenges for the media industry.
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Company Focus
Media Nusantara Citra
Advertising revenue (Rpbn)
7075 7145.3 6639 6852 CRITICAL DATA POINTS TO WATCH 6353 6124.6 5936 Critical Factors 5103.8 4083.0 Advertising revenue is positively correlated with GDP 3062.3
2041.5 Adex growth is a function of economic growth. During periods of 1020.8 economic boom, the adex/nominal GDP growth multiplier may rise 0.0 to close to 2x. On the other hand, during periods of economic 2015A 2016A 2017A 2018F 2019F downturns, the multiplier may soften to below 1x of nominal GDP. Content (Rpbn) 2870 Correlation between audience share and advertising revenue 2342.1 2126
Based on our analysis, there are some correlations between media 1756.6 advertising revenue growth and the previous year’s audience share. 1466 If the audience share of a TV media company falls, the following 1171.1 1001 year’s revenue growth would be affected. Accordingly, its 585.5 379 advertisers would ask for revisions to the rate card, depending on the company’s audience share. 0.0 2015A 2016A 2017A 2018F 2019F
Others (Rpbn)
MNCN: Correlation between previous year’s audience share 531.72 521 and following year’s revenue growth 455 425.38 409 50.0 6.0% 369 45.0 5.0% 319.03 40.0 4.0% 212.69 35.0 3.0% 130 30.0 2.0% 106.34 25.0 1.0% 20.0 0.0% 0.00 15.0 ‐1.0% 2015A 2016A 2017A 2018F 2019F 10.0 ‐2.0% Elimination (Rpbn) 5.0 ‐3.0% 0 0.0 ‐4.0% 0.0 2013 2014 2015 2016 2017 -520.9 MNCN PT audience share MNCN revenue growth
Source: Nielsen and Companies -1041.9 -1145.06
-1562.8 -1507.65
-2083.8 -1913.49
-2367.95 -2604.7 2015A 2016A 2017A 2018F 2019F
Source: Company, DBSVI
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Company Focus
Media Nusantara Citra
Leverage & Asset Turnover (x) Balance Sheet: 0.45 0.5 Higher non-current assets. Non-current assets were at Rp8.34tr, an 0.40 0.5 increase of 10% from Rp7.60tr in 2016. This was mostly due to an 0.35 0.5 0.5 increase in fixed assets related to the development of MNC Studios, 0.30 0.5 0.25 which will be used to improve synergies and competitiveness of 0.5 0.20 MNCN. 0.4 0.15 0.4 0.10 ROE is on the rise. In 2017, MNCN recorded a ROE of 16.3% vs 0.4 0.05 0.4 15.4% in FY16 due to an improvement in net profit for the 0.00 0.4 company. 2015A 2016A 2017A 2018F 2019F Gross Debt to Equity (LHS) Asset Turnover (RHS)
Successful refinancing of syndicated loan. MNCN’s total liabilities as Capital Expenditure RpbnRpm of Dec 2017 were Rp5.26tr (+11% y-o-y). Short-term liabilities 2,000.0 were Rp1.46tr (-65% y-o-y), while long term liabilities increased to 1,800.0 1,600.0 Rp3.80tr compared to Rp554.03bn in the previous year. On 1,400.0 September 2017, MNCN refinanced their Rp3.29tr syndicated loan. 1,200.0 1,000.0 800.0 600.0 400.0 Share Price Drivers: 200.0 Higher ad spend by FMCG companies. The market will likely regain 0.0 2015A 2016A 2017A 2018F 2019F some confidence in 2018, as major advertisers have indicated their Capital Expenditure (-) plans to increase TV ad spend in 2018 by up to 7-8%. This is also supported by MPA’s latest data that the FTA advertising market will ROE (%) 18.0% grow by 6.7% in 2018. 16.0%
14.0% Improvement in audience share. A high and stable audience share 12.0% is essential for media players, as this would enable them to charge 10.0% advertisers a higher rate card. 8.0% 6.0% 4.0%
Key Risks: 2.0% Weakening adex growth. Our 10% adex growth is based on an 0.0% assumption of higher ad spend by FMCG companies. If adex 2015A 2016A 2017A 2018F 2019F growth is only at 7%, revenue growth and PE multiple will be Forward PE Band (x) lower. (x)
36.0 Weaker audience share number. If its audience share falls and +2sd: 33.5x MNCN concedes market share to its competitors, this will translate 31.0 into potentially lower rate card charges and weak revenue growth 26.0 +1sd: 26.8x in FY18F. 21.0 Avg: 20.1x
16.0 ‐1sd: 13.4x Company Background 11.0 Media Nusantara Citra (MNCN) is one of the Southeast Asia’s 6.0 ‐2sd: 6.8x largest and most integrated media companies, controlled by Media Jun-14 Jun-15 Jun-16 Jun-17 Mogul, Hary Tanoesoedibjo. It focuses on national free to air (FTA) PB Band (x) television broadcasting. MNCN controlled 32.8% of all time (AT) (x) audience share as of May 2018. 5.3 4.8 4.3 +2sd: 4.35x 3.8 +1sd: 3.65x 3.3
2.8 Avg: 2.95x
2.3 ‐1sd: 2.25x 1.8 ‐2sd: 1.56x 1.3 Dec-14 Dec-15 Dec-16 Dec-17 Source: Company, DBSVI
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Company Focus
Media Nusantara Citra
Key Assumptions FY Dec 2014A 2015A 2016A 2017A 2018F 2019F
Advertising revenue 6,580 5,936 6,353 6,639 6,852 7,075
Content 0.0 379 1,001 1,466 2,126 2,870
Others 85.5 130 521 455 409 369 Elimination 0.0 0.0 (1,145) (1,508) (1,913) (2,368)
Segmental Breakdown FY Dec 2014A 2015A 2016A 2017A 2018F 2019F
Revenues (Rpbn) Advertising revenue 6,580 5,936 6,353 6,639 6,852 7,075
Content revenue 0.0 379 1,001 1,466 2,126 2,870 Others 85.5 130 521 455 409 369 Elimination 0.0 0.0 (1,145) (1,508) (1,913) (2,368) Total 6,666 6,445 6,730 7,053 7,474 7,945 Elimination is due to sales of content to the internal companies
Source: Company, DBSVI
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Company Focus
Media Nusantara Citra
Income Statement (Rpbn) Margins Trend FY Dec 2014A 2015A 2016A 2017A 2018F 2019F
Revenue 6,666 6,445 6,730 7,053 7,474 7,945 37.0%
Cost of Goods Sold (2,813) (2,861) (2,875) (2,670) (2,842) (3,015) 32.0% Gross Profit 3,853 3,584 3,856 4,382 4,631 4,930 27.0% Other Opng (Exp)/Inc (1,251) (1,390) (1,524) (1,716) (1,819) (1,934) Operating Profit 2,602 2,194 2,332 2,666 2,813 2,996 22.0%
Other Non Opg (Exp)/Inc (81.9) (372) 4.05 (0.3) (80.0) 0.0 17.0% 2015A 2016A 2017A 2018F 2019F Associates & JV Inc (6.2) (7.9) (25.2) (10.3) (10.3) (10.3) Operating Margin % Net Income Margin % Net Interest (Exp)/Inc 28.2 (133) (158) (240) (240) (240) Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0 0.0 Pre-tax Profit 2,542 1,681 2,153 2,416 2,482 2,746 Tax (660) (404) (670) (848) (745) (687) Minority Interest (121) (91.3) (114) (114) (117) (130) Preference Dividend 0.0 0.0 0.0 0.0 0.0 0.0 Net Profit 1,761 1,186 1,369 1,453 1,620 1,930 Net Profit before Except. 1,761 1,186 1,369 1,453 1,620 1,930 EBITDA 2,690 2,118 2,582 3,113 3,293 3,612
Growth One-off non-cash expenses such Revenue Gth (%) 80.4 (3.3) 4.4 4.8 6.0 6.3 as higher depreciation, tax credit write off due to tax amnesty, and EBITDA Gth (%) 44.5 (21.3) 21.9 20.6 5.8 9.7 forex gain and losses. Opg Profit Gth (%) 47.9 (15.7) 6.3 14.3 5.5 6.5 Net Profit Gth (Pre-ex) (%) 37.6 (32.7) 15.4 6.2 11.5 19.1
Margins & Ratio Gross Margins (%) 57.8 55.6 57.3 62.1 62.0 62.0 Opg Profit Margin (%) 39.0 34.0 34.6 37.8 37.6 37.7 Net Profit Margin (%) 26.4 18.4 20.3 20.6 21.7 24.3 ROAE (%) N/A 13.3 15.4 16.3 17.0 18.1 ROA (%) N/A 8.4 9.5 9.9 10.4 11.5 ROCE (%) N/A 12.7 13.6 14.5 13.7 14.3 Div Payout Ratio (%) 42.4 154.1 88.7 58.4 46.4 43.4 Improvement in GPM was due Net Interest Cover (x) NM 16.5 14.8 11.1 11.7 12.5 to higher content from internal productions. Source: Company, DBSVI
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Company Focus
Media Nusantara Citra
Quarterly / Interim Income Statement (Rpbn) Revenue Trend FY Dec 4Q2016 1Q2017 2Q2017 3Q2017 4Q2017 1Q2018 2,500 40% 30% 2,000 Revenue 1,466 1,610 2,016 1,756 1,671 1,602 20%
1,500 Cost of Goods Sold (571) (681) (830) (626) (533) (663) 10%
0% Gross Profit 895 928 1,186 1,130 1,138 939 1,000 -10% Other Oper. (Exp)/Inc (452) (401) (466) (416) (433) (411) 500 -20% Operating Profit 443 527 720 714 704 528 0 -30% Other Non Opg (Exp)/Inc (294) 74.8 4.12 (58.8) (30.6) (50.7) 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 3Q2017 4Q2017 1Q2018 Associates & JV Inc 0.0 0.0 0.0 0.0 0.0 0.0 Revenue Revenue Growth % (QoQ) Net Interest (Exp)/Inc (33.8) (33.8) (42.1) (71.6) (92.1) (54.6) Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0 0.0 Pre-tax Profit 115 568 682 584 582 423 Tax (176) (123) (293) (217) (215) (127) Minority Interest (13.3) (25.9) (33.5) (19.8) (35.1) (21.8) Net Profit (74.0) 419 356 347 332 274 Net profit bef Except. (74.0) 419 356 347 332 274 EBITDA 232 693 843 760 816 579
Growth Revenue Gth (%) (13.6) 9.8 25.2 (12.9) (4.9) (4.1) EBITDA Gth (%) (68.3) 199.1 21.6 (9.8) 7.4 (29.1) Opg Profit Gth (%) (25.2) 19.1 36.6 (0.8) (1.4) (25.1) Net Profit Gth (Pre-ex) (%) (116.8) (666.0) (15.0) (2.6) (4.4) (17.3)
Margins Gross Margins (%) 61.0 57.7 58.8 64.3 68.1 58.6 Opg Profit Margins (%) 30.2 32.7 35.7 40.7 42.2 32.9 Net Profit Margins (%) (5.1) 26.0 17.7 19.7 19.8 17.1
Source: Company, DBSVI
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Company Focus
Media Nusantara Citra
Balance Sheet (Rpbn) Asset Breakdown FY Dec 2014A 2015A 2016A 2017A 2018F 2019F Net Fixed Assets - Net Fixed Assets 2,659 4,146 4,824 5,307 5,370 5,466 Debtors - 47.5% 27.1% Invts in Associates & JVs 92.3 85.7 60.3 10.1 10.1 10.1 Other LT Assets 2,187 2,516 2,717 3,022 2,972 2,981 Cash & ST Invts 1,132 398 499 469 1,526 2,504 Assocs'/JVs - Inventory 1,635 1,593 1,950 2,359 2,293 2,433 0.1% Debtors 3,215 3,395 3,054 3,026 3,221 3,425 Bank, Cash Other Current Assets 2,688 2,340 1,135 864 593 620 Inventory - and Liquid 21.1% Assets - Total Assets 13,609 14,475 14,240 15,057 15,986 17,438 4.2%
ST Debt 25.8 65.6 55.7 143 143 143
Creditor 475 603 435 740 625 663
Other Current Liab 392 371 3,709 576 329 332 LT Debt 3,135 3,649 252 3,387 3,541 3,541 Other LT Liabilities 188 219 302 410 410 410 Shareholder’s Equity 8,907 8,966 8,818 9,025 10,044 11,326 Minority Interests 486 601 669 776 894 1,024
Total Cap. & Liab. 13,609 14,475 14,240 15,057 15,986 17,438
Non-Cash Wkg. Capital 6,672 6,354 1,996 4,934 5,154 5,483 Net Cash/(Debt) (2,029) (3,316) 192 (3,061) (2,158) (1,180) Debtors Turn (avg days) N/A 187.2 174.9 157.3 152.6 152.7 Creditors Turn (avg days) N/A 77.0 72.8 96.9 109.7 98.4 Inventory Turn (avg days) N/A 230.4 248.4 355.4 373.8 361.0
Asset Turnover (x) NM 0.5 0.5 0.5 0.5 0.5 Current Ratio (x) 9.7 7.4 1.6 4.6 7.0 7.9 Quick Ratio (x) 4.9 3.6 0.8 2.4 4.3 5.2 Net Debt/Equity (X) 0.2 0.3 CASH 0.3 0.2 0.1 Net Debt/Equity ex MI (X) 0.2 0.4 CASH 0.3 0.2 0.1 Capex to Debt (%) 41.0 48.5 328.5 26.7 17.2 19.6
Source: Company, DBSVI
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Company Focus
Media Nusantara Citra
Cash Flow Statement (Rpbn) Capital Expenditure FY Dec 2014A 2015A 2016A 2017A 2018F 2019F Rpbn Rpm 2,000.0 Pre-Tax Profit 2,542 1,681 2,153 2,416 2,482 2,746 1,800.0 Dep. & Amort. 176 304 271 458 571 626 1,600.0 1,400.0 Tax Paid (660) (404) (670) (848) (745) (687) 1,200.0 1,000.0 Assoc. & JV Inc/(loss) 0.0 0.0 0.0 0.0 0.0 0.0 800.0 600.0 Chg in Wkg.Cap. (779) (182) (204) (10.7) (315) (302) 400.0 Other Operating CF (181) (150) 416 183 (21.8) (26.8) 200.0 0.0 Net Operating CF 1,098 1,249 1,966 2,198 1,972 2,357 2015A 2016A 2017A 2018F 2019F Capital Expenditure (-) Capital Exp.(net) (1,296) (1,800) (1,011) (943) (634) (722) Other Invts.(net) 0.0 0.0 0.0 0.0 0.0 0.0
Invts in Assoc. & JV 5.99 6.58 25.5 50.2 0.0 0.0 Div from Assoc & JV 0.0 0.0 0.0 0.0 0.0 0.0
Other Investing CF (1,446) 730 789 166 320 (9.1)
Net Investing CF (2,736) (1,064) (196) (727) (314) (731) Div Paid (497) (888) (587) (587) (578) (648) Chg in Gross Debt 2,667 575 (49.6) (9.0) (23.3) 0.0
Capital Issues 288 (230) (1,013) (666) 0.0 0.0 Other Financing CF (264) (377) (18.9) (239) 0.0 0.0
Net Financing CF 2,195 (919) (1,669) (1,501) (601) (648) Currency Adjustments 0.0 0.0 0.0 0.0 0.0 0.0 Chg in Cash 557 (734) 101 (30.2) 1,057 978 Opg CFPS (Rp) 131 100 152 155 160 186 Free CFPS (Rp) (13.8) (38.6) 66.9 87.9 93.8 115
Source: Company, DBSVI
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Company Focus
Media Nusantara Citra
Valuation
Initiate coverage: BUY, TP Rp1,300. Our DCF-based TP below its historical 8-year mean. Currently, the stock is of Rp1,300/share for MNCN assumes a WACC of 12.2% trading at 8.8x FY18F PE (-2SD of its historical 8-year mean and terminal growth of 3%, with cash flow discounted of 17.4x). back to FY25F. To arrive at our WACC of 12.2%, we assume a risk-free rate of 8%, market risk premium of 5%, and equity beta of 0.95. Our TP implies 11.5x FY18F PE which is
MNCN forward PE band
40
35
30 P/E 25 MEAN
20 +1 STDEV +2 STDEV 15 ‐1 STDEV 10 ‐2 STDEV
5
0 Jan‐10 Jan‐11 Jan‐12 Jan‐13 Jan‐14 Jan‐15 Jan‐16 Jan‐17 Jan‐18
Source: Bloomberg Finance L.P. Data as of 21 June 2018
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Industry Focus
Indonesia Media
DBSVI recommendations are based an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FULLY VALUED (negative total return i.e. > -10% over the next 12 months) SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame) Share price appreciation + dividends
Completed Date: 25 Jun 2018 15:18:33 (WIB) Dissemination Date: 25 Jun 2018 15:43:04 (WIB)
Sources for all charts and tables are DBSVI unless otherwise specified.
GENERAL DISCLOSURE/DISCLAIMER This report is prepared by PT DBS Vickers Sekuritas Indonesia (''DBSVI''). This report is solely intended for the clients of DBS Bank Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of PT DBS Vickers Sekuritas Indonesia (''DBSVI'').
The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies.
Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report.
This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned schedule or frequency for updating research publication relating to any issuer.
The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:
(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein.
Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets. Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report.
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DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making.
ANALYST CERTIFICATION The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s) primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or his associate does not have financial interests2 in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the DBS Group.
COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), DBSV HK or their subsidiaries and/or other affiliates have a proprietary position in Matahari Department Store recommended in this report as of 31 May 2018. 2. Neither DBS Bank Ltd, DBS HK nor DBSV HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.
Compensation for investment banking services:
3. DBS Bank Ltd., DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have received compensation, within the past 12 months for investment banking services from Indofood Sukses Makmur as of 31 May 2018.
4. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.
Disclosure of previous investment recommendation produced:
5. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months.
1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst.
2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.
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RESTRICTIONS ON DISTRIBUTION General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
Australia This report is being distributed in Australia by DBS Bank Ltd. (“DBS”) or DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”). DBS holds Australian Financial Services Licence no. 475946.
DBSVS is exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. DBSVS is regulated by the Monetary Authority of Singapore under the laws of Singapore, which differ from Australian laws.
Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.
Hong Kong This report has been prepared by an entity(ies) which is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Vickers Hong Kong Limited, a licensed corporation licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).
For any query regarding the materials herein, please contact Paul Yong (CE. No. ASE988) at [email protected].
Indonesia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia.
Malaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies.
Wong Ming Tek, Executive Director, ADBSR
Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.
Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd.
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United This report is produced by PT DBS Vickers Sekuritas Indonesia which is regulated by the Otoritas Jasa Keuangan (OJK). Kingdom This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd, ("DBSVUK"). DBSVUK is authorised and regulated by the Financial Conduct Authority in the United Kingdom.
In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVUK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication.
Dubai This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at PO Box 506538, 3rd Floor, International Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Financial Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for Centre professional clients (as defined in the DFSA rulebook) and no other person may act upon it.
United Arab This report is provided by DBS Bank Ltd (Company Regn. No. 196800306E) which is an Exempt Financial Adviser as defined Emirates in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. This report is for information purposes only and should not be relied upon or acted on by the recipient or considered as a solicitation or inducement to buy or sell any financial product. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situation, or needs of individual clients. You should contact your relationship manager or investment adviser if you need advice on the merits of buying, selling or holding a particular investment. You should note that the information in this report may be out of date and it is not represented or warranted to be accurate, timely or complete. This report or any portion thereof may not be reprinted, sold or redistributed without our written consent.
United States This report was prepared by PT DBS Vickers Sekuritas Indonesia (''DBSVI''). DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate.
Other In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, jurisdictions professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.
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DBS Regional Research Offices
HONG KONG MALAYSIA SINGAPORE DBS Vickers (Hong Kong) Ltd AllianceDBS Research Sdn Bhd DBS Bank Ltd Contact: Paul Yong Contact: Wong Ming Tek (128540 U) Contact: Janice Chua 18th Floor Man Yee Building 19th Floor, Menara Multi-Purpose, 12 Marina Boulevard, 68 Des Voeux Road Central Capital Square, Marina Bay Financial Centre Tower 3 Central, Hong Kong 8 Jalan Munshi Abdullah 50100 Singapore 018982 Tel: 65 6878 8888 Kuala Lumpur, Malaysia. Tel: 65 6878 8888 Fax: 65 65353 418 Tel.: 603 2604 3333 Fax: 65 65353 418 e-mail: [email protected] Fax: 603 2604 3921 e-mail: [email protected] Participant of the Stock Exchange of Hong Kong e-mail: [email protected] Company Regn. No. 196800306E
INDONESIA THAILAND PT DBS Vickers Sekuritas (Indonesia) DBS Vickers Securities (Thailand) Co Ltd Contact: Maynard Priajaya Arif Contact: Chanpen Sirithanarattanakul DBS Bank Tower 989 Siam Piwat Tower Building, Ciputra World 1, 32/F 9th, 14th-15th Floor Jl. Prof. Dr. Satrio Kav. 3-5 Rama 1 Road, Pathumwan, Jakarta 12940, Indonesia Bangkok Thailand 10330 Tel: 62 21 3003 4900 Tel. 66 2 857 7831 Fax: 6221 3003 4943 Fax: 66 2 658 1269 e-mail: [email protected] e-mail: [email protected] Company Regn. No 0105539127012 Securities and Exchange Commission, Thailand
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