Elang Mahkota Teknologi Bloomberg: EMTK.IJ | Reuters: EMTK.JK Technology Sector 29 April 2021 JCI Index: 5,964

Not Rated Proxy of Indonesia’s Technology

Target Price (IDR) n.a EMTK started its journey to build a tech ecosystem in 2012, with the establishment of KMK Online. Since then, EMTK has invested in several major players in Indonesia’s

digital sector, such as Bukalapak, DANA, Vidio, and KlikDokter. EMTK's share price went

Price Comparison up by +366% in the past year, and currently ranks 10th on the list of companies with the Cons. Target Price (IDR) 3,400 biggest market cap on the IDX. In March 2021, EMTK conducted a private placement, SSI vs. Cons. (%) n.a obtaining IDR 9.3 trillion (75% of its equity in FY20). There have been many rumors and speculations about the corporate action, but the company’s management hasn’t given any response or information on this matter. We have not made any projection for Stock Information EMTK, but we hope this report will provide an understanding of EMTK's businesses and Last Price (IDR) 2,230 its future potential. Shares Issued (Mn) 55,032 Market Cap. (IDR Bn) 141,366 Tech ecosystem and e-commerce exposure. EMTK has invested in several major players 52-Weeks High/Low (IDR) 2,680/397 in Indonesia’s digital sector; Bukalapak, DANA, Vidio, and KlikDokter. EMTK's digital 3M Avg. Daily Value (IDR Bn) 61.4 journey began in 2012, with the establishment of KMK Online, which is currently the Free Float (%) 38.3 holding company for EMTK's digital business lines. Several speculations related to Shareholder Structure:

Eddy Sariaatmadja 22.3 Bukalapak's IPO plan, with a valuation of USD 4-5 billion, and the Gojek-Tokopedia (GoTo) merger have also boosted the valuation of other e-commerce companies. At present,

EMTK is the only listed company on the IDX with e-commerce exposure. In addition to its

digital business, EMTK also owns 61% of Surya Citra Media (SCMA), a media company, and

Stock Performance Elang Medika Corpora (EMC), which runs two hospitals in Sentul and Tangerang. EMC had (%) YTD 1M 3M 12M also acquired 100% of Sarana Meditama Metropolitan (SAME) shares for IDR 1.35 trillion. Absolute 65.0 (7.2) 16.1 366.7 An IDR 9.3 trillion private placement. In March 2021, EMTK conducted a private JCI Return 0.2 (4.2) (5.0) 30.5 placement, issuing 4.76 billion new shares valued at IDR 9.3 trillion. The number of new Relative 64.6 (3.2) 22.2 257.7 shares issued was equivalent to 8.4% of the total number of EMTK shares before the

private placement. Some of the investors purchased those shares including Naver Stock Price & Volumes, 12M Corporation (a South Korean company known for its popular mobile messenger, LINE) and 3,000 140 H Holdings Inc, alleged to be an affiliate of Grab. H Holdings purchased IDR 4 trillion worth 2,500 120 of EMTK’s new shares (43% of the total value of new shares issued). Several insurance and 100 asset management institutions also participated in the private placement. 2,000 80 Share price growth of +366% yoy, tenth biggest market cap on the IDX. EMTK's share 1,500 price had gone up by +366.7% in a year, and with a market cap of IDR 142.6 trillion, EMTK 60 1,000 is the company with the tenth biggest market cap on the IDX. EMTK's stock liquidity has 40 also improved after its 1:10 stock split, which resulted in an increase in the average daily 500 20 transaction value to IDR 2.632 billion in 1Q21 (vs.90.6 billion in 4Q20). At present, we

- - have not made any projection for EMTK. However, considering its market cap and average Jan-20 May-20 Sep-20 Jan-21 daily transaction value, EMTK is one of the ones to watch, as a proxy for the growth of the

Volume Last Price Millions technology sector on the IDX.

Company Background Forecast and Valuations (at IDR 2,230/share) Elang Mahkota Teknologi TBk (EMTK) is the holding Y/E Dec 16A 17A 18A 19A 20A company of Surya Citra Media (SCMA). Aside from Revenue (IDRBn) 7,369 7,593 8,960 11,030 11,936 SCMA, EMTK has also invested in several well-known EBITDA (IDRBn) 3,549 2,753 2,694 3,851 3,852 startups such as Bukalapak, DANA, Vidio, and KlikDokter. EV/EBITDA (x) 16.3 21.6 18.9 9.0 33.9 Established in 1983 and listed since 2010, EMTK was Net Profit (IDRBn) 354 44 (2,622) (1,516) 2,058 founded by Eddy Sariaatmadja and is currently EPS (IDR) 6.4 0.8 (47.6) (27.6) 37.4 controlled by the Sariaatmadja family. EPS Growth (%) (73.4) (87.6) n.m n.m n.m P/E Ratio (x) 155.4 1,193.6 n.m n.m 62.0 BVPS (IDR) 286.5 324.4 281.0 222.9 225.3 P/BV Ratio (x) 3.5 2.9 3.0 2.6 10.3 DPS (IDR) 4.0 4.0 n.a n.a n.a Dividend Yield (%) 0.4 0.4 n.a n.a n.a ROAE (%) 2.5 0.3 n.a n.a 19.3 Nashrullah Putra ROAA (%) 1.7 0.2 n.a n.a 11.5 +62 21 2854 8339 Interest Coverage (x) n.a n.a n.a n.a n.a [email protected] Net Gearing (%) n.c n.c n.c n.c n.c

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Elang Mahkota Teknologi Bloomberg: EMTK.IJ | Reuters: EMTK.JK Technology Sector 29 April 2021 JCI Index: 5,964

Financial Highlight Profit and Loss Cash Flow Y/E Dec (IDR Bn) 16A 17A 18A 19A 20A Y/E Dec (IDR Bn) 16A 17A 18A 19A 20A Revenue 7,369 7,593 8,960 11,030 11,936 Net Profit 354 44 (2,622) (1,516) 2,058 Cost of Revenues (4,169) (4,755) (6,125) (8,270) (9,043) D&A 2,175 2,264 2,590 2,975 2,594 Gross Profit 3,200 2,838 2,835 2,760 2,893 Chg in Working Capital (1,340) (1,268) 795 (3,061) (2,883) Operating Expenses (1,826) (2,348) (2,731) (1,883) (1,635) Operating Cash Flow 1,189 1,040 763 (1,603) 1,770 Operating Profit 1,374 490 104 877 1,258 Capital Expenditure (294) (1,191) (1,240) (845) (306) EBITDA 3,549 2,753 2,694 3,851 3,852 Others (5,063) 2,687 (1,998) 69 115 Other Income (Expense) (63) 379 (2,041) (314) 2,444 Investing Cash Flow (5,357) 1,497 (3,238) (775) (192) Finance Expense - - - - - Net - Borrowing (362) (28) (11) 1,467 1,287 Pre-tax profit 1,311 868 (1,938) 563 3,703 Other Financing (254) 1,704 (356) (319) (3,101) Income Tax (449) (420) (368) (267) (346) Financing Cash Flow (616) 1,676 (367) 1,148 (1,813) Profit for Period 862 448 (2,306) 296 3,357 Net - Cash Flow (4,784) 4,212 (2,842) (1,230) (235) Net Extraordinary Gain (Losses) - - - (2,640) (1,639) Cash at beginning 7,700 2,915 7,181 4,665 3,339 Minority Interest (508) (404) (316) 827 341 Forex Adjustment - 54 325 (96) (266) Net Profit 354 44 (2,622) (1,516) 2,058 Cash at ending 2,915 7,181 4,665 3,339 2,838

Balance Sheet Key Ratios Y/E Dec (IDR Bn) 16A 17A 18A 19A 20A Y/E Dec 16A 17A 18A 19A 20A Cash & equivalents 2,915 7,181 4,665 3,339 2,838 Gross Profit Margin (%) 43.4 37.4 31.6 25.0 24.2 Receivables 1,711 1,719 1,752 1,932 2,230 Operating Margin (%) 18.6 6.4 1.2 7.9 10.5 Others 4,927 1,595 3,402 3,336 2,262 EBITDA Margin (%) 48.2 36.3 30.1 34.9 32.3 Total Current Asset 9,553 10,496 9,819 8,607 7,330 Pre-Tax Margin (%) 17.8 11.4 (21.6) 5.1 31.0 Net Fixed Asset 2,367 2,334 2,519 3,029 4,727 Net Profit Margin (%) 4.8 0.6 (29.3) (13.7) 17.2 Other Non-Current Asset 8,516 9,380 7,188 5,905 5,827 Debt to Equity (%) 1.4 1.6 1.9 17.2 23.6 Total Asset 20,437 22,210 19,525 17,541 17,884 Net Gearing (%) n.c n.c n.c n.c n.c ST. Bank loan 130 135 148 110 416 Payables 531 1,492 1,824 2,266 1,468 Major Assumption Other current Liability 1,220 234 301 314 982 16A 17A 18A 19A 20A Total Current Liability 1,881 1,861 2,273 2,689 2,865 LT.Debt 60 95 77 1,588 2,109 Other LT Liabilities 2,727 2,403 1,711 998 512 Total Liabilities 4,668 4,359 4,061 5,275 5,485 Minority Interest 1,830 3,320 3,545 2,389 1,711 Total Equity 13,939 14,530 11,919 9,876 10,688

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Elang Mahkota Teknologi Bloomberg: EMTK.IJ | Reuters: EMTK.JK Technology Sector 29 April 2021 JCI Index: 5,964

Company Background Emtek Group (EMTK) was founded in 1983 by Eddy Sariaatmadja, and made its debut on the IDX in 2010. Initially, EMTK was founded under the name "Elang Mahkota Komputer" , focusing on computer hardware distribution business. In 2005, EMTK successfully acquired Surya Citra Media (SCTV), and in 2011, Emtek acquired another Indonesian TV station, Indosiar Visual Mandiri (IVM). After acquiring those FTA TV stations, EMTK started to shift its business focus to the media sector. Aside from TV stations, EMTK has also ventured into other business fields in the media sector, such as web portals (Kapan Lagi Youniverse / KLY), OTT platform (Vidio), production houses (Indonesia Entertainment Group (IEG), Sinemart, Screenplay Films), event management (Samara), and even out of home (OOH) media (EYE Indonesia). All of EMTK’s media business lines are consolidated into its subsidiary, Surya Citra Media (SCMA), which has also been listed on the IDX.

Figure: EMTK’s Media Business

Source: Company, SSI Research

Aside from the media sector, EMTK has also invested in several startups that have the potential to drive the company's growth in the future, such as Bukalapak (Indonesia's third- largest e-commerce), bobobobo.com, PropertyGuru, Bridestory, Hijup.com, and Kudo. EMTK has also expanded into the digital wallet sector through DANA, a joint venture with Alibaba- affiliated Ant Financial.

Figure: EMTK’s Startups Portfolio

Source: Company, SSI Research

EMTK is also involved in the hospital management business through its subsidiary, Elang Medika Corpora (EMC). To strengthen its hospital network, EMTK recently acquired the majority ownership in Omni Hospital (SAME).

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Elang Mahkota Teknologi Bloomberg: EMTK.IJ | Reuters: EMTK.JK Technology Sector 29 April 2021 JCI Index: 5,964

Figure: EMTK’s Business Portfolio

Source: Company

Historically, media segment has always been the largest contributor to EMTK's revenue, with an average contribution of ~ 60%. However, in FY20, mainly due to the effect of COVID-19 pandemic on the media industry, the share of revenue from this segment fell to ~ 43%. In FY20, the solutions segment (a combination of the telecommunications equipment segment and DANA), became the largest contributor to EMTK's revenue (53%). For the record, in FY20, DANA was deconsolidated from EMTK's book, because there was a transfer of ownership of 5% of DANA's shares to a third party. Currently, EMTK owns 49% of DANA. Another note: Bukalapak and Klikdokter are not consolidated into EMTK book’s. The 'others' segment includes telecommunication services and revenue from hospitals.

Figure: Revenue Composition Figure: Revenue Composition FY20

Media Solution Others 3% 5% Sale of Goods 100%

80% 27% 26% 26% 34% Media 45% 53% 60% Health and hospital 40% 39% 52% 69% 67% 66% services 60% 50% 20% 43% Others 0% FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020

Source: Bloomberg, SSI Research Source: Bloomberg, SSI Research

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Elang Mahkota Teknologi Bloomberg: EMTK.IJ | Reuters: EMTK.JK Technology Sector 29 April 2021 JCI Index: 5,964

After Private Placement: What Might Happen?

Figure: EMTK’s Ownership Structure (Before Private Placement)

Source: Company EMTK had just conducted a private placement in March, issuing 4.76 billion new shares with a total value of IDR 9.3 trillion. The number of new shares issued was equivalent to 8.4% of the total number of EMTK shares before the private placement. Some of the investors purchased those shares including Naver Corporation (a South Korean company known for its popular mobile messenger, LINE) and H Holdings Inc, alleged to be an affiliate of Grab. H Holdings purchased IDR 4 trillion worth of EMTK’s new shares (43% of the total value of new shares issued). Several insurance and asset management institutions also participated in the private placement. We consider Grab's involvement in EMTK to be a positive catalyst, considering that Grab has experience developing digital ecosystems in Indonesia.

Figure: EMTK’s Ownership Structure (Before Private Placement)

43% Grab (through H Holdings) IDR 4 trillion Total Private Placement IDR 9.29 Trillion Naver and other investors IDR 5.3 trillion 57%

Source: Company

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Elang Mahkota Teknologi Bloomberg: EMTK.IJ | Reuters: EMTK.JK Technology Sector 29 April 2021 JCI Index: 5,964

There is a lot of speculation and rumors regarding what might happen after the private placement. Some of the things we expect to happen are: OVO-DANA merger. As previously mentioned, DANA is a joint venture between EMTK and Ant Financial, an affiliate of Alibaba. With Grab's entry into EMTK, a merger between OVO and DANA is getting even closer to reality. At present, OVO and DANA are competitors in the field of digital wallets together with Gopay, ShopeePay, and LinkAja. DANA is the digital payment partner of Bukalapak (related to EMTK) and Lazada (related to Alibaba), while OVO is currently used by Grab and Tokopedia. However, with the planned merger between Tokopedia and Gojek, there is a possibility that Tokopedia will switch to Gopay. If the OVO- DANA merger did take place, the corporate structure of the new company that emerged from the merger would be very strong, making it more competitive.

Figure: E-Wallet Market Share, 2Q20 (%) Figure: Estimated transaction value share and user share (%)

70% Transaction Value User Share 58% 60% 40% 36% 50% 35% 30% 30% 40% 23% 29% 25% 21% 22% 30% 18% 18% 20% 17% 20% 15% 9% 9% 10% 7% 10% 4% 5% 0% 0% Gopay OVO DANA LinkAja Shopee pay OVO DANA Gopay LinkAja

Source: iPrice & App Annie Survey, as of 2Q20 Source: Snapchart (as of Dec’20)

Acquisition of SCMA. Another rumor that emerged after the private placement is that EMTK will acquire 100% of SCMA shares, its subsidiary in the media sector. The rumor is based on speculation that EMTK will be more aggressive in spending funds to support its startup portfolio. With the acquisition of 100% of SCMA, EMTK will get all the dividends distributed by SCMA, which may be a good source of funds to support EMTK’s investment plan. Currently, SCMA is EMTK's most profitable subsidiary, contributing ~ IDR 1-1.5 trillion in net income annually. Another thing that supports the speculation is the aggressive buyback that SCMA has made to reacquire 14% of its shares. Currently, EMTK controls 61% of SCMA shares, and if EMTK wants to take over the remaining 25% of the outstanding shares through a tender offer, it is estimated that EMTK will have to spend IDR ~ 5-6 trillion. Figure: SCMA’s Ownership Structure Figure: SCMA’s Revenue and Net Profit (IDR Bn)

Revenue Net Profit

8,000 14% 7,000 EMTK 6,000 5,000 Public 25% 4,000 61% Treasury 3,000 2,000 1,000 - 2018 A 2019 A 2020 A 2021F 2022F 2023F

Source: Bloomberg, as of April’21 Source: SSI Research

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Elang Mahkota Teknologi Bloomberg: EMTK.IJ | Reuters: EMTK.JK Technology Sector 29 April 2021 JCI Index: 5,964

Research Team Head of Equity Research, Strategy, Banking, Suria Dharma [email protected] +6221 2854 8148 Consumer Staples William Mamudi, CFTe, CMT Technical Analyst [email protected] +6221 2854 8382 Muhamad Alfatih CSA, CTA, CFTe Senior Technical Portfolio Advisor [email protected] +6221 2854 8129 Cement , Cigarette,Paper, Plantation,Telco Yosua Zisokhi [email protected] +6221 2854 8387 Infra, Chemical Dessy Lapagu Aviation, Coal, Metal, Retail [email protected] +6221 2854 8392 Automotive,Construction, Mining Cont., Selvi Ocktaviani [email protected] +6221 2854 8393 Precast,Telco, Toll Roads Nashrullah Putra Media, Poultry [email protected] +6221 2854 8739 Olivia Laura Anggita Healthcare, Property [email protected] +6221 2854 8346 Ahmad Fadillah Oil & Gas [email protected] +6221 2854 8144 Calista Muskitta Research Associate [email protected] +6221 2854 8331 Adolf Richardo Editor, Translator [email protected] +6221 2854 8396

Equity Institutional Team

Benny Bambang Soebagjo Head of Institutional Equity Sales [email protected] +6221 2854 8312 Ronny Ardianto Institutional Equity Sales [email protected] +6221 2854 8399 Fachruly Fiater Institutional Equity Sales [email protected] +6221 2854 8325 Henry Sutanto Institutional Equity Sales [email protected] +6221 2854 8329 Sylviawati Customer Service [email protected] +6221 2854 8193

Private Wealth Management Evelyn Satyono Head of PWM Equity Sales [email protected] +6221 2854 8380 Clarice Wijana PWM Equity Sales [email protected] +6221 2854 8395 Gitta Wahyu Retnani PWM Equity Sales [email protected] +6221 2854 8365 Wahyudi Budiyono Dealer [email protected] +6221 2854 8152

Equity Retail Team Lucia Irawati Retail Equity Sales [email protected] +6221 2854 8173 Salt World Widjaja Retail Equity Sales [email protected] +6221 2854 8163

Fixed Income Sales Team R. Virine Tresna Sundari Head of Fixed Income [email protected] +6221 2854 8170 Rudianto Nugroho Fixed Income Sales [email protected] +6221 2854 8306 Sany Rizal Keliobas Fixed Income Sales [email protected] +6221 2854 8337 Julio Simangunsong Fixed Income Sales [email protected] +6221 28548384 Thita Rossiana Putri Admin & Sales Support Fixed Income [email protected] +62-21 2854 8385

Online Trading Sales Team

Joseph Soegandhi Head of OLT [email protected] +6221 2854 8872 Nugroho Nuswantoro Head of Marketing Online Trading [email protected] +6221 2854 8372 Wahyu Widodo Marketing [email protected] +6221 2854 8371

DISCLAIMER: Analyst Certification: The views expressed in this research accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this research. The analyst(s) principally responsible for the preparation of this research has taken reasonable care to achieve and maintain independence and objectivity in making any recommendations. This document is for information only and for the use of the recipient. It is not to be reproduced or copied or made available to others. Under no circumstances is it to be considered as an offer to sell or solicitation to buy any security. Any recommendation contained in this report may not be suitable for all investors. Moreover, although the information contained herein has been obtained from sources believed to be reliable, its accuracy, completeness and reliability cannot be guaranteed. All rights reserved by PT Samuel Sekuritas Indonesia.

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