MNCN Immense Pressures on Bottom Line 20181115 NHKS Company Report (English)

Media Nusantara Citra Tbk (MNCN)

  Immense Pressures on Bottom Line Company Report | Nov 15, 2018

  3Q18: The Highest Revenue Growth

  In 3Q18, MNCN posted the revenue of IDR1.84 trillion (+4.8% y-y)— the highest

  growth in 2018—backed by the growth of 6.8% y-y to IDR1.82 trillion in Hold

  revenues posted by the ads and content segments. On an annual basis, the

Dec 2019 TP (IDR) 875

  downtrend in programs & contents expenses of 2Q17—relating to strategies for

  Consensus Price (IDR) 1,289

  100% local contents in 2018—did not continue in 3Q18 and throttled the 3Q18

  TP to Consensus Price -32.1%

  margin to 58.8% (vs. the 3Q17 margin of 64.3%)

  vs. Last Price +12.9% Continued Headwinds of Forex Losses Shares data

  Although the 3Q18 forex loss amounted to IDR155 billion, lower than the 2Q18,

  Last Price (IDR) 775

  its amount had soared to IDR376 billion since the early of 2018. We project that

  Price date as of Nov 14, 2018

  the loss lingers still until at the end of 2018, skyrockets than the forex loss of

  52 wk range (Hi/Lo) 1,600 / 730

  FY2015, and whittles away net profits and net margins of FY18. Indeed, the

  Free float (%)

  42.9

  rupiah depreciation in 2018 worsened

  the 9M18 interest expenses, ballooning to Outstanding sh.(mn) 14,276 47.8% y-y.

  Market Cap (IDR bn) 11,064 Market Cap (USD mn) 747 A More Intense Competition in 2018

  Avg. Trd Vol - 3M (mn)

  19.0 Post-the 2018 Asian Games Event, MNCN’s audience shares is still below Avg. Trd Val - 3M (bn)

  15.7 SCMA.

  Its strategy for improving its content qualities is futile to enthrone it as the Foreign Ownership 16.4% leader of audience share. It is powerless to fight against SCMA’s intense

  competition. Its current powerless state is in a stark contrast to its prior powerful

  Trade, Services & Investment

  state in 2017 when it jostled for the leader of audience shares with effortless

  Media, Television endeavors.

  Bloomberg MNCN IJ Reuters MNCN.JK Target Price of IDR875

  We use an estimate of a forward P/E of 7.2x (2.1 SD lower than the last 3-year average). The target price implies a 2019E P/E of 7.6x. Now, MNCN is traded at

  Share Price Performance a 2019E P/E of 6.7x. Media Nusantara Citra Tbk | Summary (IDR bn) 2017 2018E 2019F 2020F

  Revenue 7,053 7,361 7,737 8,089

  Revenue growth 4.8% 4.4% 5.1% 4.5%

  EBITDA 3,097 3,133 3,363 3,504 Net Profit 1,453 1,308 1,640 1,764 EPS (IDR) 102 92 115 124

  EPS growth 6.2% 25.4% 7.5%

• -10.0%

  YTD

  1M

  3M

  12M

  BVPS (IDR) 687 754 840 930

  Abs. Ret. -39.7% 4.0% -17.1% -46.2%

  EBITDA margin 43.9% 42.6% 43.5% 43.3%

  Rel. Ret. -31.9% 1.7% -18.6% -44.3%

  NPM 20.6% 17.8% 21.2% 21.8% ROE 15.1% 9.2% 9.1% 9.1% ROA 9.9% 4.9% 4.9% 4.9% ROIC 12.9% 13.9% 13.0% 12.6% P/E 12.6x 8.5x 6.7x 6.3x P/BV 1.9x 1.0x 0.9x 0.8x

Michael Tjahjadi

  EV/EBITDA 6.2x 3.7x 3.3x 2.9x

• 62 21 797 6202, ext:114

  DPS (IDR) 15 15 20 22

  michael@nhsec.co.id Dividend yield 1.1% 1.9% 2.5% 2.9%

  Source: Company Data, Bloomberg, NHKS Research Please consider the rating criteria & important disclaimer NH Korindo Sekuritas Indonesia

  Media Nusantara Citra www.nhsec.co.id

  Source: Company, NHKS Research MNCN Quarterly Net Profit | 3Q16 - 3Q18

  Source: Company, NHKS Research MNCN Quarterly Revenue | 3Q16 - 3Q18

  All-Time Audience Share by Group | Jan ‘17 - Oct ‘18 Source: Company, NHKS Research

  Margin Ratios | 3Q17 - 3Q18 Source: Company, NHKS Research

  Performance Highlights MNCN Quarterly Ads & Content Revenue | 3Q16 - 3Q18

  Source: Company, NHKS Research Prime Time Audience Share by Group | Jan ‘17 - Oct ‘18

  Source: Company, NHKS Research

  Media Nusantara Citra www.nhsec.co.id

  3Q18 review (IDR bn)

  3Q18

  3Q17

  4Q17

  1Q18

  2Q18

  4Q18E Actual Estimate y-y q-q surprise

  Revenue 1,756 1,671 1,602 2,087 1,840 1,815 4.8% -11.8% 1.4% 1,831 Gross Profit 1,130 1,138 939 1,261 1,082 1,193 -4.3% -14.2% -9.4% 1,150

  Gross Margin 64.3% 68.1% 58.6% 60.4% 58.8% 65.7% 62.8%

• -5.6% -1.6% -7.0%

  EBIT 714 704 528 790 674 770 -5.7% -14.7% -12.5% 674

  EBIT Margin 40.7% 42.2% 32.9% 37.8% 36.6% 42.4% -4.1% -1.2% -5.8% 36.8%

  EBITDA 826 800 638 911 781 898 -5.4% -14.3% -13.0% 803

  EBITDA Margin 47.0% 47.9% 39.8% 43.6% 42.4% 49.5% -4.6% -1.2% -7.0% 43.9% Net Profit 347 332 274 362 353 271 1.7% 2.7% 30.2% 319 -

  Net Margin 19.7% 19.8% 17.1% 17.4% 19.2% 14.9% -0.6% 1.8% 4.2% 17.4% Source: Bloomberg, NHKS research Earnings revision (IDR bn) 2018E 2019F 2020F

  7,361 7,737 8,089

• Revised Revenue
>Previous 7,368 7,696 8> -Change -0.1% 0.5% 1.0%

  4,431 4,675 4,898

• Revised Gross Profit
• Previous 4,682 4,954 5,208
• Change -5.4% -5.6% -6.0%
• Revised 60.2% 60.4% 60.6% Gross Margin

  63.5% 64.4% 65.0%

• Previous EBIT -Revised 2,665 2,833 2> -Previous 2,872 3,115 3
• Change -7.2% -9.0% -10.3%

  36.2% 36.6% 36.4%

  EBIT Margin -Revised

• Previous 39.0% 40.5% 41.0% EBITDA -Revised 3,133 3,363 3> -Previous 3,357 3,655 3
• Change -6.7% -8.0% -9.4%

  42.6% 43.5% 43.3%

  EBITDA Margin -Revised

• Previous 45.6% 47.5% 48.3%
• Revised

  Net Profit 1,308 1,642 1,769

• -Previous 1,267 1,633 1,827
• -Change 3.3% 0.5% -3.2%
• Revised 17.8% 21.2% 21.9% Net Margin

  17.2% 21.2% 22.8%

• Previous

  Source: NHKS research

• 11.02%
• 35.61%
• 54.81%

  53

  Hubei Broadcasting 676 1,454 422 45 -4.72% 10.7% 4.86% 15.8x 0.7x

  China

  0.6% 0.26% 730.0x 1.9x

  1

  TV18 Broadcast Ltd 865 1,040 229

  India

  9.7% 9.94% 54.1x 5.8x

  2

  21

  35

  14.9% 22.57% 11.6x 2.6x Manila Broadcasting Co 107

  42

  6.8% 10.65% 5.9x 0.5x GMA Network Inc 331 296 282

  ABS-CBN Corp 318 1,503 784

  Philippines

  BEC World PCL 346 440 307 (13) N/A -4.1% -6.23% N/A 1.8x MCOT PCL 191 214 73 (79) -285.30% -107.0% -51.28% N/A 1.7x

  Thailand

  Astro Malaysia Holdings 1,404 1,756 1,360 128 -29.60% 9.4% 82.61% 11.3x 10.1x

  Malaysia

  VIVA 127 569 204 2 -90.11% 1.2% 1.6% 56.6x 0.9x

  SCMA 1,798 396 347 103 -0.85% 29.6% 32.3% 18.6x 5.8x MNCN 747 1,108 518 95 26.05% 18.3% 14.2% 8.0x 1.0x

• 22.95%

  Source: Bloomberg Company Market Cap (USD mn) Asset (USD mn) Revenue LTM (USD mn) Net Profit LTM (USD mn) Net Profit Growth LTM Net Margin ROE LTM P/E LTM P/BV Indonesia

  

television to digital media is on the rise. Additionally, production expenses and business expenses in Indonesia are

relatively lower than are that of its peers in the Asia Pacific.

  MNCN is capable of posting the high revenue, net profit and net profit growth, even it is the best among its peers in the Asia Pacific. Indonesia is home to the profit-making media industry, notably television media. In light of Indonesia’s large numbers of populations, the industrialists of fast-moving consumer goods, cigarettes, and e-commerce sectors to make a good use of television as the main media for marketing their products. However, the paradigm shift in the marketing medium from

  MNCN’s Competitiveness in the Asia Pacific

  MNCN is one of Indonesia-based media companies with the largest number of free-to-air TV portfolios. Its 4 free-to-air TV channels are RCTI, MNCTV, GTV focusing on entertainment, and iNews focusing on news and sports. Another to its free-to-air TV channels, it has 20 pay TV channels. To support its business core, MNCN runs radio, printed media, content production, content library, and talent management businesses. In June 2018, it performed Initial Public Offering (IPO) of its subsidiary running a content business: PT MNC Studios International Tbk (MSIN).

  Media Nusantara Citra www.nhsec.co.id Asia Pacific Media Company

  MNCN at A Glance

  Media Nusantara Citra www.nhsec.co.id

  Multiple Valuation Forward P/E band | Last 3 years Dynamic Forward P/E band | Last 3 years Source: NHKS research Source: NHKS research Rating and Target Price Update Target Price Revision Date Rating Target Price Last Price Consensus vs Last Price vs Consensus

  05/03/2018 Buy 1,550 (Dec 2018) 1,305 1,902 +18.8% -18.5% 07/12/2018 Buy 1,125 (Dec 2018) 905 1,595 +24.3% -29.5%

• 19.4% 09/17/2018 Buy 1,125 (Dec 2018) 840 1,396 +33.9% 11/14/2018 Hold 875 (Dec 2019) 775 1,289 +12.9% -32.1%

  Source: NHKS research, Bloomberg Analyst Coverage Rating Closing and Target Price Source: Bloomberg

  Source: NHKS research

NH Korindo Sekuritas Indonesia (NHKS) stock ratings

  1. Period: End of year target price

  2. Rating system based on a stock’s absolute return from the date of publication

   Buy : Greater than +15%

   Hold : -15% to +15%  Sell : Less than -15%

  Media Nusantara Citra www.nhsec.co.id

  Summary of Financials

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