We set the target price of IDR1,550 with an estimate of forward PE of

  Dividend yield 2.5% 3.5% 3.9% 0.0%

  4Q17 outperformance succeeding in achieving the growth of 14% y-y into IDR1.67 trillion in revenue. Another to the top-line outperformance, its margin performance was reign in upswing mood. The efficiency of content and program segment succeeded in beefing up the gross margin of 5% y-y. However, the general and administrative expense hiking by 12.7% y-y suppressed the bottom line performance resulting in nudging up net margin and net profit by 0.3% y-y and 6.2% y-y respectively.

  44 45 51 54

  P/E 17.3x 11.5x 11.0x 10.3x P/BV 2.5x 1.7x 1.6x 1.5x EV/EBITDA 10.5x 6.7x 6.4x 5.9x DPS (IDR)

  12.1% 12.9% 13.9% 14.0%

  ROIC

  9.5% 9.9% 10.0% 10.2%

  BVPS (IDR) 704 751 799 865 EBITDA margin 39.1% 43.9% 45.3% 46.2% Net Profit Margin 20.3% 20.6% 20.9% 21.3% ROE 14.4% 15.1% 15.2% 15.3% ROA

  EPS growth 19.8% 9.7% 6.1% 7.7%

  EBITDA 2,631 3,097 3,349 3,590 Net profit 1,369 1,453 1,541 1,660 EPS (IDR) 102 111 118 127

  Revenue growth 4.4% 4.8% 4.8% 5.2%

  Revenue 6,730 7,053 7,390 7,777

  2016/12A 2017/12A 2018/12E 2019/12E

  Target Price of IDR1,550 We set the target price of IDR1,550 with an estimate of forward P/E of 12.3x (1 SD lower than the 2-year average). The target price implies a 2018/ E P/E of 13.1x. Now, MNCN is traded at a 2018/E P/E of 11.0x

  This backdrop was a logical takeaway for a more diversified business MNCN has as it is not reliant only on the ads revenue. The diversified revenue sources allow MNCN to maintain its performance even though its TV channels have no broadcasting license for such special events as World Cup Champion and Asian Games.

  Consistent Improvement in Local Contents On the annual basis, the upswing in top-line performance was backed by the respective growth of 46.5% and 10.4% in content revenue and non- RCTI ads revenue. Through MNC Pictures, the local contents in MNCN’s TV channels reached 90% in 2017.

  IDR7.05 trillion in revenue. The top line growth was underpinned by the

  Outperformance in the End of 2017 MNCN marked the end of 2017 with posting the growth of 4.8% into

• 18.5% vs. Last Price +18.8%

  Shares data

  Last Price (IDR) 1,305 Price date as of May 03, 2018 52 wk range (Hi/Lo) 2,020 / 1,230 Free float 40.8% Outstanding sh.(mn) 14,276 Market Cap (IDR bn) 18,630 Market Cap (USD mn) 1,335 Avg. Trd Vol - 3M (mn)

  14.4 Avg. Trd Val - 3M (bn)

  21.0 Foreign Ownership 16.2%

  Trade, Services & Investment Media, Television Bloomberg MNCN.IJ Reuters

  MNCN.JK Michael Tjahjadi

• 62 21 797 6202, ext:114

  Media Nusantara Citra Tbk | Summary (IDR bn) Source: Company Data, Bloomberg, NHKS Research

  Share Price Performance YTD

  1M

  3M

  12M

  Abs. Ret. 1.6% -10.6% -18.2% -29.8% Rel. Ret. 9.4% -4.7% -6.6% -33.6%

  Please consider the rating criteria & important disclaimer NH Korindo Sekuritas Indonesia Company Report | May 04, 2018 Media Nusantara Citra Tbk (MNCN) Optimizes Internal Content Production Buy Dec 2018 TP (IDR) 1,550 Consensus Price (IDR) 1,902 TP to Consensus Price

  michael@nhsec.co.id

  Hubei Broadcasting 990 1,454 5.05% 46.1% 12.7% N/A 5.9% 18.4x 0.8%

  MNCN 1,335 1,108 4.79% 62.1% 37.8% 43.9% 16.3% 12.0x 3.2%

  China

  TV18 Broadcast Ltd 1,572 1,040 50.62% N/A

  India

  27

  ABS-CBN Corp 458 1,503 -2.24% 39.4% 10.1% 23.6% 10.4% 6.8x 3.3% GMA Network Inc 362 296 -7.97% 58.1% 23.0% 27.3% 20.9% 10.7x 9.0% Manila Broadcasting 140

  Philippines

  MCOT PCL 219 214 -2.61%

  BEC World PCL 645 440

  Thailand

  Astro Malaysia Hold- 2,432 1,756

  Malaysia

  VIVA 352 569 3.32% N/A 25.4% 52.7% 7.0% 32.4x N/A

  SCMA 2,410 396

  Company Market Cap (USD mn) Total Asset (USD mn) Sales Growth Gross Margin Operating Margin EBITDA Margin ROE P/E Dividend Yield

• 10.03% 17% 2% 35.3% 0.9% 316.2x 1.0%

  Source: Bloomberg, NHKS research

  Asia Pacific Media Firms

  Indonesia’s large numbers of populations, low production cost, and low business cost are factors contributing to the higher margin ratio of Indonesia-based media industry

compared to the margin ratios of its Asia Pacific’s peers.

  Indonesia’s large numbers of populations are key takeaway for industrialists in fast- moving consumer goods, cigarettes, and e-commerce sectors to make use the television as the main media for marketing their products. However, the paradigm shift in the marketing medium from television to digital media is the noteworthy fact.

  Indonesia-based Media Industry in Asia Pacific’s Emerging Countries Indonesia homes to the profit-making media industry, notably television media.

  A Glance at MNCN MNCN is one of Indonesia-based media companies with the largest number of free-to-air TV portfolios compared to its peers. Its 4 free-to-air TV channels are RCTI, MNCTV, GTV focusing on entertainment and iNews focusing on news and sports. Another to free-to-air TV channels, it has 20 pay TV channels. To support its business core, MNCN has radio, printed media, content production, content library, and talent management businesses.

  May 04, 2018

  Company Report

• 1.55% 58.8% 39.8% 44.2% 36.3% 25.3x 2.5%
• 1.46% 41% 20.6% 40.0% 120.7% 12.4x 6.5%

• 75%
• 104%
• 64.9%
• 48.0% N/A N/A

• 14.82% 40.2% 21.2% 24.6% 18.2% 57.0x 1.7%

• 0.8% 3.9% 0.3% 1223.0x N/A

  Company Report

  May 04, 2018

  Operational Performance Quarterly Revenue (IDR bn)| 1Q15 - 4Q17 Quarterly Net Profit (IDR bn)| 1Q15 - 4Q17

  Source: Company, NHKS research Source: Company, NHKS research

  Margin Ratios | 2013 - 2017 Program and Content Expenses (IDR bn)| 1Q15 - 4Q17

  Source: Company, NHKS research Source: Company, NHKS research

  

All Time Audience Share by Group| Jan ‘17 - Apr ‘18 Prime Time Audience Share by Group| Jan ’17 - Apr ‘18

  Source: Nielsen Source: Nielsen

  Company Report

  May 04, 2018

  Multiple Valuation Forward P/E band | Last 2 years Dynamic Forward P/E band | Last 2 years

  Source: NHKS research Source: NHKS research

  Rating and target price Date Rating Target Price Last Price Consensus vs Last Price vs Consensus

  05/03/2018 Buy 1,550 1,305 1,902 +18.8% 18.5%

• Source: Bloomberg, NHKS research

  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 : Greater than +15%

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

  Company Report

  May 04, 2018

  Summary of Financials

DISCLAIMER

INCOME STATEMENT BALANCE SHEET

  

This report and any electronic access hereto are restricted and intended only for the clients and related entity of PT NH Korindo Sekuritas Indonesia. This

report is only for information and recipient use. It is not reproduced, copied, or made available for others. Under no circumstances is it considered as a selling

offer or solicitation of securities buying. Any recommendation contained herein may not suitable for all investors. Although the information here is obtained

from reliable sources, it accuracy and completeness cannot be guaranteed. PT NH Korindo Sekuritas Indonesia, its affiliated companies, respective employees,

and agents disclaim any responsibility and liability for claims, proceedings, action, losses, expenses, damages, or costs filed against or suffered by any person

as a result of acting pursuant to the contents hereof. Neither is PT NH Korindo Sekuritas Indonesia, its affiliated companies, employees, nor agents liable for

errors, omissions, misstatements, negligence, inaccuracy arising herefrom. All rights reserved by PT NH Korindo Sekuritas Indonesia ^{MNCN Summary Last Price (IDR) 1,305}

^{Target Price (IDR) 1,550 2016/12A 2017/12A 2018/12E 2019/12E}

^{Rating: Buy ROE 14.4% 15.1% 15.2% 15.3% ROA 9.5% 9.9% 10.0% 10.2% ROIC 12.1% 12.9% 13.9% 14.0% EBITDA/Equity 27.6% 32.1% 33.1% 33.1%}

^{In IDR bn 2016/12A 2017/12A 2018/12E 2019/12E EBITDA/Assets 18.3% 21.1% 21.7% 22.1%}

^{Revenue 6,730 7,053 7,390 7,777 Cash Dividend (IDR bn) 587 587 662 700}

^{Growth (% y/y) 4.4% 4.8% 4.8% 5.2% Dividend Yield (%) 2.5% 3.5% 3.9% 0.0%}

^{Direct cost (2,875) (2,670) (2,701) (2,740) Payout Ratio (%) 48.8% 42.9% 45.8% 45.4%}

^{Gross Profit 3,856 4,382 4,689 5,037 DER 39.9% 39.0% 38.0% 35.5%}

^{Gross Margin 57.3% 62.1% 63.5% 64.8% Net Gearing 91.8% 92.6% 96.1% 97.2%}

^{Operating Expenses (1,524) (1,716) (1,863) (2,027) LT Debt to Equity 3.4% 35.7% 34.8% 32.5%}

^{EBIT 2,332 2,666 2,827 3,009 Capitalization Ratio 28.5% 28.0% 27.5% 26.2%}

^{EBIT Margin 34.6% 37.8% 38.2% 38.7% Equity Ratio 66.6% 65.1% 66.1% 67.5%}

^{Depreciation 299 432 523 581 Debt Ratio 26.6% 25.4% 25.1% 24.0%}

^{EBITDA 2,631 3,097 3,349 3,590 Financial Leverage 150.7% 151.9% 152.5% 149.7%}

^{EBITDA Margin 39.1% 43.9% 45.3% 46.2% Current Ratio 158.1% 460.4% 490.3% 505.2%}

^{Interest Expense (194) (260) (277) (279) Quick Ratio 111.6% 298.7% 308.4% 310.6%}

^{EBT 2,153 2,416 2,476 2,649 Cash Ratio 11.9% 32.1% 38.9% 42.2%}

^{Income Tax (670) (848) (820) (877) Par Value (IDR) 100 100 100 100}

^{Minority Interest (114) (114) (115) (112) Total Shares (mn) 13,479 13,047 13,047 13,047}

^{Net Profit 1,369 1,453 1,541 1,660 Share Price (IDR) 1,755 1,285 1,305 1,305}

^{Growth (% y/y) 15.4% 6.2% 6.1% 7.7% Market Cap (IDR tn) 23.7 16.8 17.0 17.0 Net Profit Margin 20.3% 20.6% 20.9% 21.3%}

^{In IDR bn 2016/12A 2017/12A 2018/12E 2019/12E 2016/12A 2017/12A 2018/12E 2019/12E}

^{Cash 499 469 556 617 Price /Earnings 17.3x 11.5x 11.0x 10.3x}

^{Receivables 3,054 3,026 3,048 3,131 Price /Book Value 2.5x 1.7x 1.6x 1.5x}

^{Inventories 1,950 2,359 2,601 2,844 Price/Revenue 3.5x 2.4x 2.3x 2.2x}

^{Total Current Assets 6,638 6,718 7,014 7,385 PE/EPS Growth 0.9x 1.2x 1.8x 1.3x}

^{Net Fixed Assets 4,824 5,307 5,790 6,264 EV/EBITDA 10.5x 6.7x 6.4x 5.9x}

^{Financial assets 1,148 975 1,060 1,061 EV/EBIT 11.8x 7.8x 7.5x 7.1x}

^{Other Non Current Assets 810 1,435 1,197 1,260 EV (IDR bn) 27,614 20,890 21,275 21,330}

^{Total Assets 14,240 15,057 15,780 16,724 Revenue CAGR (3-Yr) 1.1% 1.9% 4.7% 4.9%}

^{Payables 435 740 713 727 EPS CAGR (3-Yr) -5.4% -3.7% 11.7% 7.8%}

^{ST debt 56 143 158 160 Basic EPS (IDR) 102 111 118 127}

^{Current maturities LT debt 3,409 177 180 182 Diluted EPS (IDR) 102 111 118 127}

^{Total Current Liabilities 4,199 1,459 1,431 1,462 BVPS (IDR) 704 751 799 865}

^{LT Debt 324 3,498 3,622 3,665 Revenue PS (IDR) 499 541 566 596}

^{Other Non Current Liab. 230 299 303 307 DPS (IDR) 43.6 45.0 50.8 53.6 Total Liabilities 4,753 5,256 5,356 5,434 Shareholders' Equity 9,487 9,801 10,424 11,290}

^{In IDR bn 2016/12A 2017/12A 2018/12E 2019/12E 2016/12A 2017/12A 2018/12E 2019/12E}

^{Net Income 1,369 1,453 1,541 1,660 DCF (IDR bn) Deprec & Amortization 271 458 523 581 NOPAT 1,606 1,730 1,891 2,013 Chg. In Working Capital 325 287 (255) (283) +Depr./Amor. 271 458 523 581 CFO 1,965 2,198 1,809 1,957 -CAPEX (1,011) (943) (988) (1,027) Capex (1,011) (943) (988) (1,027) -Incr. (Decr.) in Working Cap. 325 287 (255) (283) CFI (196) (727) (946) (1,150) (Unlevered) FCFF 1,192 1,532 1,170 1,284 Dividends Paid (587) (587) (662) (700) WACC Net Borrowing (9) 29 143 47 Cost of Debt (Tax Adj.) 6.7% 6.2% 7.5% 7.5% CFF (1,660) (1,531) (776) (747) Cost of Equity (COE) 10.3% 10.8% 10.5% 10.8% Net Changes in Cash 109 (59) 87}

^{60 WACC (%)}

^{9.8% 9.9% 9.9% 10.2%}

^RIM

^{Spread (FROE-COE) (%) 4.0% 4.6% 5.2% 5.1% Residual Income (IDR) 387 432 514 531 By Geography % Shareholders % Equity Charge 981 1,021 1,027 1,128 Indonesia 83.8 Global Mediacom Tbk 59.2 EVA United States 10.5 FMR LLC 2.5 Invested Capital (IDR bn) 13,364 13,276 13,619 14,385 Canada 1.1 Blackrock 1.3 ROIC-WACC (%) 2.3% 3.1% 4.0% 3.8% Hong Kong 1.0 Vanguard Group}

^{1.2 EVA (IDR bn)}

^{302 414 539 546}

  CASH FLOW STATEMENT DCF, RIM & EVA OWNERSHIP PROFITABILITY & STABILITY _{May 3, 2018 Dec 2018 Analyst: Michael Tjahjadi}