MNCN Will Strengthen Intensively Its Content 20180917 NHKS Company Report (English)

Media Nusantara Citra Tbk (MNCN)

  Will Strengthen Intensively Its Content Company Report | Sept 17, 2018 Bottom Line Undermined by Rupiah Depreciation

  In 2Q18, MNCN posted the growth of 3.5% y-y to IDR2.09 trillion and of 1.8% y-y to

  IDR362 billion in the revenue and net profit, respectively. The surge in revenue was backed

Buy by the incline of 5.8% y-y to IDR2.04 trillion in the revenue posted by the ads. and Dec 2019 TP (IDR) 1,125

  content revenues. MNCN succeeded to post a stellar growth in the revenue in light of Consensus Price (IDR) 1,396 its downturn audience share in the early of 2018. On the quarter basis, its revenue edged

  TP to Consensus Price -19.4% up 30.3% q-q because its ahead of Idul Fitri local soap operas successfully attracted vs. Last Price +33.9% audiences.

  However, the rupiah’s exchange rate for the U.S. dollar depreciated further whittled Shares data away its bottom line. Since the early of 2018, the loss of foreign exchange rate

  Last Price (IDR) 840 reached IDR221 billion. 2Q18’s pre tax profit margin also declined to 27.4% (vs. 33.8% in Price date as of Sep 13, 2018 2Q17). 52 wk range (Hi/Lo) 1,655 / 835 Free float (%)

  43.1 Spurred by Trend of Upbeat Ads. Expense Outstanding sh.(mn) 14,276 The ads. revenue increased by 4.17% y-y to IDR3.54 trillion in 1H18. The increase aligned Market Cap (IDR bn) 11,992 with the trend of upbeat ads. expenses on the national basis. According to Nielsen, a

  Market Cap (USD mn) 810 leading global information & measurement company, 1Q18’s ads. expenses in the mass media was buoyant at around 5% y-y (vs. +4% y-y in 1H17). The TV media still dominated Avg. Trd Vol - 3M (mn)

  17.1 the biggest ads. expense portion of 82% because the TV’s coverage to Indonesia reached Avg. Trd Val - 3M (bn)

  16.4 96%. Foreign Ownership 17.2%

  To Remain Focus on Strengthening Content Quality Trade, Services & Investment Another to the upbeat ads. expenses, the content revenue grew further. In 1H18, the

  Media, Television In future years, MNCN likely content revenue climbed by 42% y-y to IDR760.9 billion.

  Bloomberg MNCN IJ improves its content quality and expands its local content to 100% at the end of

2018. The strategy likely bolsters its top line margin in ahead years. Reuters MNCN.JK

Target Price of IDR1,125

  Share Price Performance We use an estimate of a forward P/E of 10.0x (2.1 SD lower than the last 3-year average).

  The target price implies a 2018E P/E of 12.7x. Now, MNCN is traded at a 2018E P/E of 9.9x.

  Media Nusantara Citra Tbk | Summary (IDR bn) 2017 2018E 2019F 2020F

  Revenue 7,053 7,368 7,696 8,008

  Revenue growth 4.8% 4.5% 4.4% 4.1%

  EBITDA 3,097 3,357 3,655 3,866 Net Profit 1,453 1,267 1,633 1,827 EPS (IDR) 102 89 114 128

  EPS growth 6.2% 28.9% 11.9%

• -12.8%

  YTD

  1M

  3M

  12M

  BVPS (IDR) 687 780 845 910

  Abs. Ret. -34.6% -10.2% -28.8% -36.3%

  EBITDA margin 43.9% 45.6% 47.5% 48.3%

  Rel. Ret. -26.8% -10.1% -26.6% -35.0%

  NPM 20.6% 17.2% 21.2% 22.8% ROE 15.1% 9.2% 9.1% 9.1% ROA 9.9% 4.9% 4.9% 4.9% ROIC 12.9% 13.0% 13.0% 12.9% P/E 12.6x 9.9x 7.7x 6.8x P/BV 1.9x 1.1x 1.0x 1.0x

Michael Tjahjadi

  EV/EBITDA 7.3x 5.0x 4.5x 4.3x

• 62 21 797 6202, ext:114

  DPS (IDR) 15 35 49 19

  michael@nhsec.co.id Dividend yield 1.1% 4.0% 5.6% 2.1%

  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 | 1Q16 - 2Q18

  Source: Company, NHKS Research MNCN Quarterly Revenue | 1Q16 - 2Q18

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

  Margin Ratios | 1Q17 - 2Q18 Source: Company, NHKS Research

  Performance Highlights MNCN Quarterly Ads & Content Revenue | 1Q16 - 2Q18

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

  Source: Company, NHKS Research

  Media Nusantara Citra www.nhsec.co.id

  2Q18 review (IDR bn)

  2Q18

  2Q17

  3Q17

  4Q17

  1Q18

  3Q18E Actual Estimate y-y q-q surprise

  Revenue 2,016 1,756 1,671 1,602 2,087 2,168 3.5% 30.3% -3.7% 1,815

  6.3% 34.3% -3.2% 1,193

  Gross Profit 1,186 1,130 1,138 939 1,261 1,302

  Gross Margin 58.8% 64.3% 68.1% 58.6% 60.4% 60.1% 1.6% 0.3% 65.7%

  1.8% EBIT 720 714 704 528 790 772 9.7% 49.6% 2.3% 770

  EBIT Margin 35.7% 40.7% 42.2% 32.9% 37.8% 35.6% 2.1% 4.9% 2.2% 42.4%

  EBITDA 851 826 800 638 911 905 7.1% 42.9% 0.7% 898

  EBITDA Margin 42.2% 47.0% 47.9% 39.8% 43.6% 41.7% 1.4% 3.8% 1.9% 49.5%

Net Profit 356 347 332 274 362 392 1.8% 32.3% -7.6% 271

  Net Margin 17.7% 19.7% 19.8% 17.1% 17.4% 18.1% -0.3% 0.3% -0.7% 14.9% Source: Bloomberg, NHKS research Earnings revision (IDR bn) 2018E 2019F 2020F

  7,368 7,696 8,008

• Revised Revenue
>Previous 7,388 7,774 8> -Change -0.3% -1.0% -1.0%

  4,682 4,954 5,208

• Revised Gross Profit
• Previous 4,672 4,916 5,167
• Change 0.2% 0.8% 0.8%
• Revised 63.5% 64.4% 65.0% Gross Margin

  63.2% 63.2% 63.9%

• Previous EBIT -Revised 2,872 3,115 3> -Previous 2,808 2,909 3
• Change 2.3% 7.1% 7.7%

  39.0% 40.5% 41.0%

  EBIT Margin -Revised

• Previous 38.0% 37.4% 37.7% EBITDA -Revised 3,357 3,655 3> -Previous 3,312 3,468 3
• Change 1.3% 5.4% 5.6%

  45.6% 47.5% 48.3%

  EBITDA Margin -Revised

• Previous 44.8% 44.6% 45.2%
• Revised

  Net Profit 1,267 1,633 1,827

• -Previous 1,486 1,591 1,729
• -Change -14.8% 2.6% 5.7%
• Revised 17.2% 21.2% 22.8% Net Margin

  20.1% 20.5% 21.4%

• Previous

  Source: NHKS research

• 90.11%

  Thailand

  Hubei Broadcasting 718 1,454 423 49 3.70% 11.6% 5.43% 15.2x 0.8x

  China

  TV18 Broadcast Ltd 976 1,040 229 1 -54.81% 0.6% 0.26% 815.0x 2.1x

  India

  21 2 -42.53% 8.9% 9.94% 69.5x 7.1x

  35

  ABS-CBN Corp 343 1,503 784 53 -11.02% 6.8% 10.65% 6.5x 0.6x GMA Network Inc 337 296 290 43 -20.89% 14.9% 22.57% 11.9x 2.7x Manila Broadcasting Co 127

  Philippines

  BEC World PCL 430 440 308 (14) N/A -4.5% -6.84% N/A 2.2x MCOT PCL 195 214 77 (79) -207.67% -102.1% -51.28% N/A 1.7x

  Astro Malaysia Holdings 2,264 1,756 1,337 182 21.38% 13.6% 113.14% 12.5x 13.7x

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

  Malaysia

  1.2% 1.6% 64.6x 1.0x

  2

  VIVA 145 569 204

  SCMA 1,788 396 332 98 -11.04% 29.6% 32.5% 19.8x 6.3x MNCN 810 1,108 523 97 15.17% 18.5% 14.6% 8.4x 1.1x

  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

  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 television to digital media is on the rise.

  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).

  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%

  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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