Company Update:
Media Nusantara Citra (MNCN IJ, BUY, TP: IDR2,500),
Margin Boost From Integrated TV Studios
Media Nusantara Citra (MNCN IJ, BUY, TP: IDR2,500),
Margin Boost From Integrated TV Studios
We
think Media Nusantara is still attractive, given better margins from cost
savings after the completion of its new studios and potentially higher
dividends in FY17F. We expect the company to report strong 2Q16 results on the
back of resilient audience share, Euro 2016, and the Ramadhan season.
Maintain BUY with a higher TP of IDR2,500 (from IDR2,300, 11% upside), which
implies 21.2x/18.6x FY16F-17F P/Es. The stock is currently trading at 19x FY16F
P/E.
¨
Margin
mprovements from integrated TV studios. With the completion of its new studios –
which should increase production capacity and cost efficiency – we expect
Media Nusantara Citra (Media Nusantara) to be able to utilise its house production
more, leading to better profitability. We estimate GPMs of 56.4%/57.7% in
FY16F-17F respectively (from 55.6% in FY15). Direct cost related to the content
of programmes should remain flattish in FY16F, offset by costs from its new
i-News TV channels.
¨
Rajawali
Citra Televisi Indonesia’s (RCTI) strong audience share performance likely to
continue. Media
Nusantara’s prime time audience share was at 45.9% (+3.4% MoM) in Apr 2016,
bolstered by its hit programme “Anak Jalanan”. In our view, the success
of the programme could translate into a higher rate card. We expect the company
to maintain strong audience share until end-FY16.
¨
Positive
catalyst from MNCTV litigation case. In the past, there had been a trading discount
to Media Nusantara’s share price due to the dispute over MNCTV ownership
between PT Berkah Karya Bersama and the previous owner, Siti Hardiyanti
Rukmana. However, in Apr 2016, the Supreme Court denied the request by Siti
Hardiyanti Rukmana for a judicial review. Based on the latest decision, MNCTV
is no longer disputable by any party. In our view, this is a positive as it
removes the overhang in the share price.
¨
Maintain
BUY with
a higher TP of IDR2,500 (from IDR2,300, 11% upside). We remain positive on the
counter on the back of:
i. Margin mprovements from its integrated TV
studios;
ii. Management’s priority to pay down its USD
debt at end-FY16, which would reduce earnings volatility from forex
gains/losses;
iii. The possibility of higher dividends in FY17
from higher FCF
¨
Key
risks are:
i. IDR depreciation against the USD – as the
company has USD250m debt which will mature in FY17;
ii. A slower-than-expected domestic economic recovery.
Best
regards,
David Arie Hartono
Assistant Vice
President
Research Analyst – Media,
Transportation
PT. RHB Securities
Indonesia
