RHB Indonesia Morning Cuppa - 14 July 2016- (Media Nusantara Citra) Unknown Kamis, 14 Juli 2016



Dear Siti,


Good morning,

Media Nusantara Citra: 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. (David Hartono)

Link to Daily report: Indonesia Morning Cuppa - 140716




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Best regards,

Helmy Kristanto
Director
Head of Indonesia Research
PT. RHB Securities Indonesia
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