Company update:
Media Nusantara Citra (MNCN IJ, BUY, TP: IDR2,500),
Short-Term Speed Bump
Media Nusantara Citra (MNCN IJ, BUY, TP: IDR2,500),
Short-Term Speed Bump
We view Media Nusantara as still attractive,
given:
1. Better margins from cost savings due
to the completion of its new studios and potential acquisition of a production
house;
2. A strong programme line-up in 2H16 to
drive its rate card;
3. Potentially higher FY17 dividends.
Maintain
BUY and DCF-based IDR2,500 TP (27% upside), implying 15-13x FY17F-18F P/Es
respectively. Management also denied recent reports on the MNCTV case. It still
remains under its umbrella of TV stations.
¨
Audience
share will remain strong in 2H16.We believe Media Nusantara Citra’s (Media
Nusantara) TV station Rajawali Citra Televisi (RCTI) will be able to maintain
its strong audience share performance in 2H16. This was after it was able to
retain its top spot, with prime time audience share of 25.9% (-15% QoQ) as at
June. This strong performance was supported by a strong programme line-up,
which included the popular Anak Jalanan. A strong 2H16performance will
be due to its new programme line-up, like AnugrahCinta and English
Premier League, in our view. This high audience share could lead to a
higher rate card for Media Nusantara.
¨
Monetisation
will finally flow via topline. The monetisation of a higher rate card
normally takes between a week and three months. This is because there is a
contract between a media company and its fast-moving consumer goods (FMCG)
clients. In 2H16, Media Nusantara should be able to monetise its high rate card
from its previous strong audience share numbers. Thus, we keep our 12% YoY
topline growth assumption for FY16.
¨
Funding
developments via an IPO. Management said subsidiary PT MNC Pictures is planning
for an IPO next year. It is looking to unlock the value of the production
house, which currently produces two drama series/day and six films/year. Based
on management’s estimates, P/E valuation is 15-20x FY17F, or IDR1.2-1.6trn. The
IPO proceeds will be used to fund MNC Pictures’ development and to acquire one
of the largest production houses in Indonesia. We view this as one of its
strategies to maintain its dominance in the media industry and to control costs
by using more in-house production.
¨
The
MNC TV case. Detikcom
wrote
on 19 Aug that a previous court ruling, which stated that MNC TV remained part
of the group, had been overruled and that Siti Hardijanti Rukmana (Tutut) was
now a 75% shareholder of MNC TV. Management denied this, but this issue has
created an overhang on the share price. In our view, we do not think Media
Nusantara will lose MNC TV –based on the Supreme Court decision, MNC Group retains
its 75% ownership. We believe short-term investor panic over this case will
diminish, as management has assured that MNC TV will remain as part of MNC
group.
¨
Reiterate
BUY and IDR2,500 TP.We
remain positive on the stock on margin improvements from its integrated TV
studios, management’s priority to pare down its USD debt at end-FY16(which
reduces earnings volatility from forex gains/losses) and the possibility of
higher FY17 dividends from increased FCF.
Kindly click the following link for the full report: Media Nusantara Citra : Short-Term Speed Bump
Best regards,
David Arie Hartono
Assistant Vice
President
Research Analyst – Media,
Transportation, Telco
PT. RHB Securities Indonesia
