RHB Indonesia Morning Cuppa - 29 September 2016- (Media)

Good morning,

Media: A Magic Year To Continue

In our view, 3Q16 adex will be soft after the Ramadan season. However, we think 4Q16 adex will accelerate on the back of the Christmas season in December. We maintain OVERWEIGHT on the media sector as:

1. We expect a recovery in Indonesia’s economy;

2. We have seen an improvement in the sales growth of consumer companies – which could benefit the media industry.

In 3Q16, we expect in-line performance in terms of topline and earnings from both Media Nusantara and Surya Citra.

¨ Softer advertising expenditure (adex) in 3Q16.We expect that adex will be soft in 3Q16 after the Ramadanperiod. However, adex should then quicken in 4Q16 on the back of the December holiday season. We maintain our OVERWEIGHT call on the media sector, on the back of:

i. An expected recovery in Indonesia’s economy;

ii. Improved sales growth of consumer companies, which are major adexplayers;

iii. Demand exceeding supply.Though there are 10 national free-to-air (FTA) channels, only 20% of airtime can be allocated to advertisers, so there is room for rate card improvement.

¨ Expect a solid 3Q16 from Media Nusantara.We expect Media Nusantara Citra (Media Nusantara) (MNCN IJ, BUY, TP: IDR2,500) to report 3Q16 topline in the range of IDR1.75-1.79trn, on the back of continuous strong audience share performance from its Rajawali Citra Televisi Indonesia (RCTI) TV station, and some revenue from Euro 2016. In 3Q16, we also expect a higher rate card from the renegotiation of new pricing,arising from the previous strong audience share numbers. We expect a moderate contribution from MNCTV and Global TV (GTV) in 3Q16, due to their unstable audience share performance. Furthermore, the stabilisation of IDR against USD would benefit Media Nusantara, as it would mean less volatility in their earnings. Thus, we expect Media Nusantara to book IDR370-390bn in earnings for 3Q16.

¨ Look forward to a revenue boost from the English Premier League in 4Q16.Media Nusantara has exclusively aired the English Premier League since August 2016,at the cost of USD15m/year. The company has succesfully booked sponsorship revenue from Djarum Group (as the main sponsors) and another 5-6 co-sponsors.

¨ Expect in-line delivery from Surya Citra Media in 3Q16.Despite some concerns over their performance in terms of audience share, we still expect that Surya Citra Media (Surya Citra)(SCMA IJ, BUY, TP: IDR3,300) could generate IDR1.09-1.12trn of revenue and IDR300-340bn in earnings. In 3Q16, we think that PT Indosiar Visual Mandiri (Indosiar) would be their growth driver on the back of the strong audience share performance from their program line-up, ieStand Up Comedy, Bintang Pantura 3, and Golden Memories Reunion. Meanwhile, we will not see a huge contribution from its Surya Citra Televisi (SCTV) TV station, due to its unsteady audience share performance.

¨ Maintain OVERWEIGHT.We continue to like Media Nusantara, given:

i. Better margins from cost savings due to completion of three new studios and potential acquisition of a production house;

ii. A strong program line-up in 2H16 to drive its rate card;

iii. Potential higher dividend in FY17F.

Meanwhile, we are positive on Surya Citra on the back of:

i. An expected improvement in SCTV’s audience share from its newdrama series and sports content;

ii. Potential additional revenue stream from big screen movies;

iii. Potential higher ad spend from economy recovery. (David Hartono)

Link to report: A Magic Year To Continue

Link to Daily report: Indonesia Morning Cuppa - 290916

Media Highlights:

Corporates

OPEC agreed to cut oil production

Members of OPEC have agreed to cut oil production for the first time after eight years on Wednesday. Under the agreement, OPEC oil production is expected to be reduced to 32.5-33m barrels of oil per day from 33.4m. Saudi Arabia is expected to give up 350k barrels a day. However, three countries are exempted from the production cuts, including Iran, Nigeria and Libya. (CNN)

Comment: PGN (PGAS IJ, BUY, TP: IDR4,000) exploration and production segment should benefit from a higher oil price because of low blended production cost of 25/bbl while total production of oil and gas has increased 25% in FY16, slated to increase further in FY17 with the development of Sedayu well of Pangkah block.

This segment has barely breakeven and dragged down PGAS overall profitability in 1H16, we believe the market is giving PGAS a valuation discount due to this and an upswing in crude oil price should narrow and eliminate the discount gap. Sufficient impairment has been done since the past 2 years, currently using Brent oil usd46/bbl as impairment test assumption.

PGAS is currently trading at undemanding valuation of 12-10x fy16-17f PE. (Norman Choong, CFA)

Bumi Serpong Damai to issue bonds for refinancing and capex

ABM Investama to divest its subsidiary

Aneka Gas to penetrate Indonesia’s eastern market

Supra Boga Lestari to open new Farmers Market in Cikarang

Ministry of Public Works and Public Housing will start the tenders in 10M16

Ministry of Industry set gas price target for industrial

Our Recent Publication:

Strategy: Regional Monthly : Catalysts Looming for Indonesia & Thailand Markets

Link to report: Regional Monthly : Catalysts Looming for Indonesia & Thailand Markets

Company Update: Nippon Indosari Corpindo : Likely Strong 3Q16 Sales Despite Rising New Players

Link to report: Nippon Indosari Corpindo : Likely Strong 3Q16 Sales Despite Rising New Players