Indonesia Media
Embracing the digital era: Growing OTT and content
Asia Pacific Equity Research
18 March 2020
Content is King, Distribution is Queen. Local language content is key to capture
audience eyeballs in Indonesia. This remains a truism even as distribution media
has evolved from newspaper, radio, TV, smartphone/tablet. We assume coverage
of the Indonesia Media sector with a constructive view, calling a bottom to five
years of continuous de-rating. We expect a turnaround on the back of a
transformation strategy to grow beyond TV, monetizing content and as
OTT/digital platforms achieve critical mass, capturing a bigger share of the fast-
growing digital ad pie going forward. We rate both SCMA (TP Rp1,340) and
MNCN (TP Rp1,570) OW, implying 89% and 82% potential upside respectively,
with key catalysts being the unlocking of value from content (IEG, MNC Studio)
and OTT (Vidio, RCTI+) businesses.
Pathway to capture a bigger share of the fast-growing Digital Ad pie. We
expect Indonesia's Ad market to reach by 2020E, growing at a %
CAGR from 2015-2020E. During this five-year period, we forecast TV will
grow at a mere +4% CAGR, Print will decline -9% CAGR, and Digital will
grow at 27%. Digital Ads have grown from 2% of ad pie in 2010, to 10% in
2015 and an expected 25% in 2020E. Meanwhile, TV saw a gradual decline
from a 66% share of the ad pie in 2015 to an expected 62% in 2020E, but
remains the medium with maximum reach. SCMA and MNCN’s ability to
capture a bigger share of the Digital ad pie (currently dominated by
Facebook and Google groups) will be a key growth catalyst.
Three key catalysts. 1) Growing OTT/Digital platforms. We value SCMA's
Vidio at USD300m (40% of current market cap) and MNCN's RCTI+ at
USD150m (17% of market cap). We view these as key growth drivers to ride
the digital ad wave. Third-party investments from strategic partners would be a
bonus catalyst. 2) Monetizing the content business. We value SCMA's IEG
(Sinemart, Screenplay) at USD309m (41% of market cap) and MNCN's MNC
Studios at USD263m (34% of market cap). The ability to grow content revenue
from third-party platforms (Cinemas, YouTube, Netflix, etc.) will be key to
unlocking further value. 3) Strategic collaborations to improve TV rate
cards. Long-time rivals MNCN and SCMA announced a strategic collaboration
in Dec-2019 to lower discount pressure and improve TV rate cards.
Under-owned sector; strong FCF yield with high dividend. The two media
names are under-owned in our view and are not in the MSCI indices, which we
think increase their attractiveness when coupled with attractive valuation
(SCMA 7x 2020E P/E, MNCN 5x P/E), 10-12% FCF yield, 5-8% dividend yield
and 19-27% ROE. We expect SCMA/MNCN to deliver 12%/11% EPS 2019-
22E CAGR, largely driven by an improving rate card outlook and additional
growth drivers from digital/content segments.
Table 1: Indonesia Media
Head of Indonesia Research &
Strategy
Henry Wibowo AC
(622-1) 5291 8526
@
PT . Morgan Sekuritas Indonesia
Head of ASEAN Research
Ajay Mirchandani
(65) 6882-2419
@
. Morgan Securities Singapore Private
Limited
Head of ASEAN TMT
Ranjan Sharma, CFA
(65) 6882-1303
@
. Morgan Securities Singapore Private
Limited
Head of Asia ex Japan Research &
APAC Telecommunication Research
James R. Sullivan, CFA
(65) 6882-2374
@
. Morgan Securities Singapore Private Limited/
. Morgan Securities (Asia Pacific) Limited
Price Mkt Cap JPM JPM Upside/ 2020E
Company Ticker Rp USD Rating PT Downside PER EPS Growth ROE Yield
Surya Citra Media SCMA IJ 710 686 OW 1340 89% 11% 27% %
Media Nusantara
Citra
MNCN
IJ
865 807 OW 1570 82% 5..4 10% 19% %
mailto:@
mailto:@
mailto:@
mailto:@
Source: Bloomberg (Price as per 17 March 2020), . Morgan estimates
See page 60 for analyst certification and important disclosures, including non-US analyst disclosures.
. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be
aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this
report as only a single factor in making their investment decision.
Table of Contents
Investment Summary .........................................................................3
Stock Picks: OW SCMA and MNCN ................................................9
Transformation of Ad Pie ................................................................11
TV Industry: Oligopolistic Market Controlled by Big 4 ...............13
Operating Matrices ...........................................................................15
Audience Shares ................................................................................16
US Media: Examining Advertising Opportunity in OTT ..............21
Companies .........................................................................................23
Surya Citra Media ......................................................................................................24
Media Nusantara Citra ...............................................................................................44
Content is King, particularly Local
Content in a non-English speaking
country like Indonesia
We have a positive view on the
Indonesia media sector with OW
ratings on both SCMA and MNCN
on new transformation strategy to
monetize content business and
rollout OTT digital platforms
TV remains the king of Ad Pie at
62% share, followed by Digital at
25%, Print at 10%, OOH 2%, and
Others
Digital ads have been growing at the
fastest rate from a mere 2% of ad
pie in 2010 to an estimated 25% in
2020E
Investment Summary
Content is King, Distribution is Queen
Content is King, Distribution is Queen. No matter how distribution platforms evolve
over time -- from newspaper, radio, TV, smartphone/tablet – content (local content,
in particular) remains the key ingredient to capture audience eyeballs.
We assume coverage of the Indonesia Media sector with a positive view. After five
years of continued de-rating, we are calling a bottom and expect a turnaround on the
back of a transformation strategy to grow beyond TV, with more focus on content
monetization and development of OTT streaming platforms to ride on the digital
media wave. The most recent strategic collaboration announcement from the two
largest media groups is a game-changer and positive for the industry, strengthening
bargaining power to lower discount pressure on TV rate cards.
We rate both SCMA (Rp1,340 TP, 89% potential upside) and MNCN (Rp1,570 TP,
82% potential upside) OW, with value to be unlocked from content (IEG, MNC
Studio) and OTT (Vidio, RCTI+) businesses as key catalysts. The relatively under-
owned positioning in media names (outside MSCI index), backed with attractive
2020E valuation (SCMA 7x P/E, MNCN 5x P/E), strong FCF yield (10-12%) and
high ROE (19-27%), further support our bull thesis.
Digital is now 25% of Ad pie; TV remains King at 62%
We expect Indonesia's Ad market to reach size by 2020E, growing at
+% CAGR from 2015-2020E. During this five-year period, we forecast TV will
grow at a mere +4% CAGR, Print will decline at a -9% CAGR, and Digital will grow
at a 27% CAGR. Digital Ads have grown from 2% of ad pie in 2010, to 10% in
2015 and an expected 25% in 2020E. This largely came at the expense of the Print
platform, which saw a big market share decline from 22% in 2010 to an estimated
mere % in 2020E. Meanwhile, TV saw a gradual decline from 66% share of ad
pie in 2015 to 62% in 2020E, but remains the best medium to advertise with. The
ability of both SCMA and MNCN to capture a bigger share of the Digital ad pie
(currently dominated by Facebook and Google groups) is a key growth catalyst. The
growth execution of SCMA's Vidio and MNCN's RCTI+ will be important to
monitor.
Figure 1: Share of Ad Pie % in Indonesia 2010-2025E
Source: Company Data & MPA, . Morgan estimates
SCMA and MNCN: Pathway to capture bigger share of
digital ad pie going forward
We estimate Indonesia’s net ad spend will grow by an estimated from Rp26tr
in 2015 to in 2020E. Of that additional of ad spend, most will be
absorbed by digital ads, followed by TV ads. The point we want to highlight here is
that while SCMA+MNCN grabbed the majority of the incremental ad spend from TV,
it was barely exposed to the fast-growing digital ad portion, which is largely
dominated by Google (including YouTube) and Facebook (including Instagram). By
expanding to digital media (SCMA growing Vidio, MNCN launching RCTI+), we
expect the dynamics to change for 2020-2025 with both companies capturing around
half of the increment digital ads growth, while maintaining dominance in the TV
space.
2015-2020E Ad spend to see a
CAGR of % (from Rp26tr in
2015 to in 2020E)
TV growth of %, Digital +27%,
while Print will decline -9%
For 2020-2025E, we estimate ad
spend at a CAGR of % (from
in 2015 to in
2025)
We estimate TV to grow +%,
Digital at +14%, while Print will
decline -7%
Figure 2: Additional Ad Spend 2015-2020E and market share of SCMA+MNCN vs others
Source: . Morgan estimates
Figure 3: Additional Ad Spend 2020-2020E & market share of SCMA+MNCN vs others
Source: . Morgan estimates
Facebook, Instagram, Google,
YouTube are the global players
dominating the digital ad pie in
Indonesia, controlling >70%
share...
Local players SCMA and MNCN
are entering the digital ads space
via OTT (Vidio and RCTI+) and
online news/lifestyle platforms
(KLY, Okezone)
Underappreciated Content assets
with big upside potential (SCMA's
IEG and MNCN's MNC
Studios)
Catalyst #1: Growing OTT/digital platform
The Indonesia media sector is currently in the midst of a digital transformation as
audience eyeballs are gradually shifting from traditional platforms to smaller digital
screens. While TV remains the king of the ad pie, digital ads have been growing
rapidly and is now the fastest growing ad platform. We believe that over 70% of the
digital ad pie in Indonesia is currently dominated by Facebook (Facebook and
Instagram) and Google (Google Search, YouTube) groups, while the remaining 30%
is scattered with some of the well-known local online publishers such as Kaskus,
Detik, and KLY, and most recently local OTT platform such as Vidio.
Both SCMA and MNCN have recently shifted gear and decide to invest in
OTT/digital platform to be able to capture some of the digital ad pie. They both
started by creating simple online news platform (SCMA: under KLY
umbrella, MNCN: ) and have evolved by creating OTT video streaming
(SCMA: Vidio, MNCN: RCTI+). Emtek group, parent company of SCMA, injected
Vidio (Hybrid of AVOD and SVOD) and KLY to SCMA in May 2019 (at below book
value) to mark new beginning of SCMA entering the new digital media segment.
Meanwhile, MNCN launched RCTI+ in September 2019 (leveraging strong brand
name of RCTI TV Station, similar name strategy with Disney and Disney+) as the
group’s primary AVOD platform.
We are encouraged to see the big shift by both players in 2019 to focus more on OTT
and digital media development, as they actually have the most important ingredient
to run a successful OTT business in Indonesia compared to competitors from different
industries, that is, local content.
Catalyst #2: Monetizing Content Business
Aside from being the two largest TV broadcasters groups in Indonesia, MNCN and
SCMA are actually also the two largest content producers in the country. We believe
the content side of the business is being underappreciated by the investor community.
It is important to highlight that Netflix's first original movie in Indonesia (and the
most watched) is actually produced by SCMA’s Screenplay Films under IEG (“The
Night has Come For Us”, starring Iko Uwais); and one of the single largest content
suppliers to YouTube in Indonesia is actually MNCN (via different YouTube
Channels of its 4 TV stations, . Clips from Indonesian Idol, short teaser of soap
opera drama series, and talk-show program).
The ability to diversify the content revenue stream of both companies to third-party
platforms, . supplying to outside their own group TV stations (eg. To Cinemas,
YouTube, Netflix, iFlix, Hooq, etc), are key catalysts to unlock further value going
forward. SCMA's content arm is currently under IEG, with 2 famous production
houses, namely Sinemart (strong in TV soap opera dramas) and Screenplay (Strong in
big screen Cinema movies). MNCN's content arm is currently under MNC Studios
International, with MNC Pictures the main production house.
Long-time rivals MNCN and
SCMA announced a strategic
collaboration on 12-Dec-2019 to
improve TV Rate cards outlook
and work together on content
production, including OTT-
dedicated content
Catalyst #3: Strategic collaboration to lower discount
pressure and improve TV rate cards
On the 12th of December 2019, MNCN and SCMA hosted a joint press statement to
announce a strategic co-operation on content production and to explore other synergy
initiatives. We believe this is a game-changer collaboration that came as a big surprise
given they are long-time rivals. We believe that one of the objectives of this
collaboration is to lower the discount pressure on TV rate cards from advertisers, and
eventually improve the net TV rate cards’ future outlook.
Given that both MNCN and SCMA control >70% of TV market share (and have over
90% share in the prime time soap opera drama categories between RCTI and SCTV),
they are optimistic to achieve 10-25% of TV rate card hikes in 2020, compared with
the mid-single digit average growth in the past five years. Furthermore, we believe
that the announcement of collaboration is also aimed to achieve better synergies in
developing local content and growing their respective OTT platforms together,
joining forces together to complete against the global players. The share prices of both
MNCN and SCMA went up strongly by 20-30% in December 2019 thanks to this
announcement.
Nonetheless, the biggest downside risk on this co-operation is the recent outbreak of
COVID-19 which might put pressure on the sales outlook of FMCG companies in
Indonesia and lead to lower purchasing power to spend on advertisements. While 1 +
1 might not equal 3, we are optimistic that something is better than nothing, and the 1
+ 1 might still equal to post this collaboration. We are forecasting SCMA and
MNCN to deliver revenue growth of 12%/10% respectively in 2020.
Valuation Multiple at 10-year low; Under-owned sector with
Strong FCF Yield and High Dividend
The two media names, Surya Citra Media and Media Nusantara Citra, are under-
owned in our view and not inside MSCI Indonesia (the most followed benchmark
index for Indonesia by foreign investors), which we think increase their
attractiveness, when coupled with attractive 2020E valuations (6-8x PER), strong
Free Cash Flow (FCF) yield of 9-11%, high dividend yield of 4-7%, and solid ROE
of 19-27%. Successful delivery and execution of the new content and OTT strategy
could lead to strong rally momentum and also index inclusion over the medium term
as new catalyst.
Post a 40-50% share price pullback in 2020 YTD (JCI: -30%), amid the COVID-19
outbreak, the earnings multiples of both SCMA and MNCN are trading attractively at
around SD below their 10-year mean level. SCMA is now trading at around 7x
2020E PER, backed by 12% 2019-2022E EPS CAGR and % 2020E ROE.
Meanwhile. MNCN is now trading at around 5x 2020E PER, backed by 11% 2019-
2020E EPS CAGR and % ROE. The earnings growth will largely be driven by
improving rate card outlook and additional growth drivers from digital/content
segments.
SCMA is currently trading
attractively at 7x 2020E PER, at
more than SD below its 10-
year mean
MNCN is currently trading
attractively at 5x 2020E PER,
more than below its 10-
year mean
Figure 4: SCMA 10-year PE Band (One year forward)
Source: Bloomberg (Price as per 17 March 2020), . Morgan estimates
Figure 5: MNCN 10-yrs PE Band (One year forward)
Source: Bloomberg (Price as per 17 March 2020), . Morgan estimates
Table 2: Valuation Comps Table – Indonesia Media and Regional Peers
Regional Media ADTV EV/EBITDA P/E Yield ROE
Stock Ticker Rec PT Price % upside US($M) US($M) 2020E 2021E 2020E 2021E 2020E 2020E
Indonesia
Surya Citra Media SCMA IJ OW 1,340 710 89% 686 %
Media Nusantara
Citra
MNCN IJ OW 1,570 865 82% 807 %
Visi Media Asia VIVA IJ NC NC 50 NA 54 NA NA % NA
Average %
Japan
Nipppon TV 9404 JT NC NC 1,139 NA 2,822 %
Average %
Thailand
BEC BEC TB NC NC NA 202 %
VGI VGI TB NC NC NA 1,532 %
Average %
India
ZEE Z IN N 320 136 135% 1,763 %
SUN TV SUNTV IN NC NC 362 NA 1,923 %
Average %
Malaysia
Media Prima MPR MK NC NC NA 33 %
ASTRO ASTRO MK NC NC NA 1,037 %
Average %
Source: Bloomberg (Price as per 17 Mar 2020), Bloomberg consensus for stocks Not Covered (NC), . Morgan estimates
We have an OW rating on SCMA
with an Rp1,340 PT
Netflix's 1st original movies in
Indonesia was produced by SCMA’s
Screenplay Films – “The Night Has
Come for US”
We are using SOTP to value
SCMA to better capture fast-
growing Content and Digital
businesses, and not just the
traditional TV assets
We are expecting SCMA to deliver
12% 2019-2022E earnings CAGR
Stock Picks: OW SCMA and MNCN
Surya Citra Media
We are assuming coverage on SCMA with an OW rating and PT of Rp1340,
implying 89% potential upside plus % yield. SCMA is currently undergoing
game-changing new/digital media transformation as it is leveraging its strong FCF
stream (12% FCF yield) from the very profitable FTA TV business (as funding
source) and investing seriously in content (IEG) and new media platforms, including
OTT (Vidio), Online Portals (KLY), Out-of-Home (EYE), Social media influencer
aggregator (Allstar), and Event Organizer (Samara).
Recent evident of success is SCMA is now seen as the preferred media partner by
Big-4 Indonesia E-Commerce to launch media Online-to-Offline (O2O) campaign
leveraging its unique ecosystem. Screenplay’s successful production of Netflix's 1st
(and most successful) Indonesia original movie 'The Night Has Come for Us" also
marked a new milestone. We believe SOTP is the right approach to value SCMA
going forward to fully capture value of new media businesses (the street is still
adopting earnings multiple methodology).
We use Sum-of-the-Parts (SOTP) to value SCMA and assign a Dec-20 PT of
Rp1,340 (20% SOTP discount). We expect TV business to still generate bulk of the
SOTP at 60% weighting (11x PER), followed by Content at 18% weight (15x
EV/EBITDA), OTT at 17% weight (USD10/MAU), Net Cash 3% weight, and other
businesses (Billboard, Online platform) for the remaining 2% weight. Our SOTP
calculation (after taking into account effective ownership stake) translates to NAV of
Rp1670/sh (), derived from:
1. FTA TV: (60% of total),
2. Content Production: USD309m (18% of total),
3. OTT: USD300m (17% of total),
4. Others (EYE/KLY): USD38m (2% of total),
5. Net Cash: USD54m (3% of total).
Figure 6: SCMA - Net Income
Source: . Morgan estimates, Company Data
We have an OW rating on MNCN
with an Rp1,570 PT
We derive our valuation using SOTP
approach to better capture exposure
from fast-growing content and
OTT/digital businesses, rather than
just the traditional TV Assets
We are expecting MNCN to deliver
11% EPS CAGR for 2019- 2020E
Media Nusantara Citra
We assume coverage on MNCN with OW rating and PT of Rp1570, implying 82%
potential upside. MNCN was one of the best-performing stocks in 2019, up 133%
(JCI: 3%), largely fueled by growth recovery from new digital ad revenue stream
(2019E Digital Ad revenue of Rp697bn +167% YoY), along with reduced risk of
political affiliation (Chairman Hary Tanoe’s Perindo Party supported winning camp
President Jokowi in 2019 election). We are optimistic that the positive trend will
continue throughout 2020, given valuation remains undemanding at current 5x
2020E PER (with 11% 2019-2022E EPS CAGR and % ROE), backed by the
value unlocking potential of OTT (RCTI+) and continued execution of Content
monetization as new growth engines. Recent collaboration announcement in Dec-19
with long-time rival, SCMA, is also positive for TV Rate Card outlook.
We are using Sum-of-The-Parts (SOTP) methodology to value MNCN to better
capture the new fast-growing non-TV businesses, especially Content (MNC Studio)
and OTT (RCTI+). We value TV business using simple 11x PER multiple (86% of
NAV), Content Business using 15x EV/EBITDA multiple (15% of NAV), OTT
using USD10/MAU (7% of NAV), and taking into account estimated Net Debt of
(-9% of NAV). We then apply a 20% discount to SOTP.
MNCN has recently released indicative 2019 unaudited results that were above
street’s expectations. 2019 Revenue reached , up 12% YoY, driven by:
TV revenue (+6% YoY),
Digital Ad revenue Rp697bn (+167% YoY),
Content Revenue (+15% YoY),
Others Rp114bn (-43% YoY).
Elimination (2018: )
The big highlight was the very strong growth coming from Digital Ad revenue, albeit
coming from low base. Digital ads are derived from combination of Digital broadcast,
YouTube Channels, and Online portals (). Management is expecting
revenue stream from this segment to continue growing strongly in 2020 as it has
recently launched RCTI+ (AVOD OTT platform) since Sep 2019.
Figure 7: MNCN – Net Income
Source: . Morgan estimates, Company Data
Transformation of Ad Pie
We expect Indonesia’s advertising market to reach in 2020, growing at a
% 5-year CAGR since 2015. As a % of GDP, Indonesia’s advertising spend is a
mere %, implying under-penetration as compared to regional peers’ average
which is more than double at >%. This translates to a promising outlook for
pricing growth on a medium to long-term basis.
Indonesia’s advertising pie has seen a notable transformation in the past decade from
2010 to 2020, and we expect further shifts in the next five years by 2025. If we look
at the expected ad pie in 2020, TV is the king of the pack with 62% market share.
This is followed by Digital at 25%, Print at 10%, Out of Home (OOH) at 2%, and
others (Radio, etc) for the remaining 1%.
Figure 8: Indonesia Advertising Pie - 2010
Source: . Morgan, Company Data & MPA
Figure 9: Indonesia Advertising Pie – 2015
Source: . Morgan, Company Data & MPA
Figure 10: Indonesia Advertising Pie – 2020F
Source: . Morgan estimates, Company Data & MPA
Figure 11: Indonesia Advertising Pie – 2025F
Source: . Morgan estimates, Company Data & MPA
It is worth pointing out that Digital has been the biggest market share gainer in the
past 10 years from a mere 3% of the pie in 2010 to 10% in 2015, 25% in 2020E, and
expected to grow further to 34% by 2025E. The biggest loser that Digital is
disrupting is Print platform, which has shrunk from 22% in 2010 to less than half at
10% in 2020E. Meanwhile, TV has declined but on a marginal basis, from 70% in
TV
66
%
Prin
t
20%
2
%
2
%
2015OOH
Others
Digita
l
10%
2010 to 62% in 2020E, and expected to further decline to 57% by 2025E; nonetheless
it remains the most favorite advertising medium. This is because TV still has the best
penetration to audience eyeball, especially when Fast Moving Consumer Good
(FMCG) companies want to launch new products and want to reach the mass market
across Indonesia.
Given the shift in Ad pie in the past years, fueled largely by the rise of digital, we can
see from the table below the stark difference in CAGR across the different platforms.
In the period 2015-2020E, the blended 5-year CAGR for the total advertising
industry is %. The strongest growth is with Digital which is expected to grow at a
staggering 27% CAGR. Digital was the only medium that is expected to grow above
the industry, while the others are expected to see below-industry growth. The
estimated CAGR for TV is %, which is marginally below real GDP growth of the
country of %. If we look at Print & Related, it is expected to show negative five-
year CAGR of %, the worst among all.
Table 3: Indonesia Advertising Spending (Rp trillion)
TV Digital Print & Related Others Total
2015 17,022,030 2,600,000 5,337,733 1,002,973 25,962,736
2016 17,586,800 3,657,629 5,387,820 941,058 27,573,307
2017 17,182,000 4,932,305 5,057,937 957,006 28,129,248
2018 17,777,270 6,362,673 5,150,555 987,828 30,278,326
2019F 19,940,505 8,040,526 3,216,211 964,863 32,162,105
2020F 20,872,815 8,416,458 3,366,583 1,009,975 33,665,831
5-yrs CAGR % % % % %
Source: Company Data & MPA, . Morgan estimates
On the back of this, we therefore believe that it is crucial for the incumbent media
companies like MNCN and SCMA, which traditionally have been strong in the TV
business, to start entering the Digital Ad pie segment and break the duopoly
dominance of Google (Youtube and Google Search) and Facebook (Instagram and
Facebook) groups. Failure to take part in the fast-growing Digital ad segment could
lead to continued erosion of ROE and eventually de-rating of the valuation earnings
multiple. The development of Content business is equally crucial as it can provide
new growth drivers and income streams by supplying it to the new fast-growing OTT
Subscription Video on Demand players like Netflix and peers. On the digital front,
SCMA is now growing via Kapan Lagi Youniverse (KLY) as online lifestyle and
news platform and as OTT video streaming; while MNCN is growing via
as news platform and RCTI+ as OTT Video streaming.
Economics of dollars spent on TV vs Digital? We believe that a dollar spent on TV
ads in Indonesia remains more effective and cheaper to penetrate higher number of
eyeballs vs. digital. This is because of TV's deep penetration reach of >95% of
household vs. internet penetration that is currently about 50-60% in Indonesia (and
Broadband penetration of <10%). This is also the reason why TV has above 60%
market share of the ad pie. Nonetheless, digital ads have their own strength being
targeted advertisement tools for brands that want to reach certain segments of
consumer, . by age group / demographic / gender / location, etc. Furthermore, as
the internet penetration in Indonesia continues to rise, dollar economics of digital ads
will also improve and narrow the gap with TV, in our view.
TV Industry: Oligopolistic Market
Controlled by Big Four
Indonesia FTA TV Media industry is an oligopolistic market where 96+% of market
share is controlled by four big groups, namely Hary Tanoesoedibjo’s MNC Group
(MNCN), Eddy Sariaatmadja’s Emtek Group (SCMA), Chairul Tanjung’s Trans
Group (Non-Listed), and Bakrie Family’s VIVA Group (VIVA). The barriers to entry
to the sector are very high as the government has stopped issuing National FTA TV
license since 2002. In the past two decades, we have seen several consolidations
within the media players, which ended up with four big groups leading the industry.
The consolidation includes when MNC Group acquired TPI in 2005 and re-branded it
into MNC TV in 2010, Emtek group acquired Indosiar from Salim Group in 2010-
2013, and Trans Group acquired TV7 and re-branded it into Trans7.
Figure 12: Indonesia Media Group - Oligopolistic market; Big Four Group Controls 96+% Market Share
Indonesia National FTA TV Broadcasters
Rank Station Group
Majority
Ow nership
Content Focus
2019 All-Time
Audience
Share (%)
Group
Share (%)
Mkt Cap
Political
Affiliation
2 RCTI Local Drama, Talent Show
5 MNC TV Drama, Variety, Cartoons
7 Global TV
MNC Group
()
Hary
Tanoesoedibjo
Box Office, Cartoons
~US$
Partai
Perindo
1 SCTV Local Drama, FTV
3 INDOSIAR
SCM Group
()
Eddy
Sariaatmadja
Variety Shows
~US$ N/A
8 TRANS 7 Variety Shows
6 TRANS TV
CT Corp Chairul Tanjung
Variety Shows
NA N/A
4 ANTV Indian Dramas, Lifestyle MDIA: US$
9 TV ONE
Viva Group
()
Bakrie Family
News
VIVA: US$
Partai
Golkar
11 METRO TV Media Group Surya Paloh News NA
Partai
Nasdem
10 TVRI
State Owned
(SOE)
SOE News, Government NA N/A
100 100
Source: . Morgan, Company
Data
MNC Group
MNC Group (PT MNC Investama Tbk; BHIT IJ) is a conglomerate group that is
controlled by businessman/politician Hary Tanoesoedibjo. MNC Group’s three core
businesses are Media (largest and biggest cash cow), Financials (BCAP IJ), and
Property (KPIG IJ). The media arm of the group is parked under PT Global
Mediacom Tbk (BMTR IJ), which is the holding company of two main subsidiaries,
namely PT Media Nusantara Citra Tbk (MNCN IJ– FTA TV and Content production
company) and PT MNC Vision Network Tbk (IPTV IJ – Broadband and Pay TV).
MNCN is the largest integrated media company with four FTA TV stations (RCTI as
flagship TV) and a content production company under MNC Studios (MSIN IJ).
MNCN is currently run by David Audy as CEO, who is the brother in law of Hary
Tanoesoedibjo. Hary is also the Chairman of Perindo Political party, which is one of
the supporters of current President Jokowi. Hary’s daughter Angela Tanoesoedibjo
currently serves as Vice Minister of Tourism of the Republic of Indonesia.
Emtek Group
Emtek Group (EMTK IJ) is a media and technology company that was founded by
Eddy Sariaatmadja. Emtek has 3 main business divisions, namely Media & Content
(SCMA), Digital (KMK Online), and others (Solution and Connectivity). PT Surya
Citra Media Tbk (SCMA IJ) is the holding company of 2 National FTA TV Stations
SCTV and Indosiar, a Content production house company IEG (which include leading
Production Houses Sinemart and Screenplay), OTT platform , Online
lifestyle platform KLY, and Digital billboard company EYE. Outside of SCMA,
Emtek group has also been investing on internet and technology companies in the past
few years under KMK Online. Its portfolios include E-Commerce company
Bukalapak (Invested by Ant Financials, GIC), Fintech Payment company DANA (JV
with Ant Financials), and PropertyGuru . Emtek group is not affiliated with any
political parties. Emtek is currently ran by Alvin Sariaatmadja as CEO (Son of Eddy
Sariaatmadja), while SCMA is ran by Sutanto Hartono as CEO (Professional
background, former Microsoft Indonesia CEO).
VIVA Group
PT Visi Media Asia Tbk (VIVA IJ) is one of the Big 4 media groups that is owned
by the Bakrie family and led by Anindya Bakrie as the CEO. VIVA owns 2 national
FTA TV Stations ANTV and TV One, and also an online news portal .
The flagship TV station ANTV is currently Indonesia’s TV after RCTI, SCTV,
and Indosiar. ANTV focuses largely on foreign soap opera dramas, mainly Indian and
Turkish dramas, and is also a listed company under PT Intermedia Capital Tbk
(MDIA IJ). Meanwhile, TV One is Indonesia’s leading news TV station, competing
head to head with MetroTV. ANTV used to be headed by Erick Thohir as the CEO,
who has recently stepped down as he was appointed as Minister of State Owned
Enterprises of the Republic of Indonesia in October 2019 during President Jokowi’s
2nd term. The father of Anindya Bakrie, Aburizal Bakrie, is a politician and used to be
the Chairman of Golkar political party; He was a Presidential candidate during the
2014 election. Aburizal Bakrie served as Coordinating Minister of Economics of the
Republic of Indonesia in 2004-2005, and Coordinating Minister of People’s Welfare
in 2005-2009. The Bakrie group is one of Indonesia’s largest conglomerates with
diversified business activities, including Bakrie and Brothers (BNBR IJ), Bumi
Resources (BUMI IJ), Bumi Resources Mineral (BRMS IJ), Bakrie Telekom (BTEL
IJ), Bakrie Development (ELTY IJ), Bakrie Plantation (UNSP IJ), Energi Mega
Persadha (ENRG IJ), and others.
Trans Group
Trans Group is part of CT Corp, which is one of Indonesia’s largest conglomerates
and is led by founder Chairul Tanjung. Trans Media is one of the business arms of
the group which owns two national FTA TV stations, namely Trans TV and Trans 7
(previously TV7). The combined TV audience shares of the two TV stations are
hovering around 10-15% and is ranked 3rd to 4th in the past years. In the media
division, the group is also the owner of , Indonesia’s news online
portal, and CNBC Indonesia. CT Corp’s other businesses include Retail (Transmart
Carrefour, Metro Department Store, Baskin & Robbins, Coffee Bean, etc), Property
(Hotels, Malls, Trans Studio theme parks), Financials (Bank Mega), Resources, and
others. Chairul Tanjung served as Coordinating Minister of Economics of the
Republic of Indonesia in 2014 during President SBY era.
Operating Matrix
Table 4: Operational Matrix Comparison - Indonesia Media Universe
Operating Matrix SCMA MNCN VIVA
Name PT Surya Citra Media Tbk PT Media Nusantara Citra Tbk PT Visi Media Asia Tbk
Ticker SCMA IJ MNCN IJ VIVA IJ
Line of Businesses FTA TV, Content Production, Video OTT,FTA TV, Content Production, Talent Agency, Print, FTA TV, Online
Portals Billboard, Online Portals Radio, Video OTT, Online Portals
Year Listed on IDX 2002 2007 2011
JPM Rating OW OW Not Covered
Largest Shareholder Emtek Group (EMTK IJ) 61% Global Mediacom (BMTR IJ) 58% Bakrie Global Ventura 54%
Majority Owner/Sponsor Eddy Sariaatmadja Hary Tanoesoedibjo Bakrie Family
CEO Sutanto Hartono David Audy Anindya Bakrie
TV Stations SCTV, Indosiar RCTI, MNC TV, Global TV, iNews TV ANTV, TV One
In-House Content Production IEG (Screenplay, Sinemart) MNC Studio (MNC Pictures) NA
Digital OTT / News Portal , KLY
()
RCTI+, Okezone
Political Party affiliation N/A Partai Perindo Partai Golkar
2019F Revenue (USDm) 392 595 200
2019F EBITDA (USDm) 139 272 10
2019F Net Profit (USDm) 96 151 -86
TV matrix (2019)
Audience Shares (All-Time)
Audience Shares (Prime-Time)
Power Ratio 90% 110% 80%
Financials - 2018 (Rpbn)
Revenue 5,002 7,444 2,400
Gross Profit 2,845 4,619 1,390
EBITDA 2,150 3,177 152
Net Profit 1,485 1,531 (1,101)
Gross Margin 57% 62% 58%
EBITDA Margin 43% 43% 6%
Net Margin 30% 21% -46%
Total Asset 6,138 16,340 8,025
Total Liabilities 1,035 5,697 6,332
Total Equity 5,103 10,642 1,692
Total Debt 17 4,493 3,457
Total Cash 830 720 32
Net Debt (Net Cash) (813) 3,773 3,425
Net Gearing (%) net cash
Receivable Days 111 139 117
Payable Days 52 51 244
Inventory Days 145 330 105
Valuation – 2020E (17 Mar 2020)
PER (x) na
PBV (x) na
EV/EBITDA (x) na
ROE (%) na
ROA (%) na
Dividend Payout (%) na
Dividend Yield (%) na
Source: Company Data, Bloomberg, .
Morgan
Audience Share
Given that TV advertising remains a big chunk of revenue for media companies in
Indonesia, one of the most important dataset indicators to monitor in the Indonesia
media sector is the movement of TV audience shares. As a rule of thumb, we believe
that there is a one month time lag between TV audience shares to TV advertising
revenue. The ability to predict the audience share trend enables more accurate
revenue forecasting. TV audience share measures the number of sample population
that watch a particular TV channel in a given period of time, as compared to the total
number of TV that is on respectively. We monitor two sets of audience share data,
namely Prime-Time (within 6-11pm) and All-Time (All category). The 5 hours
within Prime Time generally account for the majority of revenue (%) of each TV
station, as the period within 6-11pm are generally the period whereby family gather
together at home in their living room to talk and watch TV together. These are also
the periods when the top "Sinetron" drama series are aired by the TV stations in their
top airing slots. The top 2 TV Stations that are well-known for airing Sinetron dramas
are RCTI (owned by MNCN) and SCTV (owned by SCMA).
Figure 13: All-Time TV Audience Shares (Per Quarter)
MNCN SCMA Trans VIVA
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19
Source: Company Data & Nielsen, . Morgan
Figure 14: Prime Time TV Audience Shares (Per Quarter)
-
MNCN SCMA Trans VIVA
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19
Source: Company Data & Nielsen, . Morgan
Prime-Time TV Audience Shares
The below charts and table are TV Audience shares data on Prime-Time basis (6-
11pm). For the period of December 2019, MNCN has the biggest market share of
%, followed by SCMA at %, Trans Group at %, and VIVA at %.
In 2019 blended Prime Time TV
audience shares, MNCN sat at
position with %, followed by
SCMA 2nd at %, Trans Group
3rd at %, and VIVA 4th at
%
Throughout 2019, MNCN has gained some market share and regained their
leadership position from SCMA. Meanwhile, Trans Group has taken back the
sport from VIVA group post recent market share gains in the past few months.
Since 2013, we can see that MNCN has generally taken the lead as the largest group
in terms of prime-time market share, which is not surprising, given that they control
3 National FTA TV (RCTI, MNC TV, and Global TV), as compared to SCMA,
Trans Group, and VIVA each with only 2 National FTA TV stations.
Within MNCN, key remains RCTI, while within SCMA, SCTV remains key driver.
Historically, RCTI and SCTV have been the top 2 TV stations in Indonesia that are
tightly competing for spot.
For 2019 blended average, MNCN generated % prime-time audience shares as
the largest group, up + YoY from % in 12M18. This is followed by
SCMA as group with % shares, down YoY from % in 12M18.
Trans Group stood as with % shares, up + YoY. VIVA stood as
group with % shares, down YoY.
Figure 15: Prime Time TV Audience Shares Chart - As per Dec 2019
Source: Company Data & Nielsen, . Morgan
Figure 16: Prime Time TV Audience Shares – 2019
Average
Source: Company Data, Nielsen, . Morgan
Table 5: Prime Time TV Audience Shares – Dec 2019
Prime Time
2019
MNCN SCMA Trans VIVA
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
MoM () () ()
12M19
12M18
YoY () ()
Source: Company Data, Nielsen, . Morgan
Table 6: Prime Time Audience Shares Table – Per TV - As per Dec 2019
Prime Time- 2018 RCTI SCTV IVM TRANSTV MNCTV TRANS7 GTV ANTV TVONE METRO TVRI1
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
MoM () () () () ()
12M17
12M18
YoY () () () () () () ()
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
MoM () () - () () () () -
12M19
12M18
YoY () () ()
Source: Company Data, Nielsen, . Morgan
Prime Time- 2019 RCTI SCTV IVM TRANSTV MNCTV TRANS7 GTV ANTV TVONE METRO TVRI1
MNCN SCMA Trans VIV
A
All-Time TV Audience Shares
The below charts and table are TV Audience shares data on All-Time basis. As per
December 2019, MNCN has the biggest audience share at % as group,
followed by SCMA at %, Trans Group at %, and VIVA at %.
Throughout 2019, MNCN has gained some market share and regained their
leadership position from SCMA. Meanwhile, Trans Group has taken back the
spot from VIVA group post recent market share gain in the past few months.
In 2019 blended All-Time TV
audience shares, MNCN stood as
group with %, followed by
SCMA 2nd at %, Trans Group
3rd at %, and VIVA 4th at
%
Since 2013, we can see that MNCN has generally taken the lead as the largest group
in terms of prime-time market share, which is not surprising, given that they control
3 National FTA TV (RCTI, MNC TV, and Global TV), as compared to SCMA,
Trans Group, and VIVA each with only 2 National FTA TV stations.
Within MNCN, key backbone remains coming from RCTI, while within SCMA,
SCTV remains key driver. Historically, RCTI and SCTV have been the top 2 TV
stations in Indonesia that are tightly competing for spot.
For the blended 2019, MNCN generated % prime-time audience shares as the
largest group, up + YoY from % in 12M18. This is followed by SCMA as
group with % shares, down YoY from % in 12M18. Trans
Group stood as with % shares, up + YoY. VIVA stood as group
with % shares, down YoY.
Figure 17: TV Audience Share Chart (All-Time), From Jan 2013 to Dec 2019 - Per Group
%
%
%
%
Source: Company Data, Nielsen, . Morgan
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Figure 18: All-Time TV Audience Shares Pie – 2019
Average
Source: Company Data, Nielsen, . Morgan
Figure 19: All-Time TV Audience Shares Table – Up to Dec 2019
All Time 2019 MNCN SCMA Trans VIVA
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
MoM - ()
12M19
12M18
YoY () ()
Source: Company Data, Nielsen, . Morgan
Table 7: All-Time TV Audience Shares Table - Per TV – as per December 2019
All Time- 2018 RCTI SCTV IVM TRANSTV MNCTV TRANS7 GTV ANTV TVONE METRO TVRI1
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
MoM () () () () () ()
12M17
12M18
YoY () () () () () ()
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
MoM () () () () () () ()
12M19
12M18
YoY () () ()
Source: Company Data, Nielsen, . Morgan
All Time 2019 RCTI SCTV IVM TRANSTV MNCTV TRANS7 GTV ANTV TVONE METRO TVRI1
US Media: Examining Advertising
Opportunity in OTT
Alexia S. Quadrani
. Morgan US Media Equity
Research
Our . Morgan US Media analyst, Alexia S. Quadrani, recently published a report
to examine the advertising opportunity in OTT, dated 5 March 2020. While it is not
an apples to apples comparison to compare the landscape of Indonesia OTT with a
developed market like the US, we believe it gives a good sense of color on where the
direction is moving in the medium to long term.
OTT services are slowly replacing linear television as the dominant form of
viewership for entertainment programming. In 2019, OTT captured 30% of living
room TV viewing; however, because many popular services do not incorporate
advertising, OTT commands a disproportionately low share of TV’s ad budget at just
3%. In 2020, the introduction and further scaling of ad-supported OTT services
(Hulu, Peacock, HBO Max, CBS All Access, Pluto) along with continued declines in
pay TV will likely accelerate the adoption of OTT advertising among brands and
potentially change the way streaming inventory is bought and sold.
OTT advertising has been the side dish, but it will likely become the main dish
over time. For a while, marketers have viewed OTT as a vehicle to extend their
reach as viewership declined on traditional linear television. Increasingly, however,
instead of being viewed as equivalent to online video (. YouTube), OTT is now
viewed as just TV and is becoming a critical way for brands to express their video
message. As Hulu scales and Peacock launches, Disney and Comcast will likely
accelerate the adoption of OTT among advertisers due to their existing relationships
and the bundling of OTT inventory with linear
OTT advertising is based on buying audiences. OTT offers the ability to target
specific audiences, but as the case is with other digital channels, there are downsides
including the lack of transparency and universal measurement. While brands are
frustrated with different walled gardens in streaming, they are not deterred and we
don’t believe there are incentives for these walls to come down in the near term. At
the same time, the development of streaming services from traditional players is
likely to result in changes to how OTT inventory is bought and sold.
Demand for linear TV advertising remains steady. Despite its limitations, linear
TV remains a unique and reliable vehicle for reaching large audiences quickly, and it
can be measured with a universally accepted currency. We expect the shift of dollars
from linear to OTT to happen slowly, with many network groups capturing the loss of
linear dollars on their respective OTT platforms.
Advertising to be crucial for the profitability of many OTT services. For
Disney’s Hulu and ESPN+, we believe advertising is essential for these two services
to achieve their breakeven targets by F2023/F2024. At ViacomCBS, we expect
Viacom execs to push harder for OTT advertising as they augment CBS All Access
with more content. We see FOX and DISCA in limbo near term as they crystallize
their DTC strategies, while agencies like IPG and OMC will likely benefit from the
increased need for data capabilities. We also address the role of other platforms
within the ad-supported OTT ecosystem, such Amazon, Roku, and Tubi.
64m households use OTT services. According to ComScore, 64m would represent
just about 50% of the US households; meanwhile, pay TV has a penetration of about
70%. Magna predicts OTT advertising will grow rapidly from $ in 2019 to $5b
in 2020, or +30% y/y. While this growth is substantial, the dollar amount still pales
in comparison to over $65b spent on linear TV each year.
Figure 20: List of Major OTT Services in US
Source: . Morgan US Media Research Team, Company Reports
23
C
om
pa
ni
es
, SCMA IJ
Asia Pacific Equity Research
18 March 2020
Surya Citra Media
Overweight
Midway through Digital Media Transformation; Price (17 Mar 20): Rp710
▼ Price Target (Dec-20): Rp1,340
Prior (Jun-20): Rp1,800
We assume coverage of Surya Citra Media with an OW rating and a
Rp1,340 PT, implying 89% potential upside plus an 8% dividend yield.
SCMA is undergoing a transformation by leveraging its strong FCF
stream (12% FCF yield) from the very profitable FTA TV business
and investing significantly in content (IEG) and new media platforms,
including OTT (Vidio), online portals (Kapan Lagi Youniverse) and
Out-of-Home advertising (EYE). In our view, recent evidence of this
successful transformation is that Indonesia’s Big-4 E-commerce see
SCMA as their preferred media partner to launch media Online to Offline
(O2O) campaigns leveraging SCMA’s unique ecosystem. Affiliate
Screenplay’s successful production of Netflix’s first (and most successful)
Indonesian original movie, The Night Comes for Us, in 2018 was also a
milestone. We believe SOTP is the right approach to value SCMA to fully
capture the value of the new media businesses. We see the current 7x
2020E P/E (backed by a 12% 2019-22E EPS CAGR and a strong net-cash
balance sheet) at >2SD below the 10-year mean as a good entry point.
Transformation from a ‘40% ROE TV broadcaster with a high
dividend’ into a ‘New Media: local content/OTT play with high
growth’ player. We believe the erosion of more than 60% of SCMA’s
market cap from 2015 to 2019 ( to now ) is
evidence that the old strategy of strong FCF generation from TV ads and
paying a high dividend to shareholders will no longer work. New
Economy investors want to see growth returns, with a diversification
strategy away from traditional TV to new media like video streaming
and content production, which is exactly what SCMA is doing now and
is the premise of our OW thesis.
Expect 13% 2019-22E revenue CAGR. We expect revenue CAGR to
more than double to 13%+ 2019-22 from 6%+ during 2014-19, largely
on the back of new growth drivers from content and new digital media
businesses, and helped by an improvement in organic TV ad pricing
from the recent collaboration with a competitor.
SOTP-based Rp1,340 PT; content (IEG) and OTT (Vidio) the new
valuation drivers. Our SOTP breaks down as follows: 60% contribution
from TV (11x 2020E PER), 18% content (15x EV/EBITDA), 17% OTT
(USD10/user), 3% net cash, with the remaining 2% from other
businesses. We value IEG at USD309m and Vidio at USD300m,
implying 41%/40% of SCMA’s current market cap, respectively.
Indonesia
Head of Indonesia Research &
Strategy
Henry Wibowo AC
(622-1) 5291 8526
@
PT . Morgan Sekuritas Indonesia
Key Changes (FYE Dec)
Prev
Cur Adj. net
income - 19E (Rp bn) 1,649
1,339 Adj. net income - 20E (Rp bn)
1,743
1,487
Style Exposure
Quant Current Hist %Rank (1=Top)
Factors %Rank 6M 1Y 3Y 5Y
Value 13 37 44 55 69
Growth 61 68 45 15 42
Momentum 87 86 71 79 79
Quality 10 15 5 1 4
Low Vol 76 65 60 79 70
Stock Price PT Upside Yield
SCMA 710 1340 89% %
Assuming Coverage at OW
mailto:@
Sources for: Style Exposure – . Morgan Quantitative and Derivatives Strategy; all other tables are company data and . Morgan estimates.
Marke
t
17
%
11
%
Price Performance
Ab
s
Re
l
Company Data
Shares O/S (mn) 14,769
52-week range (Rp) 1,870-710
Market cap ($ bn)
Exchange rate 14,
Free float(%) %
3M - Avg daily vol (mn)
3M - Avg daily val ($ mn)
Volatility (90 Day) 57
Index JCI
BBG BUY|HOLD|SELL 17|0|0
Key Metrics (FYE Dec)
Summary Investment Thesis and Valuation
Investment Thesis
We have an Overweight rating on SCMA with a Dec-20 PT of
Rp1,340. Our bullish thesis is premised on: (1) unlocking of
value from the digital media assets (especially the OTT
platform, ) to ride on the fast-growing digital ad pie;
(2) unlocking of value from the content business, via IEG
(Sinemart, Screenplay), to diversify the revenue stream to
non-TV third-parties such as cinema and Netflix; and (3) the
recently-formed collaboration with long-time competitor,
MNC Group lowering the discount pressure from advertisers
and eventually improving the TV rate card momentum.
Valuation
We use a sum-of-the-parts (SOTP) methodology to value
SCMA and assign a Dec-20 PT of Rp1,340 (applying a 20%
SOTP discount to account for any execution delay). We expect
the TV business to still generate bulk of the SOTP at 60%
weighting (11x 2020E PER), followed by content at 18% (15x
EV/EBITDA), OTT at 17% (USD10/MAU), net cash at 3%
and other businesses (billboard, online platform) at 2%.
Risks to Rating and Price Target
Downside risks to our rating and price target include: (1)
deteriorating macroeconomics, leading to weak ad spend
environment; (2) failure of SCMA to execute new OTT and
content businesses; (3) declining TV audience shares due to
greater competition; (4) regulatory risks, especially involving
TV broadcasting licensing; and (5) failure to execute on the
recently formed collaboration with competitor MNC Group.
Performance Drivers
Revenue growth % % % %
EBIT margin % % % % Region 8%
EBIT growth % (%) % %
Adj. EPS growth % (%) % % Idiosyn. 62%
Ratios
Adj. tax rate % % % % Factors 6M Corr 1Y Corr
Interest cover NM NM NM Market: MSCI Asia Pac ex JP
Net debt/Equity NM NM NM NM Region: Indonesia
Net debt/EBITDA NM NM NM NM
ROE % % % %
Valuation
FCFF yield % % % %
Dividend yield % % % %
EV/EBITDA
Adj. P/E
Macro:
Citi Economic Surprise - EM
JPM EM Currency(EMCI) Fixing
Emerging Economies CPI(YoY)
Quant Styles:
Quality
Size
Momentum
YT
D
-
%
-
%
1m
-
%
-
%
3m
-
%
-
%
12
m
-
%
-
%
Rp in billions
Financial
Estimates
FY18A FY19E FY20E FY21E
Revenue 5,002 5,486 6,130 6,960
Adj. EBIT 1,938 1,767 1,965 2,254
Adj. EBITDA 2,096 1,941 2,157 2,465
Adj. net income 1,485 1,339 1,487 1,697
Adj. EPS
BBG EPS
Cashflow from operations 1,648 1,085 1,455 1,541
FCFF 1,631 881 1,251 1,345
Margins and Growth
EBITDA margin % % % % Macro
EBITDA
growth Net
margin
%
%
(%)
%
%
%
%
% Style 2%
Sources for: Performance Drivers – Bloomberg, . Morgan Quantitative and Derivatives Strategy; all other tables are company data and . Morgan estimates.
25
Table of Contents
Investment Summary .......................................................................27
Valuation Methodology ....................................................................30
Company Profile ...............................................................................33
Business Divisions ..............................................................................34
TV Audience Shares ..........................................................................36
Financial Summary ...........................................................................37
Management Team ...........................................................................40
Investment Thesis, Valuation and Risks .........................................42
SCMA is Indonesia’s leading
media group, focusing on FTA
TV broadcasting, content
production, and digital media
(OTT, online platforms, digital
billboard)
We have an OW rating on SCMA
with a Rp1,340 PT
A potential near- to medium-term
catalyst is announcing
investment by a strategic partner to
fund future expansion
We expect SCMA to deliver 12%
earnings CAGR during 2019-22
Investment Summary
Indonesia’s leading integrated media company
PT Surya Citra Media Tbk (SCMA IJ) was established in 1999 and is now one of
Indonesia’s leading media companies, primarily focused on free-to-air (FTA) TV,
content production, and digital media. SCMA accounts for over 30% of FTA TV
audience share via two TV stations, namely SCTV (drama) and Indosiar (lifestyle,
variety shows). SCMA also has a 72% stake in PT Indonesia Entertainment Group
(IEG), a leading content production company whose subsidiaries include Sinemart
Production and Screenplay Films. SCMA’s new digital media portfolio includes
(an OTT service), Kapan Lagi Youniverse (lifestyle online platforms),
EYE (a digital billboard business) and Samara Media (a social media
aggregator/event organizer). SCMA is ~60% controlled by the Sariaatmadja family’s
Emtek Group (EMTK IJ), with the remaining 40% being free float.
OW SCMA – unlocking value from OTT and Content
We have an OW rating on SCMA as we believe that its share price will outperform
the benchmark index in the next 12 months. Our bullish thesis is premised on our
expectations of:
Unlocking of value from digital media assets (especially the OTT platform,
) by riding on the fast-growing digital ad pie;
Unlocking of value from the content business via majority-owned IEG (Sinemart,
Screenplay), which is Indonesia’s leading content producer, by diversifying the
revenue stream away to non-TV third parties such as cinema and Netflix; and
The recently-formed collaboration with long-time competitor MNC Group
lowering discount pressure from advertisers and eventually improving the TV
rate card momentum.
In our view, a potential near- to medium-term catalyst to watch is an
investment/partnership announcement by in order to help fund expansion
while at the same time validating a new valuation benchmark.
Earnings growth profile
Figure 21: SCMA - Net Income
Source: Company data, . Morgan estimates
We are using SOTP to value
SCMA to better capture content
and digital businesses, and not just
the TV business
We believe content and OTT
businesses will account for 35% of
SCMA's total NAV vs. TV at 60%
SOTP-derived price target of Rp1,340
We assign a Dec-20 price target of Rp1,340/share, implying 89% potential upside
from the current level. We use a sum-of-the-parts (SOTP) methodology to value the
company, as we believe this is a better approach to capture the value of SCMA’s
fast-growing non-TV businesses such as content and OTT. We then apply a 20%
SOTP discount to factor in execution delay risk.
We derive an NAV of Rp1,670/share () from:
6. FTA TV: (60% of the total).
7. Content production: USD309m (18%).
8. OTT: USD300m (17%).
9. Other businesses (including EYE and KLY): USD38m (2%).
10. Net cash: USD54m (3%).
Figure 22: SCMA’s NAV Breakdown
Source: . Morgan
Emtek Group has a solid track record in the tech business
We believe one of the biggest challenges for SCMA in delivering on its new/digital
media strategy is to grow successfully. One aspect we wish to highlight
here is the solid track record of the Emtek Group, the parent company of SCMA,
within the tech sector in the past few years. It has had more success in its tech
investments (Bukalapak, PropertyGuru, DANA) as compared to non-tech ones such
as the not-so-successful one (BBM). Emtek was an early investor in Bukalapak,
which ranks among the top 3 e-commerce marketplaces in Indonesia with a reported
valuation of and investments from Ant Financials and GIC. Emtek is also
the sole partner of Ant Financials for the rollout of DANA (among the top 3 fintech
payment wallets in Indonesia). Emtek is one of the key shareholders of
PropertyGuru, South-East Asia’s largest online property listing platform. Emtek was
also an early key investor in KUDO, an e-commerce agent/payment enabler, which
got acquired by Grab in 2017.
Downside risks
Downside risks to our rating and price target include:
Deteriorating macroeconomics, leading to softer country GDP growth and a weak
advertising spending environment.
Failure to execute on rollout of the OTT platform (Vidio) and the content
business (IEG).
Declining TV audience shares due to greater competition.
Regulatory risks, especially TV broadcasting licensing.
Failure to execute on recently-formed collaboration with competitor MNC Group
to lower discount pressure and improve rate-card momentum.
SCMA is trading at 7x 2020E PER,
at more than SD below its 10-
year mean
Figure 23: SCMA 10-year PE band (one-year forward)
Source: Bloomberg (priced as of close of business 17 March 2020), . Morgan
Table 8: Valuation Comps Table – Indonesia Media and Regional Peers
Regional Media ADTV EV/EBITDA P/E Yield ROE
Stock Ticker Rec PT Price % upside US($M) US($M) 2020E 2021E 2020E 2021E 2020E 2020E
Indonesia
Surya Citra Media SCMA IJ OW 1,340 710 89% 686 %
Media Nusantara
Citra
MNCN IJ OW 1,570 865 82% 807 %
Visi Media Asia VIVA IJ NC NC 50 NA 54 NA NA % NA
Average %
Japan
Nipppon TV 9404 JT NC NC 1,139 NA 2,822 %
Average %
Thailand
BEC BEC TB NC NC NA 202 %
VGI VGI TB NC NC NA 1,532 %
Average %
India
ZEE Z IN N 320 136 135% 1,763 %
SUN TV SUNTV IN NC NC 362 NA 1,923 %
Average %
Malaysia
Media Prima MPR MK NC NC NA 33 %
ASTRO ASTRO MK NC NC NA 1,037 %
Average %
Source: Bloomberg (Price as per 17 Mar 2020), Bloomberg consensus for stocks Not Covered (NC), . Morgan estimates
Valuation Methodology
We value the company using a sum-of-the parts (SOTP) methodology as we believe
it better captures the value of the non-TV assets, especially the fast-growing content
and OTT businesses. We believe that the Street is valuing SCMA using a simple
price to earnings multiple, which is not the appropriate method, in our view, as that
dilutes the values of new/digital media assets that are growing very fast but still have
a negative bottom line.
Table 9: SOTP valuation – PT Surya Citra Media Tbk
% (x) 2020E (Rpbn) Rpbn USDm NAV
SOTP Analysis - SCMA Stake Valuationmethod Multiple Net profit EBITDA Sales Value
Effective
value
FTA TV (SCTV and
Indosiar)
100% PER 1,350 NA NA 14,850 14,850
Content production (IEG) 72% EV/EBITDA 400 NA 6,000 4,320
OTT (Vidio) 100% Price per Users Rp140,000 30m MAU 4,200 4,200
Billboard (EYE) 60% EV/EBITDA NA 10 NA 150 90
Online news/lifestyle
(KLY)
50% Price to Sales NA NA 300 900 450
Effective
Breakdow
n value
1,061 60%
309 18%
300 17%
6 0%
32 2%
Source: Company data, Bloomberg, . Morgan
estimates
We value SCMA’s TV business by applying an 11x earnings multiple to our
2020 net profit estimate of . This translates into a valuation of
() and accounts for 60% of the total NAV. We believe that the 11x
earnings multiple is justified for SCTV and Indosiar, given their strong brand
equity, being among the top 3 TV stations in Indonesia, and backed by a high
ROE profile (35-40% for pure TV) and solid margin, largely thanks to an in-
house programing strategy.
We value SCMA’s OTT business, namely , by multiplying our
Rp140,000 (USD10) average revenue per monthly active user (MAU) estimate by
our MAU estimate of 30m. This translates into a valuation of
(USD300m), accounting for 17% of our total NAV. We believe the USD10/MAU
multiple is justified, as we apply a discount to regional peers (., IQIYI in China
at around USD30/MAU, IFlix at USD10-15/MAU). is Indonesia’s
second-largest online video streaming platform (by number of users) after
YouTube. It has a hybrid business model of subscription video on demand
(SVOD) and advertisement video on demand (AVOD) with a unique local content
offering as well as exclusive sports streaming (such as local soccer league, Liga
Satu). Vidio was the exclusive digital broadcaster of Asian Games 2018 that
Indonesia hosted.
We value SCMA’s content business, namely IEG (which comprises of Sinemart
and Screenplay, among others) by applying a 15x EV/EBITDA multiple to our
2020 EBITDA estimate of Rp400bn (assuming a 20% EBITDA margin from
Total 23,910 1,708 97%
(+) Cash 750 54 3%
(-) Debt 0
NAV 24,660 1,761 100%
No. of shares (bn)
NAV/share (Rp) 1,670 1,409
Discount to SOTP 20%
Price target (Rp) 1,340
Current price 710
Upside 89%
Rp2tr revenue). We believe that the multiple is justified, in line with the global
average for other content production houses (see the table below). After adjusting
for SCMA’s 72% ownership stake, we derive a valuation of (USD309m),
accounting for 18% of our total NAV estimate. IEG has two main subsidiaries
with strong execution track records. The first is Sinemart, the leading production
house for TV soap opera dramas (Sinetron), acquired in 2017. The other is
Screenplay, Indonesia’s leading movie producer for cinemas and content for
global OTT players like Netflix.
Table 10: EV/EBITDA multiple comparison for content producers
Alibaba Pictures Group
Ltd
1060 HK Hong Kong 3,462
Studio Dragon Corp 253450 KS South Korea 1,752
Wanda Film Holding 002739 CH China 5,584
Walt Disney Co DIS US USA 190,226
Lions Gate Entertainment LGF US USA 1,198
Simple Average
Source: Bloomberg estimates (11 March 2020), . Morgan
We value SCMA’s billboard/out-of-home advertising business, namely EYE,
applying a 15x EV/EBITDA multiple to our 2020 EBITDA estimate of Rp10bn
(20% EBITDA margin from Rp50bn revenue). We believe the multiple is
justified, based on the simple average for regional and global OOH peers (see
table below). After taking into account SCMA’s 60% stake, we derive a valuation
of Rp90bn (USD6m), which accounts for <1% of our NAV. SCMA owns 60% of
EYE, Plan B of Thailand owns 10%, and the remaining 30% is owned by the co-
founders (who are not related to SCMA or the Emtek group). As of 1Q2019, EYE
has 76 screens covering approximately 1,700sqm across Jakarta, Bandung and
Lombok. The locations include three airports and the CBD area of Jakarta.
Table 11: EV/EBITDA multiple comparison for out-of-home/billboard companies
VGI PCL VGI TB Thailand 1,833
Plan B Media PCL PLANB TB Thailand 513
Lamar Advertising
Co
LAMR US USA 6,904
Simple Average
Source: Bloomberg estimates (11 March 2020), . Morgan
We value SCMA’s online news/lifestyle platform business, namely Kapan Lagi
Youniverse (KLY), using a 3x revenue multiple with a 2020 revenue assumption
of Rp300bn. After taking into account SCMA’s 50% ownership stake in KLY,
this translates into a valuation of Rp450bn (USD32m) and accounts for 2% of
NAV. KLY’s online portals by genre include: (1) news: ,
and ; (2) lifestyle/entertainment: ,
, ; and (3) sports: and .
We apply a 20% discount to the NAV derived from the sum of the parts. This is
to take into account execution delay risks in the new/digital media businesses,
given these are relatively new ventures. A successful fund raising from a new-
third party investor into one of SCMA’s new/digital media assets, especially
, could move the discount rate lower on better expectations of
execution.
BBG Country of Mkt cap EV/EBITDA EV/Revenue
Company ticker domicile USDm 2020E 2020E
BBG Country of Mkt cap EV/EBITDA EV/Revenue
Company ticker domicile USDm 2020E 2020E
Company Profile
PT Surya Citra Media Tbk (SCMA IJ) was established in 1999 and is now
Indonesia’s leading media company, primarily focusing on free-to-air (FTA) TV,
content production and digital media. SCMA is ~60% controlled by the Sariaatmadja
family’s Emtek Group (EMTK IJ), with the remaining 40% being free float.
SCMA has over 30% of FTA TV audience share via two TV stations, namely
SCTV (drama) and Indosiar (lifestyle and variety shows).
SCMA also has a 72% stake in PT Indonesia Entertainment Group (IEG), a
leading content production company whose subsidiaries include Sinemart
Production and Screenplay Films.
SCMA’s new digital media portfolio includes (OTT), Kapan Lagi
Youniverse (lifestyle online platforms), EYE (digital billboard), and Samara
Media (a social media aggregator and live events organizer).
In 2013, Indosiar (IDKM) was
merged into SCMA, making it a
leading media group with the
largest market cap in Indonesia at
that time.
2017 and 2019 marked important
milestones for SCMA when it
conducted two acquisitions for
content and digital businesses. This
is important as they are growing
revenue streams from outside the
core TV business.
In 2017, SCMA acquired
Indonesia’s production house
for TV Sinetron dramas, namely
Sinemart, which at that time was
the exclusive content supplier of
competitor MNCN's RCTI.
In 2019, SCMA acquired three
digital media assets from parent
company Emtek group at below
book value, using ~1% of newly
issued shares (at a premium price of
Rp2,440/sh); these were: ,
KLY, and EYE. 2H19 was the
period when SCMA started growing
its digital business more aggressively
Table 12: Company milestones – PT Surya Citra Media Tbk (SCMA IJ)
1999 The company was established under the name of PT Cipta Aneka Selaras.
2001 The company changed its name to PT Surya Citra Media.
2002 Acquisition of 99,99% of shares of PT Surya Citra Televisi (SCTV) by the company.
2002 The company obtained an effective statement from the Bapepam-LK to conduct an initial
public offering with ticker code of SCMA.
2010 The company established PT Surya Cipta Pesona (SCP) on July 26, 2010, that engages in the field of television broadcasting services in the coverage area of Gorontalo.
2013 Merger of the company and PT Indosiar Karya Mandiri Tbk (IDKM).
2013
The company and PT Elang Mahkota Teknologi Tbk (the holding company) signed an
agreement for sale and purchase and transfer of shares of 51% which had been issued and fully
paid up in PT Screenplay Produksi (Screenplay).
2014 The company founded PT Surya Trioptima Multikreasi with a share ownership of 60%.
2015 Established a sub-holding in content production, PT Indonesia Entertainment Grup (IEG), which has several subsidiaries engaged in content production and marketing, and
infrastructure.
2017 Through its subsidiary, PT Indonesia Entertainment Grup (IEG), the company acquired 80% shares of PT Sinemart Indonesia on January 23, 2017.
2019
The company acquired 99% shares of PT Vidio Dot Com (), 50% plus 1 shares of
PT Kapan Lagi Dot Com Networks (KLY) and 99% shares of PT Binary Ventura Indonesia
(BVI).
2019 The company invested in PT Mediatama Televisi (Nexparabola) representing 51% share
ownership.
Source: Company data, . Morgan
SCTV was ranked as the TV
station in 2019 in All-Time
Category with % audience
share, beating long-time rival RCTI,
which took the second position
SCTV's performance has notably
improved since Sinemart came on
board as an exclusive content
supplier in 2017
Indosiar has been consistently
ranked as the TV station in the
past years, and is famous for its
talent-search program with the
Dangdut (local country music)
theme
Business Divisions
Table 13: FTA TV business
TV Station Description
SCTV
PT Surya Citra Televisi (SCTV) is Indonesia’s second privately
owned television network that started operations in 1990. SCTV
is broadcast via 39 transmission stations, covering a population
of more than 180 million. SCTV is well known for its soap
opera Sinetron dramas, primarily aired during evening prime-
time hours. In 2019, SCTV was ranked as the TV
station in the All-Time Category with % audience share
and ranked in the Prime-Time Category with %
audience share.
Indosiar
PT Indosiar Visual Mandiri (IVM) started its operations in 1995
and has been recognized as one of the leading national FTA TV
channels focusing on the middle-to-low income group. Indosiar
is broadcast via 33 transmission stations, covering more than a
180 million population. Indosiar has been well-known for its
local and in-house capabilities, especially through its well-
equipped studios. Its popular programs include: Dangdut
D’Academy, D’Academy Asia and Stand Up Comedia Academy.
In 2019, Indosiar was ranked as the TV station in both
All-Time and Prime-Time categories with % and %
audience shares, respectively. Indosiar was acquired by Emtek
group from Salim Group in 2011. Indosiar was then merged into
PT Surya Citra Media Tbk (SCMA) in 2013.
Source: Company Data,
Table 14: Content production business
Name Description
Indonesia
Entertainment
Group
(IEG)
PT Indonesia Entertainment Group was established in 2015 as
the content holding company of Emtek group. IEG is 72%
owned by SCMA and 28% owned by EMTK. The subsidiaries
of IEG include Indonesia’s top-rated and leading production
houses such as Sinemart Pictures (which makes Sinetron
dramas), Screenplay Films (which makes movies for theatrical
release) and IEP (variety shows). On a consolidated basis, IEF
houses over 600 production personnel and over 120,000 hours
of content. IEG focuses on four core business activities:
content production; studio & facility management; content
library monetization; and content distribution.
Sinemart Pictures
Sinemart is one of Indonesia’s largest production houses that
was founded in 2003 by Leo Sutanto and partners. Leo has
over 25 years of experience in the industry and is a well-known
producer within Indonesia’s entertainment industry. Sinemart’s
specialty is to produce Sinetron drama series and television
films, and also movies for theatrical release. SCMA’s IEG
acquired an 80% stake in Sinemart in 2017. Since then,
Sinemart has been an exclusive content supplier for the SCMA
group and stopped producing for other TV competitors.
Screenplay Films PT Screenplay Sinema Film (Screenplay Films) was
established in 2015, largely to support the development of the
movie industry, particularly for the big screen. Its famous
movie titles include: Magic Hour (2015), London Love Story
(2016), Headshot (2016), London Love Story 2 (2017),
Jailangkung (2017), London Love Story 3 (2018), The Night
Comes for Us (2018 – exclusively for Netflix) and Gundala
(2019).
Indonesia
Entertainment
Produksi (IEP)
IEP started operations in 2015 as one of IEG’s subsidiaries.
IEP focuses on managing the production of in-house content
for national FTA’s (SCTV and Indosiar) flagship programs.
Some of IEP’s highly rated programs are D’ Academy,
Infotainment Awards, SCTV Music Awards, Bintang Pantura
and Liga Dangdut Indonesia.
Source: Company data, . Morgan
Table 15: New digital media business
Name Description
Vidio is Indonesia’s second-largest online video streaming
platform after YouTube. Vidio runs a hybrid advertisement
video on demand (AVOD) + subscription video on demand
(SVOD) model with key content differentiation. The SVOD
model is under Vidio Premier, where it focuses on offering
original local content drama series and also offering sports
content, such as the local soccer league Liga, La Liga,
Champions League and NBA. Vidio was the official digital
broadcaster of the Asian Games that were hosted in Indonesia
in 2018. SCMA owns 100% stake in Vidio.
Kapan Lagi
Youniverse
(KLY)
Kapan Lagi Youniverse (KLY) operates leading online portals
in the categories of news (, ),
lifestyle (), entertainment (), sports
(), etc. SCMA owns 50% + 1 share of KLY.
EYE
EYE is one of Indonesia’s leading out of home (OOH)
billboard and street furniture business groups. SCMA owns
60% of EYE and Plan B of Thailand owns 10%, with the
remaining 30% owned by other founders (unrelated to
SCMA/Emtek group). As of March 2019, EYE has 76 screens
in Jakarta, Bandung and Lombok (1,700sqm). Locations
include three airports and the SCBD in Jakarta.
Samara Media
Samara Media Entertainment (PT Benson Media Kreasi) was
founded by Ben Soebiakto, focusing on live event management,
social media influencer platform (allstar), e-spirts, etc. SCMA
acquired 50% stake in the company for Rp44bn in 2019.
Source: Company data, . Morgan
MNCN SCMA Trans VIV
A
TV Audience Shares
As of the end of 2019, SCMA had a % TV audience share in the Prime Time
category (6-11pm) and % in the All-Time category. It is the second-largest group
by market share, controlling two national FTA TV stations, SCTV and Indosiar, and
competes head-to-head with the group MNCN, which controls three national
FTA TV stations: RCTI, MNC TV, and GTV.
Figure 24: Prime-time TV audience shares chart - as per December 2019
Source: Company data & Nielsen, . Morgan
Figure 25: All-time TV audience shares chart - as per December 2019
%
%
%
%
Source: Company data & Nielsen, . Morgan
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We expect SCMA to deliver 2019
revenue of (+10% YoY)
and 2020 revenue of (+12%
YoY). We are optimistic that the
company can deliver double-digit
top-line growth amid new drivers
from digital media as well as a
better TV rate card outlook
We forecast EBITDA to reach
in 2019 (-7% YoY) and
in 2020 (+11% YoY)
We expect net profit to reach
in 2019 (-10% YoY) and
in 2020 (+11% YoY)
We believe SCMA can generate
of FCF in 2020
SCMA is likely to sit on Rp1tr of
net cash at end-2020
Financial Summary
Table 16: Income statement, cash flow, balance sheet – SCMA
Income statement (Rpb) 2016 2017 2018 2019E 2020E 2021E
Revenue 4,524 4,454 5,002 5,486 6,130 6,960
Gross Profit 2,742 2,619 2,845 2,854 3,182 3,630
EBITDA 2,140 1,922 2,096 1,941 2,157 2,465
Depreciation and Amortization (137) (150) (159) (175) (192) (211)
Operating Profit 2,003 1,772 1,938 1,767 1,965 2,254
Net Interest 18 (1) 22 5 5 (5)
Exceptional Income - Net (2) (11) (9) - - -
Pre-Tax Profit 2,024 1,782 1,969 1,772 1,970 2,249
Taxation (510) (464) (494) (443) (492) (562)
Minority Interests (10) 14 10 10 10 10
Recurring Net Profit 1,501 1,331 1,485 1,339 1,487 1,697
Cash flow (Rpb) 2016 2017 2018 2019E 2020E 2021E
Change in Working Capital (267) (83) (13) (343) (280) (357)
Cash Flow from Operations 1,375 1,615 1,648 1,085 1,455 1,541
Capex (12) (877) 27 (200) (200) (200)
Cash Flow from Investing
Activities
(283) (958) (193) (375) (392) (411)
Free Cash Flow 1,349 739 1,631 881 1,251 1,345
Proceeds from Issue of Shares 0 - 0 158 - -
Dividends Paid (1,214) (848) (804) (891) (803) (892)
Cash Flow from Financing
Activities
(1,323) (878) (859) (750) (803) (892)
Cash at Beginning of Period 686 455 234 830 790 1,050
Net Change in Cash (231) (221) 596 (40) 260 238
Ending Balance Cash 455 234 830 790 1,050 1,287
Balance sheet (Rpb) 2016 2017 2018 2019E 2020E 2021E
Total Cash and Equivalents 455 234 830 790 1,050 1,287
Tangible Fixed Assets 967 1,029 1,050 1,250 1,450 1,650
Intangible Fixed Assets 457 1,271 1,224 1,224 1,224 1,224
Total Other Assets 2,942 2,852 3,035 3,498 3,851 4,296
Total Assets 4,821 5,386 6,138 6,762 7,574 8,457
Short-Term Debt 207 65 16 - - -
Total Long-Term Debt 0 2 0 - - -
Other Liabilities 908 913 1,018 1,138 1,211 1,299
Total Liabilities 1,115 980 1,035 1,138 1,211 1,299
Shareholders' Equity 3,427 3,901 4,571 5,102 5,852 6,656
Minority Interests 279 504 531 521 511 501
Total Equity 3,705 4,405 5,103 5,624 6,363 7,157
Net Debt (247) (166) (813) (790) (1,050) (1,287)
Total Liabilities & Equity 4,821 5,386 6,138 6,762 7,574 8,457
Source: Company data, . Morgan estimates
We expect SCMA to grow its
revenue by 12% in 2020
Earnings are likely to decline in
2019 by 10% amid additional costs
related to new/digital media
businesses, which started more
meaningfully since May 2019;
nonetheless, we expect earnings to
normalize from 2020 onwards and
grow in- line with the top line
We expect 25-28% ROE to be the
new normal for SCMA post-
digital/new media expansion (from
35-45% previously)
SCMA’s net profit posted a 6%
CAGR for 2011-19E… we expect
an acceleration of the earnings
CAGR to 12% for 2019-22E, on the
back of: 1) new drivers coming
from content and digital businesses;
2) normalization of cost growth
from OTT; and 3) a better TV rate
cards outlook given collaboration
with FTA TV peers
Table 17: Key metrics and valuations
Key metrics 2016 2017 2018 2019E 2020E 2021E
Revenue Growth (%) ()
Net Profit Growth (%) () () ()
Gross Margin (%) 61% 59% 57% 52% 52% 52%
EBITDA Margin (%) 47% 43% 42% 35% 35% 35%
Net Profit Margin (%) 33% 30% 30% 24% 24% 24%
Dividend Payout Ratio (%) 80% 56% 60% 60% 60% 60%
Capex / Sales (%) 0% -20% 0% -4% -3% -3%
Interest Cover (x) 70 110 668 353 393 451
Valuations 2016 2017 2018 2019E 2020E 2021E
EPS (Rp) 103 91 102 91 101 115
DPS (Rp) 83 58 55 60 54 60
BVPS (Rp) 234 267 313 345 396 451
FCFPS (IDR) 92 51 112 60 85 91
Recurring P/E (x)
P/B (x)
FCF Yield (%) % % %
Dividend Yield (%)
EV/EBITDA (x)
Return on Average Equity (%)
Net debt to equity (%) net cash net cash net cash net cash net cash net cash
Weighted Avg Adjusted Shares
(m)
14,622 14,622 14,622 14,769 14,769 14,769
Source: Company data, Bloomberg, . Morgan estimates. Based on latest closing price per 17-Mar-2020
Figure 26: Net income (2011–22E) – SCMA
Source: Company data, . Morgan estimates
We expecting a revenue CAGR of
11% for 2019-2022E
We expect SCMA to have a
normalized EBITDA margin of
35% going forward after the new
strategy shift to expand into digital
media
We expect SCMA to have a
normalized ROE of 25-28% going
forward as it grows its OTT and
content portfolios. While the ROE is
lower as compared to the previous
35-45% level, we believe it is still
materially higher as compared to
Indonesia’s average of low-mid
teen’s level
Figure 27: Revenue (FY11-22E) – SCMA
Source: Company data, . Morgan estimates
Figure 28: EBITDA margin (FY11-22E) – SCMA
Source: Company data, . Morgan estimates
Figure 29: Return on average equity (ROAE) – SCMA
Source: Company data, . Morgan estimates
Management Team
Table 18: Management team – PT Surya Citra Media Tbk (SCMA IJ)
Board of
Commissioners
Age Title Background
Raden Soeyono 77 President Commission
er
Mr Soeyono has been serving as the President Commissioner of the company since 2005. His
academic background includes the National Military Academy in Magelang in 1965 and the
National Defence Agency regular course class XXII. He obtained his Bachelor’s Degree in
Economics from Universitas Terbuka. His career path ranged from Aide de Camp to President
Soeharto, Vice Assistant of Security to the Head Staff of Military, Vice Commander to the Centre
of Infantry Arms, Commander of Regional Military IV/Diponegoro, Head of Staff of the Armed
Forces, Secretary to the Bureau of Aid Coordination to National Stability, and
Secretary General of the Defence and Security Department.
Suryaini Zaini 58
Vice
President
Commission
er
(Independent
)
Ms Zaini graduated from the Department of Economic Laws and Notarial Program of the University
of Indonesia. In 2011, she joined PT Indosiar Karya Media (IDKM) and held the position of
President Commissioner and Independent Commissioner of IDKM and Indosiar. She was appointed
as the company's Vice President Commissioner and Independent Commissioner in April 2013. Aside
from holding the position of
Vice President Commissioner, she actively participates in various social and educational
programs in the community.
Alvin Sariaatmadja 37 Commissioner
Mr Sariaatmadja graduated from the University of New South Wales, Australia, with a Bachelor’s
degree in Law and Finance. He has been the company's Commissioner since 2015. Previously, he
served as a Director of the company from 2013 to 2015. Before that, he served as a Director of PT
Indosiar Karya Media Tbk and PT Indosiar Visual Mandiri from 2011 to 2013. Alvin currently
serves as CEO of PT Elang Mahkota Teknologi (EMTK), the parent company of SCMA. Alvin is
the son of Eddy Sariaatmadja, Chairman and the largest
shareholder in EMTK.
Glenn Surya Yusuf 65 Commissioner
Mr Yusuf obtained his Bachelor of Arts Degree in Economics from the University of the Philippines
and a Master Degree in Business from the Asian Institute of Management, Philippines. He started as
the company's Independent Commissioner on May 24, 2012. In addition, he is also chairman of the
Audit Committee since October 2012. Currently, his titles includes Non-Executive Independent
Director of CIMB Group, Malaysia, since 2010, and Vice President Commissioner of PT Bank
CIMB Niaga Tbk. Several governmental roles he has previously assumed include: Chairman of the
Assistance Team to the Minister of Finance for the Financial Sector Restructuring during the period
of October 2001 to October 2002; Chairman of the Indonesian Bank Restructuring Agency (IBRA)
for the period of June 1998 to January 2000, and Director General for Finance
Institutions, Ministry of Finance, for April-June 1998.
Jay Geoffrey Wacher 53 Commissioner
Mr Wacher was appointed as Commissioner in April 2013. He has over 26 years experiences in
finance, private equity, mergers and acquisitions, direct investment, business development and
strategy. He is also a Commissioner of PT Elang Mahkota Teknologi Tbk, Plan B Media Public
Co. Ltd (Thailand) and Property Guru Pte Ltd (Singapore). Previously, he served as a Financial
Director of PT PP London Sumatra Indonesia Tbk from 2004 to 2007 and Investment Director of
Carnegie Wylie & Company, Sydney, Australia, from 2000
to 2006. He completed his studies at UNSW, Sydney, Australia in 1991, earning a Bachelor’s
of Law and Commerce degree as well as becoming an Associate of the Australia Securities
Institute in 1996.
Board of Directors Age Title Background
Sutanto Hartono 53 President Director (CEO)
Mr Hartono was appointed as the company’s President Director in 2013. Prior to his appointment,
from 2011 to 2013 he served as the President Director of SCTV, a role to which he was re-
appointed in 2015. Previously, he was the Country General Manager/President Director of PT
Microsoft Indonesia and the CEO of Rajawali Citra Televisi (RCTI) from 2008. He served as a
Managing Director from 2003 and, at the same time, the Director of Media Nusantara Citra (MNC).
Prior to this, Sutanto started his career in Sony Music Entertainment as the Senior Vice President for
the South-East Asia Division, and was a Senior Associate at Booz Allen & Hamilton, South-East
Asia. He obtained his Bachelor’s Degree in Chemical Engineering from the University of
Notre Dame, Indiana, and obtained his Master of Business Administration Degree from the
University of California, Berkeley, US.
Harsiwi Achmad 54 Director
Ms Achmad has been serving as the company’s Director since 2013. Previously, she held the
position of Programming Director of PT Surya Citra Televisi (SCTV) from 2010 to 2013, Director
at PT Rajawali Citra Televisi (RCTI) from 2006 to 2010 and General Manager of PT CTPI from
2004 to 2005. She started her career in SCTV in various positions in the programming division
from 1997 to 2004. She was the best graduate of Gadjah Mada University in 1990, and in 1992, she
secured a scholarship from AIDAB Australia to
study for a Master’s Degree at Monash University
Imam Sudjarwo 65 Director
Mr Sudjarwo has been the company's Director since 2015. Previously, he served as the President
Director of PT Indosiar Visual Mandiri in 2014. In December 2013, he held the position of
Inspector of General
Supervision in the National Police; previously, he was the Head of Security Intelligence of the
National Police
(BIN), Head of National Police Security (Kabaharkam Polri), Head of National Police
Educational Institution, Head of Mobile Brigade Corps of National Police (Brimob Polri) and
Chief of Regional Police of Bangka Belitung Islands. He obtained his Bachelor's Degree from
Perguruan Tinggi Ilmu Kepolisian (PTIK) and his
Master of Science Degree from the University of Indonesia.
Rusmiyati Djajaseputra 42 Director
Ms Djajaseputra has been the company’s Director since 2015. Previously, she served as the Finance
Director of PT Surya Citra Televisi (SCTV) and PT Indosiar Visual Mandiri (Indosiar). She started
her career as an auditor at the public accounting firm of Prasetio Utomo & Co in 2000, before
joining the public accounting firm of Prasetio, Sarwoko & Sandjaja (Ernst & Young) in 2002. In
2005, she continued her career at the public accounting firm of Haryanto Sahari & Rekan
(PricewaterhouseCoopers). In 2006, she continued her career at PT Johnson Home Hygiene
Products (member of the SC Johnson Group). She graduated from
Tarumanagara University with a Bachelor’s Degree in Accounting and earned the CPA Indonesia
certificate.
Mutia Nandika 40
Director
(Independen
t)
Ms Nandika has been the company’s Independent Director since 2016. Previously, she served as the
Country Industry Head of Google Indonesia from March 2013 until October 2015; as Marketing
General Manager of PT Surya Citra Televisi from November 2012 until February 2013 and as
Education Lead In PT Microsoft Indonesia from August 2010 until October 2012. Besides, she
served as Sales Manager and News Producer and Reporter in PT Rajawali Citra Televisi Indonesia
from 2002 until 2010. She obtained her Bachelor's
Degree in Politic & Social Sciences from Catholic University of Parahyangan, Bandung, Indonesia.
Source: Company Data, . Morgan
Investment Thesis, Valuation and Risks
PT Surya Citra Media, Tbk (Overweight; Price Target: Rp1,340)
Investment Thesis
We have an Overweight rating on SCMA with a Dec-20 PT of Rp1,340. Our bull
thesis is premised on: (1) unlocking of value from the digital media assets (especially
the OTT platform ) to ride on the fast-growing digital ad pie; (2) unlocking
of value from the content business, via IEG (Sinemart, Screenplay), by diversifying
the revenue stream away to non-TV third parties such as cinemas and Netflix; and (3)
the recently-formed collaboration with long-time competitor MNC Group lowering
the discount pressure from advertisers and eventually improving TV rate card
momentum.
Valuation
We use a sum-of-the-parts (SOTP) methodology to value SCMA and assign a Dec-
20 PT of Rp1,340. We expect the TV business to still generate bulk of the SOTP at a
60% weighting (11x 2020E PER), followed by content at 18% (15x EV/EBITDA),
OTT at 17% (USD10/MAU), net cash 3% and other businesses (billboard, online
platform) making up the remaining 2%. We apply a 20% discount to the SOTP to
take into account execution risks in the new/digital media businesses.
Risks to Rating and Price Target
Downside risks to our rating and price target include: (1) deteriorating
macroeconomics, leading to softer GDP growth and a weak ad spend environment;
(2) failure to execute on OTT and content businesses in line with our expectations;
(3) declining TV audience shares due to greater competition; (4) regulatory risks,
especially involving TV broadcasting licensing; and (5) failure to execute on the
recently-formed collaboration with competitor MNC Group, lower discount pressure
and improve the rate card momentum.
Surya Citra Media: Summary of Financials
Income Statement
Revenue
FY17
A
4,454
FY18
A
5,002
FY19
E
5,486
FY20
E
6,130
FY21E
6,960
Cash Flow Statement
Cash flow from operating activities
FY17
A
1,615
FY18
A
1,648
FY19
E
1,085
FY20
E
1,455
FY21
E
1,54
1
COGS (1,835) (2,157) (2,632) (2,948) (3,331) o/w Depreciation & amortization 150 159 175 192 211
Gross profit o/w Changes in working capital (83) (13) (343) (280) (357)
SG&A (840) (906) (1,087) (1,218) (1,376)
Adj. EBITDA 1,922 2,096 1,941 2,157 2,465 Cash flow from investing activities (958) (193) (375) (392) (411)
D&A (150) (159) (175) (192) (211) o/w Capital expenditure (877) 0 (200) (200) (200)
Adj. EBIT 1,772 1,938 1,767 1,965 2,254 as % of sales % % % % %
Net Interest (1) 22 5 5 (5)
Adj. PBT 1,782 1,969 1,772 1,970 2,249 Cash flow from financing activities (878) (859) (750) (803) (892)
Tax (464) (494) (443) (492) (562) o/w Dividends paid (848) (804) (891) (803) (892)
Minority Interest 14 10 10 10 10 o/w Shares issued/(repurchased) 0 0 158 0 0
Adj. Net Income 1,331 1,485 1,339 1,487 1,697 o/w Net debt issued/(repaid) (140) (50) (17) 0 0
Reported EPS Net change in cash (221) 596 (40) 260 238
Adj. EPS
Adj. Free cash flow to firm 739 1,631 881 1,251 1,345
DPS y/y Growth (%) % (%) % %
Payout ratio % % % % %
Shares outstanding 14,622 14,622 14,769 14,769 14,769
Balance Sheet FY17A FY18A FY19E FY20E FY21E Ratio Analysis FY17A FY18A FY19E FY20E FY21E
Cash and cash equivalents 234 830 790 1,050 1,287 Gross margin - - - - -
Accounts receivable 1,556 1,555 1,917 2,142 2,432 EBITDA margin % % % % %
Inventories 766 943 1,062 1,190 1,344 EBIT margin % % % % %
Other current assets 153 99 81 81 81 Net profit margin % % % % %
Current assets 2,709 3,427 3,851 4,463 5,145
PP&E 1,029 1,050 1,250 1,450 1,650 ROE % % % % %
LT investments - - - - - ROA % % % % %
Other non current assets 1,648 1,662 1,662 1,662 1,662 ROCE % % % % %
Total assets
5,386
6,138 6,762 7,574 8,457 SG&A/Sales % % % % %
Net debt/Equity NM NM NM NM NM
Short term borrowings 65 16 0 0 0 Net debt/EBITDA NM NM NM NM NM
Payables 437 486 606 679 768
Other short term liabilities 241 301 301 301 301 Sales/Assets (x)
Current liabilities 743 804 908 981 1,069 Assets/Equity (x)
Long-term debt 2 0 0 0 0 Interest cover (x) 1, NM NM NM
Other long term liabilities 0 0 0 0 0 Operating leverage % % (%) % %
Total liabilities 980 1,035 1,138 1,211 1,299 Tax rate % % % % %
Shareholders' equity 3,901 4,571 5,102 5,852 6,656 Revenue y/y Growth (%) % % % %
Minority interests 504 531 521 511 501 EBITDA y/y Growth (%) % (%) % %
Total liabilities & equity 5,386 6,138 6,762 7,574 8,457 EPS y/y Growth (%) % (%) % %
BVPS Valuation FY17A FY18A FY19E FY20E FY21E
y/y Growth % % % % % P/E (x)
P/BV (x)
Net debt/(cash) (166) (813) (790) (1,050) (1,287) EV/EBITDA (x)
Dividend Yield % % % % %
Source: Company reports and . Morgan estimates.
Note: Rp in billions (except per-share data).Fiscal year ends Dec. o/w - out of which
Media Nusantara Citra
King of the Jungle; Assume coverage at OW
We assume coverage of MNCN
