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Danareksa Equity Snapshot - MNCN 14 Februari 2018
February 14, 2018 14:15

Media Nusantara

Unaudited top and bottom line, in-line

MNCN has booked +6.0% yoy and +5.1% yoy unaudited net profit and revenue growth in 2017, in-line with our estimate. 2017 key revenue growth driver has come from advertising and content, a result of a significant in-house production and library monetization. This has as well lowered down direct costs which further improved MNCN’s profitability in 2017. We reiterate our BUY recommendation on the stock. 

In-line top and bottom line 2017. MNCN has achieved an unaudited net profit of IDR1.45tn (+6.0% yoy) with a slight improvement on net margin at 20.5% (2016: 20.3%). This has translated to 102.3% of our estimate, IN-LINE. Meanwhile, 2017 unaudited revenue has achieved IDR7.1tn (+5.1% yoy), achieving 102.7% of our estimate, IN-LINE. This has taken into account a one off revenue from Euro Cup in 2016, if we exclude the Euro Cup revenue (IDR230bn), MNCN’s 2017 revenue grew by 8.9% yoy.

2017 key revenue growth driver: advertising and content. Advertising revenue in 2017 has increased by +5% yoy to IDR6.7tn. Meanwhile, content revenue in 2017 has increased to IDR1.5tn before elimination representing an impressive +50% yoy growth from 2016. 4Q17 revenue has significantly increased by +15.6% yoy, despite -3.5% qoq. This was a result of a significant in-house production and library monetization. MNCN’s extensive production facilities managed to improve the company’s production capacity, now almost all of the local content across MNCN’s 4 FTA (RCTI, MNCTV, GTV, and iNews) is produced by MNCN’s in-house production unit. MNC content enjoys multiple revenue streams such as pay-tv channel sales to overseas and content licensing to regional OTT players. Content holds massive potentials for growth and the management has committed to continue strengthening their content business.

Local content has lowered direct costs. Expansion of MNCN’s in-house production capacity has also resulted in a decrease in MNCN’s direct cost by -9.3% yoy, further improving MNCN’s profitability in 2017 (exhibit 5). Capex investment in the past has proven to be the right strategy. In 2018, the company will continue to strengthen its leadership in the broadcast industry by diversifying advertising revenue to include virtual, digital mobile, and build-in advertising as well as content production, library monetization, and paid-channels.

Reiterate our BUY call. We reiterate our BUY call at TP IDR1,750, implied only 11x P/E 2018F , based on -1 STD 2010-2017 P/E Band. The stock trades cheap at +9.8x P/E 2018F. Risks to our call include 1) audience share stagnating or worsening, 2) higher content and operating costs, and 2) capex overruns.

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