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Danareksa Equity Snapshot - SCMA 30 Mei 2018
May 30, 2018 10:02

Surya Citra Media (SCMA IJ)

Big jump in 1Q18 advertising revenues

SCMA’s 1Q18 revenues and net profits are inline, both numbers reaching 22.6% of our full year forecasts. SCMA’s 1Q18 revenues are up an impressive 15.0% yoy, mainly thanks to higher advertising revenues. While the EBIT margin improved slightly in the period mainly on the back of efficiencies in salaries and allowances expenses, the gross margin was compressed due to higher program and broadcasting expenses. In the media sector, SCMA is our top pick.


In-line 1Q18 revenues and bottom line. The 1Q18 net profits reached IDR359bn, +19.3% yoy and +51.1% qoq, or reaching 22.6% of our full year forecast, in-line, and 20.6% of the consensus. At the top line, SCMA booked revenues of IDR1.2tn, +15.0% yoy and +12.4% qoq, or reaching 22.6% of our full year forecast and the consensus, in-line. Revenues from advertising were up sharply by 15.1% yoy and 9.7% qoq in 1Q18 to IDR1.4tn thanks to: 1) larger overall adex in 1Q18 mainly from local FMCG players and e-commerce companies, and 2) SCMA’s higher audience share in 4Q17 that improved SCMA’s bargaining power to increase its blended net rate card in 1Q18 compared to the previous year.


Slightly better EBIT margin despite gross margins compression in 1Q18. The 1Q18 gross margin narrowed slightly to 58.2% (1Q17: 59.4%; 4Q17: 52.9%), mainly on the back of slightly higher program and broadcasting expenses, especially related to Liga Dangdut that aired on IVM in 1Q18. On a positive note, however, the 1Q18 EBIT margin of 40.5% was still higher than it was last year (1Q17: 40.3%; 4Q17: 40.0%), mainly owing to efficiencies in salaries and allowances expenses. Meanwhile, SCMA recorded an IDR4.8bn share of profits from associated companies in 1Q18 (1Q17: no share), coming from: 1) Whisper Media Pte. Ltd (1Q18: IDR9.6bn of net profits); 2) PT Satu Indonesia Film (1Q18: IDR1.8bn of net losses); and 3) PT Whisper Media (1Q18: IDR0.02bn of net profits), in which companies’ SCMA owns 50% stakes.


SCMA is our top pick in the sector; maintain BUY with an unchanged TP of IDR3,100. We will provide further details after the earnings call on Wednesday morning (30/05/2018). Post the release of the 1Q18 results, we maintain our BUY call on SCMA with an unchanged TP of IDR3,100, implying 28.5x P/E 2018F, slightly below its +1sd of 29.4x P/E 2018F. At the current level, we think SCMA shares have significant upside. The risks to our call include: 1) audience share stagnating, 2) higher content and operating costs, and 3) stiffer competition.


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