EQUITY RESEARCH

Media Sector Update - 12 December 2019

CIPTADANA SEKURITAS ASIA

Overweight Media
Potential collaboration on OTT contents

Sector Media MNCN and SCMA to cooperate on OTT contents

MNCN and SCMA just disclosed a joint press release regarding to their collaboration. At
Bloomberg Ticker JAKTRAD
the moment, details are still very limited. Based on the release, the strategic cooperation
Share Price Performance
is on the OTT contents, while collaborations in further media ecosystem are possible in the
future.
Last price 766.7
Impact on SCMA
SCMA will be the direct beneficiary as its OTT platform is already on stream and is
currently loss-making due to heavy content-costs. SCMA has budgeted Rp250-300 bn for
52w High/Low price 839/756 OTT contents next year. Save for the USD10 mn (Rp140 bn) for sport contents (which we
Mkt. Cap (Rpbn/USDmn) 696,348/49,668 believe will remain exclusive), room for costs saving is on the balance of Rp110-160 bn.
Assuming all these costs could be directly shared with MNCN, SCMA could save Rp55-80
3m 6m 12m
bn costs next year, translating to 4-5% upside to our current NPAT forecasts.
Absolute (%) -6.0 -4.8 -3.0
Relative to JCI (%) -3.5 -3.1 -4.2
Impact on MNCN
MNCN’s current OTT platform is RCTI+ which does not incur much cost as the contents are
mostly derived from its FTA with minimum incremental productions (behind the scene,
840 5% bloopers, and mini-quizzes). MNCN has already partnered with iQiYi (Chinese OTT player)
4%
820 3%
to develop contents-loaded OTT platform with the expected launching date on April 2020,
2% at the earliest. Given no disclosure so far on the business model and development plan;
800 1% and uncertainty on the launching date, we and Consensus still leave this business out of
0%
780 our forecasts, hence no potential upside to earnings estimates. However, the cooperation
-1%
-2% will also beneficial in smoothening MNCN’s earnings trajectory during the development of
760
-3% the platform.
740 -4%
-5%
720 -6%
Our overall take on this
We believe this is a strategic move for both companies to compete in the OTT sphere, given
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intense competitions with more-mature foreign players. Key challenge, we believe, is on

aligning each company interests for mutual benefits, while at the same time competing
JAKTRAD 1yr Rel. to JCI (RHS) against each other. A talk on possible share swap was raised before to tackle this issue,
however no details yet. Both SCMA and MNCN have a very solid content producing
capability which will be important to provide the platforms with localized and relevant
contents that could differentiate one platform with other. That said, we believe the
cooperation will be more shared-costs upon buying international or Hollywood movies to
give them a better edge in competing with foreign players’ library.

Maintain OVERWEIGHT stance for the sector; MNCN as our top pick
Gani Aside from cooperation in OTT contents, both companies are currently in talk to
collaborate further to foster growth in broader media industry. Some points in
+62 21 2557 4800 ext. 734 consideration include: 1) to set a floor price for FTA-TV rate card, 2) to standardize the
gani@ciptadana.com collection days for the industry, especially from ads agencies, and 3) to explore the
possibility in bundle sales of unoccupied airing times. Should this materialize, it will give
greater impacts to both SCMA and MNCN as FTA-TV still form c.80-85% of their respective
http://www.ciptadana.com revenue. With a better playing field on the cards, we are expecting more appetite on media
sector which will trigger re-ratings in industry. We lift SCMA’s TP to Rp1,600/share (was
at Rp1,500/share previously) as now we assign a higher target PER of 15x, at 15%
discount to regional peers of 17.7x (previously: 14x PER, at 20% discount to regional
peers). At 15x PER, SCMA still only trades at -2SD to its 5 year average. For MNCN, we lift
our TP to Rp1,875 (from Rp1,750/share) as we now assign 10.7x PER (vs. 10x previously,
maintaining c.29% discount to SCMA’s target PER). MNCN is our top pick for the sector
given its stronger earnings momentum visibility.

Exhibit 1: Sector Valuation Matrix

Bberg Mkt.Cap Last Target Upside PER EV/EBITDA ROE Yield

Ticker Rating (Rptn) Price Price pot.(%) 2019F 2020F 2019F 2020F
20F (%) 20F (%)
MNCN Buy 18.4 1,485 1,875 26.3 9.3 8.5 6.3 6.0 16.2 2.4
SCMA Buy 20.5 1,400 1,600 14.3 14.1 13.1 9.3 8.5 25.7 4.6

Source: Companies, Ciptadana

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 EQUITY RESEARCH
Media Sector Update - 12 December 2019
CIPTADANA SEKURITAS ASIA

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 EQUITY RESEARCH
Media Sector Update - 12 December 2019
CIPTADANA SEKURITAS ASIA

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