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Equity Research

// Result Update

Surya Citra Media

BUY

Temporary speedbumps
After having above-industry-growth in 1H14, SCMAs 3Q14 growth was
slowing down due to several internal and external factors. SCMAs
advertising revenue had a mild growth of 3.6% due to the cutdown in
adspend as a result of political tension post-election. Additionally, higher
growth in programming costs puts additional pressure to margins.
Despite the slow growth, 9M14 revenue still make up to 73% of FY14F
while Net Profit 75.2% of FY14F target. Considering the similar situation in
2013 (9M13 contributed 73.5% of revenue and 75.5% net profit), we are
confident that this years target can be achieved. We maintain our BUY
reccomendation with 12-month DCF price target of Rp4,060. We remain
bullish in our view because we believe that current situation will last for
short term and ad demand will recover due to the strong and stable
audience share of SCTV and potential upside from indosiar.

Jefrix Kosiady
Jefrix.kosiady@sucorinvest.com
+ 62-21-29960735

Page Title

November 10, 2014

Indonesia

Not the best time for strategy switching

Media
Current price

Rp3,280

Price target

Rp4,060

Upside potential

23.8%

Stock Data
Bloomberg Ticker
Outstanding share (bn)
Market Cap (Rp tn)
52 week range (Rp)
6-M Avg Value(Rp bn)
YTD Returns (%)
Beta (x)

SCMA IJ
14.6
45.8
2,410 4,200
31.2
19.2
0.9

Major Shareholders (%)


PT Elang Mahkota Teknologi

66.7

Public

33.3

Earlier in 2H14, SCMA switch revenue strategy to significantly reduce the


number of less valuable CPRP (Cost Per Rating Point) adverts and replace them
with higher value spot rate in order to monetize improvement in audience
shares. In 3Q, SCMA managed to improve average all-time audience rating to
30.3% beating MNCN at 29.8%. This new strategy has enabled them to push
higher net rate in certain slots in exchange for a drop in advertising volumes.
Additionaly, the implementation timing was not the best as political tension post
election has caused FMCG companies to tighten their advertising spending
which resulted in lower ad demand. 3Q14 revenue only grew by 3.6%, lower
than 25.1% growth in 2Q14.

Incentives weight down margin


SCMAs 3Q14 cost of programming increased 24.8% yoy owing to the new
incentives payments for succesful dramas, accounting policy change which
increased cost of programming relative to 2013 and more soccer programming
including Barclays Premier League which is denominated in USD and thus
impacted by Rupiah depreciation. In order to maintain high rating and audience
in prime time segment, SCMA introduced incentive payment to succesful dramas
to incentivise teams to keep producing best dramas. Moreover, with the new
accounting policy, amortization of drama series was increased from 70% to 90%
on the first run. Compilation of all those factors resulted in lower gross and profit
margin which stay at 58% and 41% respectively.

Still confident in TV and SCMA adspend prospects


Although the industry is facing tough challenges at the moment, TV still acts as
the best advertising medium for advertisers and thus we believe that there is
still high upside potential for the industry. Moreover, SCMAs current ad
revenue contribution consists of non-prime time contributes 60% and prime
time with the other 40%. SCTV is well known for being a strong performer in
non prime-time, proven by the numer 1 position for 7 out of the last 9 years.
Thus, with the experience in monetizing non-PT performance, followed by
strong position in PT, we believe that SCMA will have a strong growth potential.

Share Price Performance


4500

4000

3500

3000

2500

Key investment metrics

2000

1/1/2013

12/1/2013

11/1/2014

Share Performance (%)


Month
3m
6m
12m

Absolute
-17.1
2.3
30.1

Relative
-19.1
-4.2
4.1

FYE Dec (Rp bn)

FY12

FY13

FY14F

FY15F

FY16F

Revenue (Rp bn)

3,277

3,695

4,235

4,910

5,763

Net Profit (Rp bn)

1,217

1,316

1,482

1,781

2,111

NPM

37%

36%

35%

36%

37%

ROE

44%

46%

45%

45%

49%

Dividend Yield

0.9%

1.8%

1.9%

2.1%

3.3%

PE (x)

30.1

41.1

36.0

30.3

25.4

PBV (x)

13.3

18.9

16.2

13.5

12.4

Source: Sucorinvest

Surya Citra Media

November 10, 2014

Figure 1: slowdown in revenue growth


Revenue (LHS)

% YoY Growth (RHS)

1200

30%

1000

25%
20%

Rp bn

800

15%

600
10%
400

5%

200

0%

-5%
3Q13

4Q13

1Q14

2Q14

3Q14

Source: Company, Sucorinvest

Figure 2: Cost of programming increase in a higher pace due to the newly


introduced incentive program
Programming Cost (LHS)

% YoY Growth (RHS)

400

40%

350

35%

300
30%

Rp bn

250

200

25%

150

20%

100
15%

50

10%
1

Source: Company, Sucorinvest

Figure 3: Weakening gross profit and operating profit along with declining
margins due to lower ad revenue and higher programming cost
Gross Profit

Operating Income

Gross Margin

Operating Margin

900

80%

800

70%

700

Rp bn

600

60%

500

50%

400
300

40%

200

30%

100
0

20%
1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

Source: Company, Sucorinvest

Please see the back page for rating definition, analysts certification, and important disclosure

Surya Citra Media

November 10, 2014

Figure 4: SCTV manages to snatch No.1 position from RCTI in All time
audience share
SCTV

IVM

RCTI

MNCTV

GTV

TRANS

TRANS7

ANTV

TVONE

METRO

Jul-14

Aug-14

Sep-14

TVRI1

20.0%
18.0%
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Oct-14

Source: Company, Sucorinvest

Figure 5: Top-rated TV shows, 27 October 2014


Program
Station
1. Ganteng Ganteng Serigala
SCTV
2. Jodha Akbar
ANTV
3. Mahabarata
ANTV
4. Emak Ijah Pengen ke Mekah
SCTV
5. Tukang Bubur Naik Haji
RCTI
6. Diam Diam Suka
SCTV
7. Catatan Hati Seorang Istri
RCTI
8. The Adventures of Hatim
ANTV
9. Kita Nikah Yuk
RCTI
10. Ramayana
ANTV

Rating
5.1
5.0
4.7
4.4
4.4
4.2
3.6
3.4
3.2
3.0

Share (%)
18.8
18.2
18.4
21.2
16.4
18.2
15.6
12.2
13.8
13.7

Source: Rating Televisi Indonesia

SCMA 9M14 Result


(In Rp bn)
Net Revenues
Programming cost
Gross profit
Operating profit
Net profit
Gross Margin
Operating Margin
Profit Margin

Figure 6: SCMAs 9M14 result


2Q14
3Q14
YoY
QoQ

3Q13

9M13

9M14

YoY

9M14/FY14

913
319
594
457
342

1,194
347
847
663
494

946
398
547
386
288

4%
25%
-8%
-16%
-16%

-21%
15%
-35%
-42%
-42%

2,715
907
1,808
1,336
1,004

3,093
1,120
1,973
1,472
1,102

14%
24%
9%
10%
10%

73%
71%
74%
75%
75%

65%
50%
37%

71%
56%
41%

58%
41%
30%

-11%
-18%
-19%

-18%
-27%
-26%

67%
49%
37%

64%
48%
36%

-4%
-3%
-4%

Source: Various sources

Please see the back page for rating definition, analysts certification, and important disclosure

Surya Citra Media

November 10, 2014

Financial summary
Incom e Statem ent (Rp bn)

2012

2013

2014F

2015F

2016F

Revenue

3,277.3

3,694.7

4,234.5

4,910.3

5,762.8

Cost of sales

1,026.5

1,285.1

1,570.5

1,821.1

2,137.3

Gross Profit

2,250.7

2,409.7

2,664.0

3,089.2

3,625.5

Operating expenses

609.0

650.9

714.2

791.4

885.5

Operating Incom e

1,641.8

1,758.8

1,949.8

2,297.9

2,740.0

Interest expense
Net Non-operating loses (gains)
EBT
Income Tax Expense
Net Profit
Balance sheet (Rp bn)

76.7

46.8

41.4

(42.8)

(52.1)

(77.9)

36.2
(125.6)

31.0
(120.3)

1,607.9

1,764.1

1,986.4

2,387.3

390.6

448.1

504.6

606.4

718.8

1,217.2

1,316.0

1,481.8

1,780.8

2,110.6

2012

2013

2014F

2015F

2,829.4

2016F

Cash and equivalent

1,065.8

1,043.3

1,233.2

1,574.0

1,571.4

Receivable

1,002.9

995.3

1,140.7

1,322.8

1,552.4

Inventories

267.4

374.6

457.8

530.9

623.1

Net Fixed Assets

732.8

755.6

863.6

963.6

1,055.8

3,837.5

4,010.2

4,568.2

5,305.0

5,769.3

190.3

197.6

241.5

280.1

328.7

Total Assets
Accounts Payable
ST Borrow ings

0.6

1.5

LT Borrow ings

501.2

449.0

398.3

348.3

298.3

Total Liabilities

1,189.0

1,220.7

1,296.1

1,389.4

1,520.1

Total Equity

2,648.4

2,789.5

3,272.1

3,915.7

4,249.2

Net Debt (cash)


Cash Flow (Rp bn)
NetProfit
Depreciation
Change in WC
Cash From Operating Activities
Capital Expenditures
Other Investing Activities
Cash From Investing Activities
Dividend Paid
Change in LT Liabilities
Change in Equity
Others

(564.0)

(592.8)

(834.9)

(1,225.6)

(1,273.0)

2012

2013

2014F

2015F

2016F

1,217.2

1,316.0

1,469.6

1,745.8

2,079.4

79.6

87.2

92.0

100.9

109.8

1,323.0

103.3

135.1

152.6

192.5

1,299.8

1,426.5

1,694.1

1,996.7

(26.2)
(108.9)
39.4

(109.9)

(201.0)

(202.0)

(5.4)

(8.6)

(12.1)

(16.7)

(69.5)

(115.3)

(208.6)

(213.1)

(218.7)

(318.0)

(957.4)

(987.0)

(1,102.2)

(1,745.8)

507.4

(32.0)

(41.0)

(37.9)

(34.8)

74.2

(217.5)

Cash from Financing Activities

263.6

(1,207.0)

Net Changes in Cash

167.9

(22.5)

Beginning Balance

897.9
1,065.8

Ending Balance

(200.0)

(1,028.0)

(1,140.1)

(1,780.5)

189.9

340.8

1,065.8

1,043.3

1,233.2

1,574.0

(2.6)

1,043.3

1,233.2

1,574.0

1,571.4

Financial Ratios

2012

2013

2014F

2015F

2016F

ROA

32%

33%

32%

34%

37%

ROE

46%

47%

45%

45%

50%

Gross Margin

69%

65%

63%

63%

63%

EBIT Margin

50%

48%

46%

47%

48%

Net Margin

37%

36%

35%

36%

37%

D/E Ratio

19%

16%

12%

9%

7%

Net Gearing (x)

(0.2)

(0.2)

(0.3)

(0.3)

(0.3)

Interest Coverage (x)

21.4

37.6

47.1

63.5

88.5
97.0

Days receivable

110.2

97.0

97.0

97.0

Days payable

66.7

55.4

55.4

55.4

55.4

Days inventory

93.8

104.9

104.9

104.9

104.9

Dividend Payout Ratio

35%

79%

75%

74%

Dividend Yield

1%

2%

2%

2%

3%

Sales Grow th

42%

13%

15%

16%

17%

Operating Income Grow th

34%

7%

11%

18%

19%

Net Income Grow th

33%

8%

13%

20%

19%

Please see the back page for rating definition, analysts certification, and important disclosure

98%

Surya Citra Media

November 10, 2014

Sucorinvest rating definition, analysts certification, and important disclosure


Ratings for Sectors
Overweight
Neutral
Underweight

: We expect the industry to perform better than the primary market index (JCI) over the next 12 months.
: We expect the industry to perform in line with the primary market index (JCI) over the next 12 months.
: We expect the industry to underperform the primary market index (JCI) over the next 12 months.

Ratings for Stocks


Buy
: We expect this stock to give return (excluding dividend) of above 10% over the next 12 months.
Hold
: We expect this stock to give return of between -10% and 10% over the next 12 months.
Sell
: We expect this stock to give return of -10% or lower over the next 12 months.

Analyst Certification
The research analyst(s) primarily responsible for the preparation of this research report hereby certify that all of the views
expressed in this research report accurately reflect their personal views about any and all of the subject securities or issuers. The
research analyst(s) also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific
recommendations or views expressed in this research report.

Disclaimers
This document has been prepared for general circulation based on information obtained from sources believed to be reliable but we
do not make any representations as to its accuracy or completeness. PT Sucorinvest Central Gani accepts no liability whatsoever
for any direct or consequential loss arising from any use of this document or any solicitations of an offer to buy or sell any securities.
PT Sucorinvest Central Gani and its directors, officials and/or employees may have positions in, and may effect transactions in
securities mentioned herein from time to time in the open market or otherwise, and may receive brokerage fees or act as principal
or agent in dealings with respect to these companies. PT Sucorinvest Central Gani may also seek investment banking 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.

Please see the back page for rating definition, analysts certification, and important disclosure

Sales office & research

Surya Citra Media

November 10, 2014

PT SUCORINVEST CENTRAL GANI


Tangerang
Ruko PDA No.9, Gading Serpong
Tel
: 021 5421 0990
Fax
: 021 835 8037

Head Office
Equity Tower, 31st Floor
Jl. Jend Sudirman Kav. 52-53
Jakarta 12190 Indonesia
Tel
: (+6221) 2996 0999
Fax
: (+6221) 5797 3937

Bogor
Komplek Ruko V Point
Jl. Pajajaran Blok ZG, Bogor 16144
Tel
: 0251 835 8036
Fax
: 0251 835 8037

Jakarta
Ruko Puri Niaga 1 Blok K7 / 3T
Jl. Puri Kencana, Jakarta Barat 11610
Tel
: 021 582 3117
Fax
: 021 582 3118
Wisma 77 Lt.17
Jl. Letjend S. Parman, Jakarta Barat 11410
Tel
: 021 536 3033
Fax
: 021 5366 2966
Ruko Pluit Village (Mega Mall Pluit) no. 30
Jl. Pluit Indah Raya, Jakarta Utara 14450
Tel
: 021 6660 7599 ; 021 6660 7607
Fax
: 021 6660 7610
Ruko Mangga Dua Square Blok F no. 39
Jl. Gunung Sahari Raya, Jakarta 14420
Tel
: 021 2961 8899
Fax
: 021 2938 3525
Ruko Inkopal Block A No. 23 A
Jl. Boulevard Barat Raya, Jakarta 14240
Tel
: 021 4585 9115
Fax
: 021 4585 9227
Universitas Pancasila
Jl. Srengseng Sawah, Lenteng Agung
Jakarta Selatan 12640
Tel
: 021 787 3711

Surabaya
Jl. Trunojoyo no.67, Surabaya 60264
Tel
: 031 563 3720
Fax
: 031 563 3710

Bandung
Ruko Paskal Hyper Square Blok B No.47
Jl. Pasir Kaliki No. 25 27, Bandung 40181
Tel
: 022 8778 6206
Fax
: 022 8606 0653

Jl. Slamet no. 37, Surabaya 60272


Tel
: 031 547 9252
Fax
: 031 547 0598
Ruko Pakuwon Town Square AA2-50
Jl. Kejawen Putih Mutiara, Surabaya 60112
Tel
: 031 5825 3448
Fax
: 031 5825 3449

JL.Hegarmanah No.57 Bandung


Tel
: 022 203 3065
Fax
: 022 203 2809

Bali
Jl. Raya Puputan Renon No.60C,
Denpasar 80226
Ph
: 0361 261 131
Fax
: 0361 261 132

Yogyakarta
Jl. Poncowinatan No. 94, Yogyakarta
Tel
: 0274 580 111
Fax
: 0274 580 111
Universitas Ahmad Dahlan
Jl. Kapas IX, Semaki, Umbulhardjo
Tel
: 0274 717 0048
Malang
Jl. Jaksa Agung Suprapto No.40 Kav. B4,
Malang
Tel
: 0341 346 900
Fax
: 0341 346 928
Universitas Merdeka
Jl. Terusan Dieng No.59, Malang 65146
Tel
: 0341 580 900

Research
1. Andy Wibowo Gunawan
2. Michele Gabriela
3. Achmad Yaki
4. Inav Chandra
5. Jefrix Kosiady

Kediri
Universitas Nusantara PGRI
Jl. KH Ahmad Dahlan 76, Mojoroto,
Kediri 64112
Tel
: 0354 741 7352

Equity Analyst
Equity Analyst
Equity Analyst
Equity Analyst
Equity Analyst

Ext

Email

103
229
277
225
215

andy.gunawan@sucorinvest.com
michele.gabriela@sucorinvest.com
yaki@sucorinvest.com
inav.chandra@sucorinvest.com
jefrix.kosiady@sucorinvest.com

Please see the back page for rating definition, analysts certification, and important disclosure