NOMURA Global Market Research
Indonesia strategy: Outlook 2016 – Time for the big push
Release Date: December 10 2015
Navigating well in choppy waters
Our key pick in ASEAN media
We reaffirm Buy on SCMA and our IDR3,450 target price, which are based on: (1) A good operational outlook. 4Q15F should be another strong quarter (10%+ y-y revenue/ EBITDA growth) driven by the return of its top FMCG customer. For 2016F too, we expect some recovery in the market adspend, and SCMA stands to benefit from it – our house view is for a more constructive macro, which along with Indonesia’s strong fundamentals should bode well; (2) Reasonable viewership trends – notwithstanding some recent volatility, SCMA remains #2 with 31% prime-time share; (3) Strong balance sheet – net cash with negligible FX exposure; (4) Solid profitability (50% margins), and ROIC profile (50%); and (5) Valuations are at around a 10% discount to its own history, plus it pays a 3% yield.
2016F – key things to watch out for
On viewership – like 2015, MNCN’s dominance should remain intact next year, we think, while SCMA is likely to remain a close #2. We expect SCMA’s focus to be on maintaining robust and consistent viewership on SCTV (60%+ of its revenues), while IVM’s trends will likely be volatile.
Growth in online media to remain strong, but we still see limited risks for cannibalization of TV adspend. This is driven by TV’s wider reach (70% penetration), and TV companies’ expertise around local content.
Digitisation – the much-awaited broadcasting law could be showcased in the coming months, which would pave the way ahead for launch of digitisation. The market landscape could transform depending on how open the new law will be in welcoming new entrants.
Forecasts summary, and valuation
Following 7% revenue growth in FY15F, we estimate 6% growth next year, with 1pp margin recovery to 51% given its focus on content costs. This leads to revenue / EBITDA / EPS CAGRs of 8-11% over FY14-17F.