Company Results Update: Media Nusantara Citra (MNCN IJ, NEUTRAL, TP: IDR2,750) Lower 1Q14 Audience Share

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Company Results Update: Media Nusantara Citra (MNCN IJ, NEUTRAL, TP: IDR2,750) Lower 1Q14 Audience Share

1Q14 earnings came in at IDR389bn (-7.5% q-o-q) – lower than our/consensus’ expectation. This was driven by lower revenue, in line with lower total audience share that declined to 30.1% in 1Q14 (from 40.1% in FY13). We cut our FY14/15F earnings estimates to IDR1,829bn/IDR2,089bn (-5.1%/-7.5%). However, we maintain our NEUTRAL call with IDR2,750 TP based on 20.7x/18.1x FY14/15F P/Es.

¨       Weak 1Q14 earnings. Media Nusantara Citra (Media Nusantara)’s 1Q14 earnings came below our expectation, declining to IDR389bn (-7.5% q-o-q) and accounting for 20.2%/18.2% of our/consensus full-year forecasts. The lower earnings were driven by lower-than-expected revenue, which declined to IDR1,496bn (-15.6% q-o-q). Its audience share dipped to 30.1% in 1Q14 from 40.1% in FY13, causing 1Q14 advertisement revenue to be flat at IDR1,399bn (+3.8% q-o-q), despite higher rate cards. In addition, 1Q14 non-advertisement revenue declined to IDR98bn (-77.1% q-o-q). This caused EBIT margin to narrow to 35.0% in 1Q14 from 35.8% in 4Q13, although 1Q14 programme costs declined to IDR722bn (-12.6% q-o-q) while general and administrative expense (GA) fell to IDR209bn (-32.9% q-o-q). These were the main reason behind its lower q-o-q earnings.

¨       Expect better onward earnings. It said that its audience share has recovered in the second quarter, driven by new drama series Ayah, Mengapa Aku Berbeda?, as well as talent shows Junior MasterChef Indonesia and Indonesian Idol 2014 – which were recently launched in 2Q14 and posted the largest prime-time audience share. It is to be more aggressive in selling its television contents which are exclusively broadcasted by MNC Sky Vision (MSKY IJ, NR). In March 2014, MNC channels formed nine of the 20 most popular channels on the MSKY service.

¨       Lower earnings estimates. We cut our FY14/15F earnings estimates to IDR1,829bn/IDR2,089bn (-5.1%/-7.5%) on lower revenue. But we keep our IDR2,750 TP based on 20.7x/18.1x FY14/15F P/Es. The counter is trading at 20.4x/17.9x FY14/15F P/Es, ~30% discount to its closest peer, Surya Citra (SCMA IJ, Under Review). We maintain NEUTRAL call.

Best regards,

RHB OSK Indonesia Research Institute

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