Media Nusantara Citra (MNCN IJ, NEUTRAL, TP: IDR2,750) Company Update: EBIT Margin Widens On Lower Costs - Daily Pack 3 April 2014

FY13 core earnings were in line, but its bottomline was lower than expected from a forex loss. 4Q13 EBIT margin widened to 44.9% in 4Q13 from 34.6% in 3Q13 as opex declined to IDR978bn (-7.4% q-o-q), driven by an increase in lower-cost television programmes aired. This boosted 4Q13 earnings to IDR421bn (32.5% q-o-q) and FY13 net profit to IDR1,691bn (+2.0% y-o-y). Maintain NEUTRAL, with our IDR2,750 TP based on 20.6-19.6x FY13-14F P/Es.

¨       An improved quarter. Media Nusantara Citra's 4Q13 earnings rose to IDR421bn (32.5% q-o-q), driven by lower operating expenses which declined to IDR978bn (-7.4% q-o-q), while revenue increased to IDR1,774bn (9.9% q-o-q). This boosted FY13 net profit to IDR1,691bn (+2.0% y-o-y), which was below our/consensus expectations - at 92.3/92.2% of our/consensus full-year estimates respectively - because of IDR134bn in foreign exchange (forex) losses. However, if we exclude the forex losses, its earnings would meet our expectation.

¨       More lower-cost programmes. The main reason for the company's lower operating costs was an increase in lower-cost television programmes aired, such as mini-series dramas and talent shows. These programmes are less popular than the Barclays Premier League, although they provide better EBIT margins. It is worth noting that Media Nusantara Citra's audience share still increased to 40.1% in FY13 (vs 38% in FY12) despite the absence of English football programmes.  Management said that it was able increase its rates by 15% in 2013. On top of that, three of its drama series are in the top five drama series in Indonesia by ratings.

¨       Maintain NEUTRAL. We maintain our NEUTRAL call on the stock, with a TP of IDR2,750 based on 20.6-19.6x FY13-14F P/Es. The company targets at least 15% advertising revenue growth and an increase of 2-3% in its EBITDA in FY14 on the back of an increase in drama series and talents shows. This is higher than our estimates, as we are estimating its EBITDA margin growth to be flat in FY14. (Andrey Wijaya)

ON THE PLATTER:

Ciputra Development (CTRA IJ, BUY, TP IDR1,370) Results Review: A Faster Cash Conversion Cycle

FROM TRADING DESK: JCI today is expected to be traded at 4,858.61 and 4,928.05

MEDIA HIGHLIGHTS:

Sampoerna Agro eyes 20% revenue growth this year

Tiga Pilar set up a plantation holding company

Luxury tax on smartphone is being reviewed again

BPJS receives 600,000 registration/month

Industrial Ministry may review LCGC policy

Best regards,

RHB OSK Indonesia Research Institute