Surya Citra Media
(SCMA IJ)
Expecting a higher rate card
For 4Q17, Surya Citra Media (SCMA) posted net profit of IDR217.9bn, falling 36% YoY
and 14.2% QoQ. Cumulative FY17 net profit was IDR1.32tr, missing our estimate (88%
achievement). The weaker-than-expected bottom line stemmed from operating
profit, which was a mere IDR1.7tr in FY17 (-11.2% YoY; 89% achievement vs. our
forecast).
We attribute the weak result to higher-than-expected operating expenses in 4Q17,
which came to IDR256.4bn (+45% QoQ, +34% YoY). This was due to: 1) higher legal
service professional fees (+48% YoY to IDR77.8bn in FY17 vs. IDR52.6bn in FY16); 2)
higher promotional expenses in October and November 2017 related to newly
produced sinetrons (causing FY17 promotional expenses to swell 86.3% YoY to
IDR16.3bn); and 3) higher amortization expenses on the intangible asset of Sinemart
(+660% to IDR49.5bn in FY17). The company stated that the amortization expense
arising from the acquisition of Sinemart is a non-cash item and will be amortized on a
straight-line basis until 2033 (IDR42bn/year, to be expensed in the fourth quarter
every year). Meanwhile, we believe the increase in promotional expenses is a one-off
factor, as the company has been able to maintain its audience share.
FY17 revenue in line with our estimate
Regarding top line, SCMA booked 4Q17 revenue of IDR1.028tr, increasing 1.9% QoQ
but declining 6.9% YoY. Cumulative FY17 net revenue was IDR4.45tr, in line with our
forecast (98% achievement). Notably, SCMA grabbed the highest all-time audience
share in December, at 31.8% (vs. MNCN’s 31.5%), due to significant gains in both
prime-time and non-prime-time audience shares. We believe 4Q17 revenue did not
yet reflect the strong audience share, as there is a lagging effect.
Upbeat on 1Q18 revenue
For 1Q18, SCMA targets decent revenue growth of at least 12% YoY on the back of
higher ad spending by large multinational, tobacco, local, and e-commerce
companies. On top of the higher demand from advertisers, we believe the company
will be able to command a higher rate card given the strong audience share gains
since mid-November; this should support revenue growth in 2018.
Reiterate Trading Buy
We raise our 2018 revenue forecast by around 4% and derived a new target price of
IDR2,980. Our target price is based on a blended calculation of 33x 2018F P/E (+1
stdev) and 10-year DCF valuation. Currently, SCMA is trading at 26x 2018F P/E, in line
with -1 stdev.
Christine Natasya
+62-21-515-1140 (ext 233)
natasya@miraeasset.co.id
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