Media company Media Nusantara Citra (MNC) is expected to post good corporate earnings in 2016 on the back of Indonesia's (estimated) accelerating economic growth, relatively high TV ad prices, and its television channels - RCTI, MNC TV, Global TV, and iNews TV - through which the company commands the largest share of the free-to-air market in Indonesia. The MNC Group is controlled by Indonesian media magnate Hary Tanoesoedibjo.
The MNC Group operates in various business sectors. However, its media line-up is among its largest assets. Besides the four aforementioned free-to-air television stations, the group also owns 22 pay-TV channels as well as printed media (Koran Sindo newspaper), websites, radio channels and more.
RHB OSK Securities expects to see a 8.5 percent (y/y) jump in Media Nusantara Citra's revenue to IDR 7.3 trillion (approx. USD $522 million) in 2016 from an estimated IDR 6.7 trillion last year. Growing revenue is triggered by improving domestic economic conditions, higher income from advertisement on TV, and the company's growing market share in terms of viewers.
Improving economic conditions - according to Indonesian brokerage firm RHB OSK Securities - can be concluded from Indonesia's consumer confidence. Bank Indonesia's Consumer Confidence Index rose to 107.5 points in the last month of 2015, up 3.8 points from the preceding month. Furthermore, lower oil prices and Bank Indonesia's decision to cut its benchmark interest rate by 0.25 percent in the January policy meeting, imply that people's purchasing power is to improve. This context will have a positive impact on the performance of the MNC Group.
Regarding income from advertisement on TV, MNC is in the best position among Indonesian television operators as its RCTI channel is the leading Indonesian television channel controlling a 29.5 percent market share in December 2015. As such, it can also charge higher tariffs to advertisers. Ä peak in advertisement income can be expected in 2016 as RCTI will broadcast the UEFA Euro 2016 soccer championship. These matches are expected to attract millions of viewers (especially men) because soccer is one of the most popular games in Indonesia.
Market Share Indonesia's Top Television Operators:
|Television Station|| December 2015
|4. MNC TV||8.4|
|11. iNews TV||0.9|
Moreover, the company has completed major investments (including the development of its own studios, a move that will have a good effect on the company's profit margin) and will therefore have a stronger cash position this year. As such, it can focus on repaying its unhedged debt (worth USD $250 million) that is due in 2017.
Another Indonesian broker, CIMB Securities, is slightly less optimistic about income from television advertisement. The broker does believe income will rise in 2016 but expects it to rise in the second half of the year, not in the first half of 2016. CIMB Securities added that tough competition in Indonesia consumer products sector will bring advantage for MNC. Consumer goods firms, such as Indofood Sukses Makmur, Unilever Indonesia and many more need to engage in aggressive advertisement campaigns in order to enhance market share in their sectors. As television remains the best medium to reach a mass audience in Indonesia, TV advertising is the best way to promote products.
Future Projection Financial Performance Media Nusantara Citra:
|P/E Ratio (x)||13.5||13.2||15.7||11.8||11.2|
in billion of IDR rupiah, unless stated otherwise
Source: RHB OSK Securities