We set the target price of IDR1,550 with an estimate of forward PE of

(1)

Please consider the rating criteria & important disclaimer

4Q17 outperformance succeeding in achieving the growth of 14% y

-

y into

IDR1.67 trillion in revenue.

Another to the top

-

line outperformance, its margin performance was reign

in upswing mood.

The efficiency of content and program segment

succeeded in beefing up the gross margin of 5% y

-

y

. However, the general

and administrative expense hiking by 12.7% y

-

y suppressed the bottom line

performance resulting in nudging up net margin and net profit by 0.3% y

-

y

and 6.2% y

-

y respectively.

Consistent Improvement in Local Contents

On the annual basis, the upswing in top

-

line performance was backed by

the respective growth of 46.5% and 10.4%

in content revenue and non

-RCTI ads revenue.

Through MNC Pictures, the local contents in MNCN’s TV

channels reached 90% in 2017

.

This backdrop was a logical takeaway for

a more diversified business

MNCN has as it is not reliant only on the ads revenue. The diversified

revenue sources allow MNCN to maintain its performance even though its

TV channels have no broadcasting license for such special events as World

Cup Champion and Asian Games.

Target Price of IDR1,550

We set the target price of IDR1,550 with

an estimate of forward P/E of

(2)

A Glance at MNCN

MNCN is one of Indonesia

-

based media companies with the largest number of free

-

to

-

air

TV portfolios compared to its peers. Its 4 free

-

to

-

air TV channels are RCTI, MNCTV, GTV

focusing on entertainment and iNews focusing on news and sports. Another to free

-

to

-

air

TV channels, it has 20 pay TV channels. To support its business core, MNCN has radio,

printed media, content production, content library, and talent management businesses.

Indonesia

-

based Media Industry in Asia Pacific’s Emerging Countries

Indonesia homes to the profit

-

making media industry, notably television media.

Indonesia’s large numbers of populations are key takeaway for industrialists in fast

-moving consumer goods, cigarettes, and e

-

commerce sectors to make use the television

as the main media for marketing their products. However, the paradigm shift in the

marketing medium from television to digital media is the noteworthy fact.

Indonesia’s large numbers of populations, low production cost, and low business cost are

factors contributing to the higher margin ratio of Indonesia

-

based media industry

Astro Malaysia Hold-

2,432

1,756

-

1.46%

41%

20.6%

40.0%

120.7%

12.4x

6.5%

(3)

Source: Company, NHKS research

Margin Ratios

| 2013

-

2017

Operational Performance

Quarterly Revenue (IDR bn)

| 1Q15

-

4Q17

Quarterly Net Profit (IDR bn)

| 1Q15

-

4Q17

Source: Company, NHKS research

Program and Content Expenses (IDR bn)

| 1Q15

-

4Q17

Source: Nielsen

(4)

Multiple Valuation

Forward P/E band

| Last 2 years

Dynamic Forward P/E

band

| Last 2 years

Rating and target price

Date

Rating

Target Price

Last Price

Consensus

vs Last Price

vs Consensus

05/03/2018

Buy

1,550

1,305

1,902

+18.8%

-

18.5%

Closing and Target Price

Source: NHKS research

Analyst Coverage Rating

Source: Bloomberg

Source: NHKS research

NH Korindo Sekuritas Indonesia (NHKS) stock ratings

1. Period: End of year target price

2. Rating system based on a stock’s absolute return from the date of publication