MNCN IJ - MNC Sekuritas Equity Report 06 Desember 2021

9M21 Financial Results: Everything is New Record High

Solid Performance in 9M21

• MNCN revenue increased by+18.62% YoY to IDR7.07 trillion in 9M21 (vs IDR5.96 trillion in 9M20) implying 78% of FY21E target consensus. The increase in revenue was driven by revenue from advertising, which was 95.35% of total revenue or IDR6.74 trillion (vs IDR5.52 trillion in 9M20).
• Digital advertising revenue increased significantly by +111.13% YoY to IDR1.43 trillion (vs IDR675.94 billion in 9M20). Digital advertising contributes 20.18% of total revenue in line with increasing digitization in the media sector.
• COGS increased by +31.04% YoY to IDR3.03 trillion in 9M21 (vs IDR2.31 trillion in 9M20) due to increased program and content expenses. On the other hand. On the other hand, MNCN recorded a gross profit increase of +10.76% YoY to IDR4.04 trillion in 9M21 (vs IDR3.65 trillion in 9M20).
• Net profit increased by +22.50% YoY to IDR1.68 trillion in 9M21 (vs IDR1.37 trillion in 9M20), implying 81% of FY21E target consensus.

FTA Business Remain Strong

• Advertising revenue increased significantly by +22.07% YoY to IDR6.74 trillion in 9M21. The non-digital segment is still the main contributor to the company's advertising revenue, which increased by +9.65% YoY. The Company maintains its strong growth by enhancing and focusing on its owned digital platform, RCTI+, along with the Company’s social media monetization and portals. It is expected that contribution from digital advertisement will look to grow exponentially from 2022 onwards, with the incremental addition of revenue from gaming.
• MNCN was able to maintain its performance despite the second wave of the Covid-19 pandemic, with an overall audience share of 53.6% in prime time slots and 40.8% in non prime time. MNCN managed to dominate the market share of FTA advertising spending in 3Q21 by controlling 51% market share in the industry. In terms of content programming, MNCN managed to get 18 out of 20 best programs until October-21. Management believes the company will continue to book a strong performance of their FTA TV throughout the year.
• As a strategic move, MNCN closed access to watch its programs via streaming or third-party OTT. The aim is to ensure RCTI's FTA channel as the exclusive and most watched channel in Indonesia. 

Capturing a Vibrant Digital Opportunity

• As the largest media company, MNCN seeks to optimize the online portal business line, which in 9M21 contributed 20.18% to total revenue. Going forward, MNCN expects digital revenue to be able to contribute 50% in FY24E. The growth of MNC’s social media increased significantly, Youtube and Facebook viewers increased to 51.5 billion in 10M21 (vs 38 billion in FY20).
• Furthermore, MNCN tries to expand by entering the world of e-sports in Indonesia by collaborating with the leading online game developer Garena who has 4.95mn YouTube subscribers. As an initial step in the agreement, MNCN and Garena have already organized the 4th season of the Free Fire Master League.
• Through its subsidiary, MNCN will release its first game entitled Rapid Fire in 4Q21. Currently, Rapid Fire is undergoing Close Beta Testing (CBT) before it is officially released. On the other hand, the company also cooperates with Moonton and Garena (Free Fire Indonesia) and shows a promising result. Revenue in the gaming industry is expected to exceed USD2 billion in FY21E.
• MNCN's strategy in the gaming industry is their huge social media and extraordinary business ecosystem to promote, Artificial Intelligence (AI) support from India and an online game & developer team from Korea. Currently, MNCN is also developing another game similar to Mobile Legend, namely Battle of Legend which is expected to launch in 1Q22-2Q22.
• MNCN successfully launched BuddyKu, a digital plarform whose content is from 3 different sources: MNC, other publisher content, and UGC (User Generated Content). MNCN uses AI in every digital platform including BuddyKu which is expected to have traffic due to it being the first in Indonesia.

Valuation and Recommendation: NOT RATED

MNCN is currently traded at 6.26x PE, close to its –1STD (5-years average). However, MNCN is affiliated with the Company, so we do not offer any recommendation related to company prospects. Recommendation: NOT RATED.

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