TRIM COMPANY FOCUS. Media Nusantara Citra Propelled by middle class growth. BUY - Rp3,400. Apr 16, Initiate Coverage.

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1 TRIM COMPANY FOCUS Media Nusantara Citra Propelled by middle class growth Apr 16, 2013 N is an integrated media and broadcasting company with operations in television (FTA, Pay TV, Local TV), radio and print. It owns and operates three freetoair television stations RCTI, Global TV and TV BUY Rp3,400 Initiate Coverage Share Price Rp2,900 Sector Media Target Price Rp3,400 (18%) Prev. TP Stock Data Reuters Code N.JK Bloomberg Code N.IJ Issued Shares (m) 13,956 Mkt Cap (Rpbn) 40,473 Average Daily T/O (m) Wk range Rp3,275 / Rp1,090 Major Shareholders: PT Global Mediacom Tbk 70.0% Indonesia Media Partners LLC 5.0% Others 10.5% Public 14.5% Consensus EPS 13E 14F Consensus (Rp) TRIM VS Cons (%) (2.6) (3.3) Stock Price Main beneficiary of advertising spending prior to 2014 election Media Nusantara Citra (N) is the largest integrated media platform covering newspaper, tabloid, radio network, television, content production and distribution. The Company has the largest freetoair (FTA) television network such as RCTI, Global TV and TV. Additionally, Indonesia s advertising pie is currently controlled by television sector (69%) and we expect this fi gure will be sustained in 4 5 forthcoming years. Hence, increase in advertising spending on election in 2014 would be advantageous for N which dominates the market audience by nearly half (2012: 42%). Furthermore, our correlation and regression test reveals that N s TV revenues strongly correlate with Indonesia s nominal GDP (R2: 96.2%). Hence, as we expect Indonesia s 2013 GDP to reach USD265.8bn (+6% YoY), we believe N s 2013 TV revenues (regression based) to reach Rp6.2tr (+21.8% YoY), contributing 86% of FY13 total revenues of Rp7.2tr (+15.5% YoY). Moreover, Indonesia s rising GDP per capita would support increase in TV penetration rate going forward from currently around 58%. Drama programs supporting growth from TV advertising In 2012, N generated 60% of TV revenues from drama (sinetron) section while sport section contributing 15% to 2012 TV revenues. These two sections were the mostviewed TV programs in 2012 while we believe sinetron and sport sections would remain the mostviewed TV programs in the next 4 5 years. Huge content library which are ready to be monetized N has content library (the previously aired programs) of more than 120,000 hours which has been increasing by more than 15,000 hours annually. Besides the 3 regional TV, N will launch local TV under Sindo TV in several cities. N aims to generate additional 38 local TVstations this year. Unlike national TV, local TVstation has the license to only broadcast in one city. With N s large content library, Sindo TV would have the opportunity to optimize this content library to generate additional revenues with insignifi cant additional costs. We note that N s content library have been reaired in N s paytv sister company, Skyvision. Initiating coverage with a BUY rating and TP of Rp3,400 Based on our DCFvaluation (WACC: 11.3%), we set target price (TP) of Rp3,400/ sh for N (18% potential upside). Our TP implies 21.3x 2013 P/E and 14.6x 2013 EV/EBITDA. We put a BUY recommendation on N due to; 1) solid 2013 net profi t growth of 15% YoY, 2) 2013 debt ratio improvement to 6.8%. 3) strong EBITDA growth of 25% per annum in on the back of Indonesia s increasing middle class population. Forecast & Rating 3,500 2,500 1, /13/2012 6/13/2012 8/13/2012 Volume 10/13/ /13/2012 Price 2/13/2013 4/13/ ,000, ,000, ,000, ,000,000 50,000,000 Net Profi t (Rpbn) 1,070 1,658 1,903 2,355 2,927 EPS (Rp) EPS Growth (%) DPS (Rp) BVPS (Rp) P/E (x) Div Yield (%) Rovandi rovandi@trimegah.com

2 TRIM Company Focus Apr 16, 2013 In Indonesia would have the largest net adspend growth Asia Pacific net adspend ( E) (USDbn) Japan Source: Media Partner Asia 28 China Australia 2011 (LHS) 2013F (LHS) Growth (RHS) Korea India 27.8% Indonesia HongKong Taiwan New Zealand Philipines 40.0% 30.0% 20.0% 10.0% 0.0% 10.0% 20.0% 30.0% Television holds the largest market share in media advertising, while N holds the largest TV audience market share RCTI, TV and Global TV cover all audience class with the largest combined market share Media advertising market share, 2012 Newspaper r, 20.7 Internet, 3.6 Magazine, 2.9 Radio, 1.5 Source: Company, TRIM Research, Media Partner Asia Indonesia s major TV Group Station Audience shares 2012 (%) Others, ANTV Metro TV 2.2 7% RCTI 3% 2% TV One 21% 4% Television, 69.1 Audience Class Television audience market shares, 2012 IVM 8% Trans 7 15% TransTV 9% Main contents N 42% SCTV 13% Global TV 6% TV 15% Others programs 21.0 ABC 15+ Sinetron, Sitcom, Sports Reality Show, Local fi lm Religious sinetron, Local Public information, N TV 15.0 CDE 15+ music Entertainment Nickelodeon, MTV VIA Global TV 5.5 BC 5+ Teen Program (Viatcom JV), F1 racing EMTK SCTV 13.2 ABCD 15+ Sinetron FTV, Sitcom News, Entertainment 8.1 BCDE 15+ Sinetron foreign, Reality Show, Film News, Entertainment CT Group TRANS 15.0 ABC ABC 15+ Variety Show, Film, Comedy Sports, Reality show, News Sinetron, News News, Entertainment VIVA ANTV 6.9 ABCD 5+ Lifestyle, Family, Children, Sports TV one 3.6 ABC 15+ News, Sports Comedy, Film Current Affairs, Documentary Others Metro TV 2.7 AB 15+ News, Talk show Documentary Source: Media Partners Asia, Company Target audience based on social economic class A Up middle class C Below middle class E Bottom class B middle class D Below class 2

3 TRIM Company Focus Apr 16, 2013 N holds 7 drama series on the top10 list by rating Top10 drama series No Top 10 Drama Series in 2012 Station Rating Share 1 Tukang bubur naik haji the series RCTI Tendangan si madun TV Si biang kerok cilik SCTV Separuh Aku RCTI Sinar bening berlian RCTI Fathiyah TV Love in paris SCTV Tendangan si madun Season 2 TV Raden Kian Santang TV Tutur Tinular Indosiar Source: Company The Largest Integrated Media Company in Indonesia N s ownership and subsidiaries UOB Kayhian (Hongkong) Ltd 12.7% Bhakti Investama Tbk 52.3% 7.% Public 14.5% Others 10.5% Global Mediacom Tbk 70.0% 0% Indonesia Media Partners LLC 5.0% FreeToAir TV Content Sindo Media Others RCTI TV Global TV Pictures Star Media Nusantara Local TV Network Tabloid & Magazine Radio Channels Newspaper Networks National & Regional Radio News Portal More channels will be added Content library contains more than 120,000 hours and increasing by more than 15,000 hours per year Sindo Weekly Source: Company, TRIM Research 3

4 TRIM Company Focus Apr 16, 2013 N s TV revenues strongly corelates with Indonesia s nominal GDP Indonesia s GDP N s TV revenues, N Revenue (Rpbn) 6,000 5,000 4,000 y = x R 2 = ,000 5,000 6,000 7,000 8,000 9,000 Indonesia nominal GDP (Rptr) Source: TRIM Research N is estimated to continue to book high EBITDA growth... N s EBITDA, ,000 6,000 EBITDA F CAGR 2013E 2017F 25% 5,299 6,591 (Rpbn) 5,000 4, CAGR % 1,254 1,681 2,275 2,730 3,411 4,255 Source: TRIM Research E 2014F 2015F 2016F 2017F...which will support solid earnings growth of 24% CAGR in period N s Net profit, (Rpbn) 5,000 4,500 4,000 3,500 2,500 1, CAGR % Net profit F 1,070 1,658 CAGR 2013E 2017F 24% 1,903 2,355 2,927 3,637 4, E 2014F 2015F 2016F 2017F Source: TRIM Research 4

5 TRIM Company Focus Apr 16, 2013 N s 2013 PE is lower than the sector s average, implying ample room to grow Comparison media sector in Indonesia M. Cap YTD P/E (x) P/BV (x) ROE (%) Div. Y (%) EPS Stock Price (Rptr) (%) Sector * 4, N 2, SCMA 2, VIVA n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a EMTK 6, MSKY 2, (7.4) IDKM 1, Source: TRIM Research, Bloomberg *) Ex VIVA (no consensus estimate) 5

6 TRIM Company Focus Apr 16, 2013 Income Statement (Rpbn) Revenue 5,390 6,266 7,239 8,715 10,501 % growth Gross Profi t 2,773 3,409 4,045 4,940 6,035 Opr Profi t 1,581 2,215 2,660 3,329 4,160 EBITDA 1,681 2,275 2,730 3,411 4,255 % growth Net Int Inc/(Exp) (91.3) (10.5) (20.7) (27.1) (31.1) Gain/ (loss) forex 11 (52) (52) (52) (52) Other inc/ (exp) Pretax Profi t 1,510 2,261 2,646 3,309 4,135 Tax (385) (498) (582) (728) (910) Minority Int Extra. Items Net Profi t 1,070 1,658 1,903 2,355 2,927 % growth Balance Sheet (Rpbn) Cash & Deposits Other curr asset 5,181 6,239 7,343 8,826 10,776 Net fi xed asset ,209 1,458 1,607 Other asset 1,808 1,208 1,782 1,876 2,318 Total asset 8,798 8,961 11,164 13,087 15,684 ST debt Other curr liab 1,083 1,174 1,736 1,809 2,110 LT debt Other LT Liabs Minority interest Total Liabilities 1,964 1,663 2,247 2,354 2,691 Shareholders Equity 6,834 7,298 8,917 10,733 12,993 Net (debt) / cash Total cap empl 5,070 6,051 6,817 8,475 10,273 Working capital 4,098 5,065 5,607 7,017 8,666 Cash Flow (Rpbn) Net Profi t 1,070 1,658 1,903 2,355 2,927 Depr / Amort Chg in Working Cap 2, ,507 1,705 Others (2,683) (1,062) (726) (1,987) (2,167) CF's from oprs 682 1,383 2,090 1,956 2,562 Capex Others (747) (506) (1,809) (1,841) (2,457) CF's from investing (632) (420) (1,507) (1,322) (1,840) Net change in debt (766) (117) Others 474 (1,156) (284) (539) (667) CF's from fi nancing (292) (1,273) (282) (537) (665) Net cash fl ow (242) (309) Cash at BoY Cash at EoY ,131 1,024 1,040 Free Cashfl ow 797 1,470 2,392 2,476 3,178 Key Ratio Analysis Profitability Gross Margins (%) Opr Margins (%) EBITDA Margins (%) Net Margins (%) ROAE (%) ROAA (%) Stability Current ratio (x) Net. Debt/Equity (x) (0) (0) (0) (0) (0) Int. Coverage (x) (12) (58) (70) (88) (109) Efficiency A/P days A/R days Inventory Days Interim Result (Rpbn) 4Q11 1Q12 2Q12 3Q12 4Q12 Capital History Date Sales 1,478 1,316 1,730 1,417 1,803 Gross Profi t Operating Profi t Net profi t Gross Margins (%) Opr Margins (%) Net Margins (%) Jun07 Rp900 6

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