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SCMA - In Touch with the Modern World - On the Ground in J-Town

A company visit to Scma in Jakarta revealed that 2Q17 has seen a marked pick up in overall ad spend, with the fastest quarterly growth since 2012. This is being driven by local consumer players such as Wings, Kalbe Farma Tbk Pt (KLBF IJ), Mayora Indah Pt (MYOR IJ)), and Indofood Cbp Sukses Makmur T (ICBP IJ) as well as e-commerce players, such as Go-Jek, Grab and Tokopedia flush with cash from recent fund raisings. 

The "Mobile Payments War" as well as the "Transport App War" are flowing through to greater advertising spending from banks and transport related App players.

In an interesting development, the draft for the new broadcasting law points towards a retraction of any proposed ban on cigarette advertising, which will be a boon to the TV companies. The more important proposal is to increase the limit for airing adverts from 20% of airtime per hour to 30%, a 50% increase. 

Sinemart went in to lock down for a couple of months but is now back on track with a clutch of new Sinetrons being launched this week, which should provide a welcome boost to audience share. 

The movie business through Screenplay, though small currently, is expanding at a rapid pace, with Screenplay now the number three producer but has made the top grossing Indonesian big screen movies. 

The secular growth story for TV Advertising in Indonesia is alive and well, with TV advertising spend only 0.22% of GDP in Indonesia versus 0.4% in Thailand and 0.5% in Vietnam. Surya Citra Media Pt Tbk (SCMA IJ) remains the best quality proxy for this growth story. The recovery in ad spend is well and truly underway, driven by a big pick up from e-commerce players and SCMA is a direct beneficiary of this. The Sinemart acquisition has been proven to be a big success and is feeding through to audience share gains, which is turn will improve ad revenues. The company's move into the movies through Screenplay is proving to be a winner and the growth from Whisper Media is also impressive, though from a low base. According to Bloomberg consensus, the company trades on 18.8x PER for FY17E and 16.2x for FY18E PER respectively, with forecast growth of +17.6% in FY17E and +15.8% for FY18E. Surya Citra Media Pt Tbk (SCMA IJ) looks to be due a rebound. 

This insight is part of Smartkarma. For more follow this link.

This post first appeared on Smartkarma | Intelligent Investing, please read the originial post: here

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SCMA - In Touch with the Modern World - On the Ground in J-Town


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