SCMA: Followup ke Surya Citra Media (24/10/2016)

Logo SCMHi Ali, please call me Olle. I’m Swedish.

I’ve replied below in your email.

I’ve also attached some information for your review.

Best regards,

From: Ali Anto []
Sent: Friday, October 21, 2016 10:26 PM
To: Olle Wennerdahl
Subject: Re: Prospek usaha Surya Cipta Media (SCM)

Dear Mr. Wenn,

Hope you don’t mind me addressing you by short surname, is it dutch nationality?

Thanks muchly for your prompt reply and your good initiatives to elaborate on your answers. I’m amazed with how quickly you responded to my email.

Here is my followup email to your previous responses, please kindly reply when you have the time.

Quoting answer to no.1:
“This was due to the acquisition and turn around of TV network Indosiar in mid-2013, whose market position we have improved from no 6 to no 3 (overall) and to no 1 in the variety and entertainment segment, with shows such as D Academy, etc. Indosiar’s high growth, coupled with SCTV going from no 2 to no 1 in prime time audience share from April 2014 to September 2016 increased the growth rate.”

From my knowledge, broadcasting industry with advertising based revenue business model, indeed expends quicker with strategic acquisitions, and SCM is a living proof. But ofcourse much credits go to SCM’s hard works in making Indosiar a top notch FTA TV station with its unique and niche programs to offer.

Question: How do you vision SCM will become in the far future say 10 years ahead. Will it be doing the same as what it has done over the past, or do you see technology slowly forcing such business model to adapt to new changes?

It will be doing what it is doing now but with an ever increasing focus on content generation and (for new platforms) and also on monetizing its content library across all relevant platforms.

Question: Related to answers to no.4 and no. 5, is there any plan on share buybacks to futher reward existing shareholders?

No there is not.

Question: Advertising based revenue tends to be easier to predict by general economy but user fee based revenue such as movies will be harder and much depended on a series of great productions, several flops will greatly severe the company’s finances. How serious is SCM expending towards user fee based model? I’m sorry if much I know is theoritical based, but my intention really is to know better how the company operates and where it is heading.

SCM is very serious in adding this ‘new’ content revenue to the existing advertising revenue stream.

Quoting answer to no.2:
“Since Q315 local FMCG companies have increased ad spend (as IDR strengthened from 16,000 to 13,000 per USD) but multinationals such as UNVR etc have not followed suit. We expect this to remain the case for the rest of 2016. We hope that in 2017 even the multinationals will also increase budgets allowing for greater market growth. But this is not certain yet.”

Question: Are you able to disclose further, how much each industry is contributing towards SCM revenue, my asumption has always been tobacoos being in top ranks apart from f&d, also how significant is local firms ads contribution compared to multi nationals?

FMCG is about 70-80%, split almost evenly between locals and multinational.
Tobacco represents less than 10%.

Quotiong answer to no.3:
“SCTV lost share during this time period. This was caused by a corresponding increase in prime time audience share at RCTI. SCTV and rcti compete head to head in prime time sinetron space. They have outperformed at the same time as our production houses have not been performing as well as they did in the previous 2 years.

To improve we have hired new staff on the creative side and also bought shows from 3rd parties (usually we produce our own sinetron). To date this has not had the desired effect so we will continue to invest in Human Resources to regain our previous ratings.”

Question: Any exciting programs in the pipeline that might boost substantial future revenue? how about soccer leage and SEA GAME, how much will each contrubute based on past experience?

We don’t provide revenue by programs. But we have recently added European Champions League football and La Liga football (Spain)

Can you also elaborate more on contribution to revenue from different segment of ads timing? You mentioned about prime time, what else are there and briefly in terms of ℅ how each time segment contributes?

Prime time generates about 45-50% of advertising revenue. If audience share improves, this number can rise to 55% at least.

Quoting answer to no.6:
“Both of our TV licenses were renewed last Friday. Same for the other 8 national FTA TV stations. I can give more details later in a follow up email.”

Question: Can licenses in TV broadcasting serve as barrier to new entries?

Licenses are a barrier of entry to new participants, but more importantly, so is the lack of available spectrum to broadcast over. A new company needs to acquire both of these.

Can you provide more information on how licenses can benefit the company apart from have rights to air?

That’s the benefit they offer – broadcasting.

Quoting answer to no.7:
“Top line target is 8% this year. We do not provide bottom line guidance.”

Question: now we are in last quarter of 2016, do you see such target is achievable? Looking at 2Q16, seems like performance is back to previous high in 2Q15, if such trend continues, SCM is well ahead of 8℅ target, looks like double digit growth. Does that mean we should expect some set back in 3Q16 and 4Q16 results from what you have indicated?

I think we should expect top line growth of max 8% FH 2016. H112016 was 7.7%. Q3 is a little weaker than that.

That’s all I have at the moment in response to your previous answers, hope you do find some time to write back.

Mr. Wenn, if I’m to request a hard copy of SCM 2015 annual report to be mailed to my office address, is that possible, dont mind paying for courier service if you could arrange.

Happy to send. Please provide me with your address.