Surya Citra Media: Reveals Share Buyback ($SCMA)
- A vote of confidence. The stock has continued its underperformance by falling 27.1% YTD. However, in the past two days, the company has disclosed recent share purchase transactions (Nov8-15) by $EMTK, its parent company with total transaction amounted to Rp89.5bn and average buyback price of Rp2,393/share. In total, $EMTK bought about 37.8mn of shares or 0.3% of outstanding shares, bringing its total ownership on SCMA to 60.6%, up from 60.3% as of 9M16. Though the share buyback amount is not significant, we think $EMTK sees values in $SCMA’s share price (as we do) and is investing for that reason.
- Good buying opportunity. Stock decline which came on account of poor audience share performance and recent market jitters would therefore still be good buying opportunity considering: 1) management's commitment to improve audience share footing; 2) margin improvement ahead as sport programs would not drag down performance starting next year; and 3) proven track record of in-house production capabilities. All in all, we believe the stock is attractive. We think higher shares buyback average @Rp2,393 (vs. last closing price at Rp2,260) coupled with current low audience share are worth considering for $SCMA’s accumulation on weakness.
- Reiterate Buy. Risks on the stock are weaker than expected audience share performance and potential exclusion from Shariah Index in Dec’16 due to higher income from cigarettes companies. Post exclusion from Shariah Index should provide some risk off tone on the stock as exclusion is a one-time event. We maintain our Buy rating with TP of Rp3,500. The stock is currently trading at 17.4x FY17F P/E