Television remains the dominant advertising medium in Indonesia, accounting for about 60 to 65 percent of total advertisement expenditure. This is despite the fact that online platforms like Google, Youtube and Facebook are slowly growing their shares in the domestic advertising market.

TV has the deepest audience penetration at more than 90 percent of Indonesian households. Consequently, demand from fast-moving-consumer-goods (FMCG) companies for its advertising slots stays strong, as they seek to promote their products.

Based on our data compiled from listed media groups, TV advertising spending rose by 3 percent year-on-year (yoy) in the second quarter of this year, up slightly from 2 percent recorded in the first quarter, although weaker than the average growth of 8 percent seen throughout 2016.

This was caused by overall weak sales growth at FMCG companies, which account for 75 percent of national advertising expenditure, as consumer purchasing power was notably weaker than expected.

Furthermore, some of the corporate advertisers were still feeling the impact of the political overhang from volatility triggered by the Jakarta gubernatorial election in February and April as well as the blasphemy-related legal case involving former Jakarta governor Basuki “Ahok” Tjahaja Purnama.

Given the soft advertising expenditure, it is all the more important for TV broadcasters to step up efforts to improve their content quality in order to expand their audience market share, and eventually their bottom line.

Indonesia’s four biggest media groups, namely Hary Tanoe’s MNC Group, Eddy Sariaatmadja’s Emtek Group, Bakrie’s VIVA Group and Chairul Tanjung’s Trans Group, control more than 90 percent of the TV audience nationwide via their multiple TV stations.

From January to August, MNC Group via PT Media Nusantara Citra (stock ticker: MNCN), grabbed 34.4 percent of all-time TV audience share through three main national free-to-air TV stations, namely RCTI, MNC TV and Global TV, making it the market leader.

Emtek Group via PT Surya Citra Media (stock ticker: SCMA) came in second place with a 27.2 percent all-time audience share, relying on its two TV stations, SCTV and Indosiar.

VIVA Group via PT Visi Media Asia (stock ticker: VIVA) ranked third, with a 21.3 percent all-time TV audience share through its two TV stations, ANTV and TV One.

Trans Group emerged as the fourth-biggest group, claiming a 14 percent all-time audience share on the back of Trans TV and Trans 7.

Soap operas, locally known as sinetron, remain the bread and butter content for Indonesian TV. The two major TV broadcasters with a strong foothold in the sinetron segment are RCTI (under MNCN) and SCTV (under SCMA).

RCTI’s sinetron content is now mostly supplied by an in-house company called MNC Pictures, while SCTV’s sinetron content derives from a newly-acquired production house called PT Sinemart Indonesia, which used to be RCTI’s main content supplier from the early 2000s to earlier this year.

The other TV stations have their own core strengths. Indosiar, for instance, is well known for good programs on dangdut musical talent search, while ANTV’s popularity is boosted by Bollywood drama.

Global TV depends largely on Hollywood and box office movies, while other channels, like TV One and Metro TV, are known for their extensive news coverage.

In August, Indonesia’s most popular program was a local comedy sinetron at RCTI titled “Dunia Terbalik”, which translates to Upside-Down World. It has been the number one show since earlier this year and a great success for MNC Group.

Another popular sinetron, consistently ranked in the top 10 daily shows since February, is SCTV’s “Anak Langit”, literally meaning “Sky Kid”.

It is also interesting to note that ANTV recently diversified its primetime content lineups from back-to-back Indian dramas to include two local sinetron.

Their new shows, “Jodoh Wasiat Bapak” and “Kecil Kecil Mikir Jadi Manten,” have shown strong ratings since June and have significantly boosted ANTV’s audience share since then.

We have an overwight view on the Indonesian media sector, as we believe the worst is over with valuations now standing at attractive levels after significant underperformance against the index year to date.

We are optimistic that consumer purchasing power will recover from the second half of this year onwards, eventually translating into better sales for FMCG companies and creating positive sentiment for advertising spending.

Our top stock pick is Surya Citra Media (SCMA) with a buy rating and a target price of Rp 3,030 (23 US cents). This is followed by Media Nusantara Citra, also with a BUY rating, and target price of Rp 2,000.
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The writer is the acting head of equity research at PT Bahana Sekuritas