Surya Citra Media - the most expensive in the group - CIMB Indo

The biggest risk for the Indonesia economy is oil price. Oil price has fallen by 11% in a weak reaching US$84/bbl level, reducing the pressure on fuel subsidy. It is unlikely that the government would reduce fuel subsidy, making the inflation to be under control. However, Indonesia ' s inflation has reached the bottom and is likely to go up in July/Aug due to the fasting month and Lebaran holiday. With a lower oil price, it helps the government to maintain fuel subsidy. Our economist maintain 2011 GDP growth forecast at 6.4%, believing that the sustained consumption patterns and improving investment climate will continue to be the key drivers of economic growth, although he's concerned on delays of some infrastructure projects. The global equity sell-off on concerns in US and Europe, will reason investors to take profit out of the market for the time being. Rupiah was down slightly to Rp8530/USD, but the 10 year bond remains at 6.8% level.

Surya Citra Media (SCMA IJ, Trading Sell, Rp6,200, market cap US$1,434mn) - EMTK has finalised the acquisition of IDKM and now with a 84.77% stake. We are looking at the comparison of the three related companies. IDKM's management has been replaced with the high reputable SCMA's former marketing director, heading the company. SCMA's consistence in margin expansion impresses us, but the valuations look rich after the recent outperformance. On EV/EBITDA, SCMA is the most expensive in the group with EV/EBITDA, 11-9..6x for FY11-12, compared to IDKM at 14-6.5x and EMTK at 6.2-5.1x, with the risk of disappointing 2H11 considering the decline in audience share. We estimate IDKM (market cap US$310mn)'s fair value of Rp2,000 (DCF based), and we have arrived to Rp2,600 fair value for EMTK (market cap US$1,387mn).