Great year as expected. FILM posted a revenue of IDR 54 billion in 4Q22 (-24.4% yoy, -49.6% qoq), IDR 17 billion of which came from cinema revenue (+44,988% yoy, -72.5% qoq). The qoq drop in cinema revenue was mainly caused by the high base effect from the record-breaking ‘KKN Di Desa Penari’ released in 3Q22. Meanwhile, the company’s EBITDA fell considerably in 4Q22 (IDR 20 billion; -63.1% yoy, -73.2% qoq) due to higher S&M expenses spent by the company to promote its new movies. Cumulatively, FILM managed to book a revenue of IDR 437 billion (+71.3% yoy) and an EBITDA of IDR 321 billion (+61.2% yoy) in FY22, with an EBITDA margin of 73.4%. On its bottom line, FILM managed to triple its net profit from the previous year to IDR 160 billion, reflecting an EPS growth of +375.2% yoy.

Finding new rabbit holes. Just like Alice in Wonderland, FILM is now exploring new rabbit holes to expand its business and find new opportunities. In our opinion, the long-awaited rights issue might be the key that will unlock FILM’s potential by allowing the company to venture into new revenue streams. Should the rights issue succeed, FILM can use the funds to venture into two media business lines at once, OTT (through its own OTT platform, Mox) and FTA, with OTT as the main growth driver for the company and FTA as the cash cow. The two-pronged strategy should provide some significant upside for the company. The company is also partnering with new OTT players, such as Amazon Prime, commemorated with the launch of FILM’s exclusive series, such as Tilik and Induk Gajah, on Amazon Prime. Despite its OTT-heavy strategy, FILM has no plans to hit the brakes on its cinema business; the company has just released two movies, Bismillah Kunikahi Suamimu and Sewu Dino, to theatres, with the latter expected to beat KKN’s success.

2023 outlook. We maintain our FY23F revenue projection for FILM at IDR 690 billion (+58% yoy), supported by the strong growth of its digital business, though its cinema revenue might experience a slight decline due to the high-base effect in FY22 cinema. We also expect FILM to maintain its solid margins in FY23F, with projected GPM and EBITDA margins of 74%. On its bottom line, we project FILM to book substantial net profit growth of +75% yoy to IDR 280 billion in FY23F. Please note that we have yet to incorporate FILM’s new strategy into our model, as the strategy will largely depend on the company’s rights issue. Nevertheless, we believe FILM can continue operating at a large scale on internal cash alone, given its massive free cashflow (IDR 242 billion).

BUY, TP IDR 2,500. We reiterate our BUY rating on FILM, albeit with a lower DCF-based TP of IDR 2,500 (8.9% WACC, 5% Tg). Main Risks: Lower-than-expected cinema and digital revenue.