Attractive acquisition of 80% NETV with minimal cash outlay of IDR 599 bn. FILM’s purchase of NETV, an Indonesian nationwide FTA TV station, is an attractive acquisition that allows for content distribution, broader viewership and potential venture into the lucrative OTT business. In this regard, FILM’s growth strategy is to issue the first NPR of IDR 661.9 bn in new shares to PSG and TI, in exchange for 1.3% PSG ownership in FILM post-acquisition and TI of 0.4%. With this transaction,  FILM will acquire 75% of Newton Capital Ltd’s debt receivables in NETV  valued at IDR 661.9 bn, and will then be converted into 13.2 bn shares at IDR 25/share (pre-reverse split). This is followed by a second NPR of 781 mn shares issued for expansions, working capital requirements and purchase 19.3% of NETV’s existing shareholders (SLM, IIH, and TI). Cashwise, FILM plans to acquire 11.9 bn Series B shares of NETV for IDR 599.1 bn (USD 38.4 million), resulting in 28.7% ownership, implying IDR 50 purchase price, equal to IDR 25 pre-reverse split (current price: IDR 85). The rest of the transaction is funded by share swaps, bringing total ownership in NETV to 80%.

Plenty of synergies for growth creation in FILM and NETV going forward. With FILM now at the helm and NETV's debt-free balance sheet, operations are likely to experience significant changes and improvements in the future. The acquisition provides FILM access to directly roll out its contents through television; on the flipside, this  should boost NETV's current 1.5% audience share and raise competitiveness against other FTA players. Additionally, acquiring NETV provides FILM with strategic advantages, paving the way for potential expansion into its own OTT platform, which would broaden viewership and drive future earnings growth.

Reiterate BUY and raise TP to IDR 7,000. Given that this growth-enhancing acquisition provides positive catalysts for equity investors, we maintain our BUY call on FILM with new TP of IDR 7,000 (DCF-based), factoring the potential FY25F FTA revenue of IDR 332 bn (USD 21.3 mn) and 35% higher EBITDA margin, in line with industry average from 1.4% at present. Further upside exists as our new TP has not factored in FILM’s potential successful venture into OTT allowing for higher valuation. Downside risk: Acquisition plan is pending 50%+1 shareholders’ approval on 4 October 2024 EGM.