DIGITAL MEDIA COMPANY VALUATION USING THE DISCOUNTED CASH FLOW METHOD CASE STUDY OF PT ARKADIA DIGITAL MEDIA TBK

• Main Author: Andrew Girsang, Yossy
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/71104
• Institution: Institut Teknologi Bandung

PT Arkadia Digital Media, Tbk (DIGI) is a digital media company with news portals such as Suara.com, Matamata.com, Mobimoto.com and Bolatimes.com, and has been listed on the Indonesia Stock Exchange since 18 September 2018. DIGI's revenue mainly comes from direct advertising (business to business), and programmatically such as Google AdSense. Due to the significant growth of internet users in Indonesia, companies and brands are starting to convert their advertising spending from conventional advertisements such as newspapers, television, and radio to digital advertisements. This trend will provide an opportunity for digital media such as DIGI to grow their revenue from year to year, and it will affect the value of the company. The author uses the Discounted Cash Flow (DCF) method to obtain the intrinsic value of DIGI shares. This method is used because the results are relevant to provide estimates of cash flows that will be generated by DIGI in the future, of course by considering risk factors that can affect the company's business strategy and financial condition. The DCF method is also suitable because it does not involve the influence factor of the performance of other companies operating in the same industry. The author's valuation considers 3 scenarios, which are the base, best and worst scenarios. In each scenario the author uses different estimation, specifically on the growth rate of revenue, and the EBIT margin of DIGI in the future. From the valuation results, the intrinsic value of DIGI in the base case scenario is Rp. 73, the best case is Rp. 169, and the worst case is Rp. 29. Based on an analysis of the 3 scenarios, DIGI's valuation range is between Rp. 25 and Rp. 110, which means that the price on June 30, 2022, of Rp. 57 is still within the range, and the author recommends investors buy DIGI shares. Investors can start to add more position in DIGI shares if in the future, its growth and EBIT margin leads to the best scenario.