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GIC buys 3.5t rupiah ticket to the movies in Indonesia
GIC is investing 3.5 trillion rupiah (S$370 million) in Indonesian cinema operator PT Nusantara Sejahtera Raya (NSR) as the Singapore sovereign wealth fund hopes to capture a slice of Indonesia's economic growth.
The investment is intended to help NSR further anchor its market position and to prepare for the next stage of growth, GIC and NSR said in a press release.
"The investment by GIC reflects our confidence in Indonesia's long-term growth potential," said Amit Kunal, GIC's head of direct investments group for South-east Asia, private equity and infrastructure. "NSR's operational expertise and portfolio of high quality cinemas positions it well to benefit from the rapidly expanding consumer class and economic development in Indonesia. We look forward to working with the team at NSR to accelerate its presence nationally and to achieve the vision of providing best-in-class cinematic experience to the country."
NSR owns the Cinema 21, Cinema XXI and The Premiere brands in Indonesia. The company operated 864 screens in 157 cinemas across 36 cities in the country as at December 2016.
The NSR investment is in line with GIC's stated long-term optimism about the region's economic prospects.
In GIC's investment report in July, the fund noted that it held more emerging market equities than a reference portfolio. About 19 per cent of the fund's portfolio was invested in emerging market equities as at March 31, 2016, up slightly from the 18 per cent allocation a year earlier.
"We have assessed that emerging market equities will benefit from the sustained structural improvements in these economies, and contribute positively to the long-term real returns of the GIC portfolio," GIC said. "We have maintained this assessment even though emerging market equities have underperformed developed market equities in recent years."
The worldwide cinema industry is expected to continue to grow over the next few years, with Asia-Pacific outpacing the global average, according to an analysis by PwC.
In a recent report, PwC estimated that the Asia-Pacific cinema business could grow at a rate of 11.8 per cent per year from US$14.2 billion in 2015 to US$24.7 billion in 2020. The expected global average is a more modest 5.8 per cent per year over the same period.
Box office sales in the region are estimated to grow at 12 per cent per year through 2020, about double the global outlook of 5.8 per cent per year. Asia-Pacific cinema advertising is expected to grow at 6 per cent every year through 2020, more than two times faster than the expected global average of 2.8 per cent.