Judgement day for SPH?

It certainly seems like Judgement Day for SPH as the media conglomerate’s shares plunged to an 8-year low. The share price free fell to $2.95 on 18 July 2017, below the $3.00 support level. During the dark days of the Great Financial Crisis, the lowest trading price was $2.40. But hey, we are not having a major market crisis now, aren’t we?

What’s going on and what’s wrong with SPH? Should investors run for their lives?

Like fellow SGX-listed SingPost, SPH belongs to the old economy. Both are struggling to adapt themselves in the new digital era. Technology has devastating impacts on their businesses as their models are being disrupted by consumers’ lifestyle changes.

For SingPost, most companies are switching to electronic statements instead of traditional postages. Hence, SingPost is now transforming itself into an eCommerce logistics by leveraging on its existing postal networks. Similarly, SPH is facing disruptions from technology as most people switch to digital instead of printed newspaper. This is understandable as who would want to read yesterday’s news when you can receive the latest updates on the breaking news from online or through social media?

SPH

But what is shocking for investors was the massive decline seen in SPH’s advertisement revenue.

For 3Q2017, the advertisement revenue declined 21.5% year-on-year. Previous quarter witnessed decline of about 18%. This is indeed worrying for the media giant as advertisement revenue is regarded as the “bread and butter” for the company. In light of the unfolding crisis, something must be done to stem the rot.

According to the latest financial results, net profit was $23.8 million or 45.2% lower against the corresponding period last year (3Q 2016). The poor results were due to impairment charges of $37.8 million, which primarily related to the poor performing magazine business. However, the impairment charges should not be an excuse for management to justify the poor showing.

Group operating revenue slid $31.6 million or 10.8% year-on-year to $260.0 million. Specifically, the Media business saw a $34.1 million or 15.7% dip in operating revenue as advertisement revenue fell $29.2 million or 18.7% year-on-year and circulation revenue declined $4.8 million or 10.6% against 3Q 2016.

To be fair to management, SPH did [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: March 23, 2019 — 3:53 pm

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