On 26 December 2018, SPH share price plunged to a record low of $2.33, a terrifying level not seen even during the dark days of The Great Financial Crisis in 2009. Given the devastating spell of run, investors must be sweating whether to run for their lives or buy on the dip.
And then there may be investors who are tempted to enter this counter on the premise that this could be a value stock in the making. For this group of investors, they must realize that fundamentally, SPH don’t make money from selling newspapers.
Traditionally, the media giant derives its revenue from selling advertising spaces. In this regard, the emerging challenges posed by social media and digital platforms are giving SPH a serious run for its monies. For SPH, revenue from print advertisements had been declining for the last few years. On this basis, whether SPH can stay relevant in this new digital economy would really depend on management’s execution in transforming its businesses to embrace digitisation. It is now or never. For sure, the management is not fighting fire with fire. Rather, the strategy is to diversify revenue sources, with a focus in property investments. I guess as an institution, SPH carries the burden of promoting literacy among Singaporeans. So I don’t see the company ditching its core media business any time soon.
Falling knife of SPH share price?
As a venerable institution, SPH share is one of the major components of Straits Times Index (STI). But then again, investors must really be careful of what they are buying into. For the past five years, SPH’s total revenue had collapsed from $1.2 billion in FY2014 to $982 million in FY2018. During this period, net income nose-dived from $404 million to $281 million. Given such alarming decline in business, why should investors risk their monies and buy SPH share?
While investors may point out that the bearish trend of SPH share price is due to the market wide sell-offs in recent weeks, it should be highlighted that SPH share price started its correction way back since 2013. When CEO Ng Yat Chung took the helm on 1st July 2017, SPH share price continued to spiral out of control, falling from $3.20 to the current $2.33. Against the backdrop of falling SPH share price, it takes a [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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