SPH share price prime for another devastating ride

The data certainly looks grim for SPH share price. 1HFY2019 results revealed that despite aggressive efforts to revive its fortune, SPH revenue and net profits continued to free fall like no tomorrow. This is indeed puzzling because the dismal financial performance came on the back of various recent acquisitions aimed at stimulating growth.

Figtree Grove (85% stake) Shopping Centre in Australia was acquired in December 2018 for A$175million. Then M1 was delisted following the successful acquisition of all the remaining shares from the open market through SPH joint venture with Keppel, Konnectivity. UK Student accommodation portfolio added 380 beds with 2 new acquisitions for $369million. Yet despite all these moves, revenue continued to slide, rupturing the form of SPH share price in the process.

It is really mind-blowing to note that total revenue for 1HFY2019 decreased 5.2% while net profit collapsed 32% to reach $33million. With such result, it takes an ardent fan to be convinced of SPH long-term growth prospect. The disruption of the traditional newsprint business is well-known and everybody knows that SPH had embarked on a transformational journey to digitize its businesses and diversify revenue sources through property investments. But it has been more than 5 years in the work, yet total revenue plunged from $1.2billion in FY2014 to $982million in FY2018. No wonder SPH share price spiralled out of control – falling from a high of $4.00 in 2016 to the current $2.40 level.

At this rate, full-year revenue could shrink to $930million for FY2019. Dividends are likely to continue to decline as well. Against this backdrop, SPH share price should come under pressure again in the coming months. Should SPH investors bite the bullet or throw in the towel?

SPH share price in disaster

The problem for SPH share price is that it is also prone to volatility because of the company’s exposure to the property development business. Take for example, following the new property curbs announced in July 2018, SPH share price fell from a high of $2.90 and never looked back since.

In addition, the decline in SPH media revenue more than offset the revenue growth from the property and digital revenue. For instance, 1HFY2019 saw an impressive 15.3% revenue growth for the property segment but it was offset by the decline in the media segment. Print advertisements fell by 12.3% while circulation sank by 9,7%. On the other hand, digital advertisements surged by 15%.

Interestingly, SPH share price [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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