SPH share price in Halloween nightmare

It is a battle that SPH can ill-afford to lose. SPH share price looks set for another horrifying meltdown following the release of a set of disappointing full-year results for FY2019. The latest results marked the fifth consecutive quarterly of decline. With such financial performance, investors should brace for yet another devastating run of SPH share price.

The declining business performance and ailing SPH share price come on the back of a change in readers’ lifestyle trend and reading habits. People are less likely to buy printed newspaper and prefer digital media for consumption of news. To make matter worse, Singapore is a small market for the Media segment to grow and I don’t foresee SPH embarking on overseas acquisitions to scale up its Media segment division.

In a bid to reposition itself in the era of digital age, the Group is undergoing a massive digital transformation and is retrenching 5% of its staff from the Media segment. The retrenchment will be the second exercise under the helm of CEO Ng Yat Chung. The last retrenchment exercise was also in October when the Group announced the FY2017 full-year results.

Interestingly, in FY2017, the net profit was $395 million, an increase of 29% as compared to FY2016. Two years after the fateful retrenchment in 2017, the net profit for full-year FY2019 collapsed to $260 million, underscoring the level of decline in its media business segment. Needless to say, SPH share price had been falling against such challenging backdrop. SPH share price would have suffered a worse fate if not for the aggressive shares buy backs conducted by the management. For the financial year, 3,947,600 shares were bought back, the second highest for the past 11 years. The share buy backs provided critical support for SPH share price.

Unlike the banking sector, SPH is not really a “hire and fire” institution but the changing landscape is forcing the media conglomerate to rethink and regroup its business strategies. As a matter of fact, SPH is still hiring, albeit people with digital technology background to support its digital transformation. But question among investor must be whether SPH share price is going to see light at end of tunnel anytime soon.

SPH share price gone with the wind

It is not business as usual for SPH share price. Despite aggressive moves to diversify revenue sources through fora into the property development, student accommodation and aged home sectors, the Group revenue and net profit continued to slide. Of more concern is the decline of its media business, which recorded a year-on-year decrease of 44.6% in net profit to reach a low of $54.7 million for full-year FY2019.

As a media giant, the media segment is the core business of SPH. In view of this, the perennial ailing performance will weigh on the outlook of SPH share price. Like it or not, investors will [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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