Singapore Press Holdings under threat as advertising revenue dwindles

Its core media business is at risk.

Singapore Press Holdings' core media business is under threat from dwindling advertising revenue, which could more than offset gains from its property portfolio.

Analysts note that total advertising expenditure in Singapore declined 6% year-on-year in 1HFY15. Advertisements make up 58% of the group’s revenue.

SPH's media revenue fell 7.1% year-on-year in the second quarter to $202.8m. Advertisement revenue saw a 9% year-on-year drop while circulation revenue declined 7% year-on-year.

“Key factors that led to the decline in adex include the anti-corruption drive in China, strengthening of the S$ against ASEAN currencies, which hit luxury spending by Indonesians in Singapore and prompted Singaporeans to spend overseas and few property launches,” noted CIMB analyst Jessalyn Chen.

Chen further noted that SPH will have to grapple with intensifying headwinds from lower newspaper circulation, declining demand for advertisements, rising labour costs and lower rental reversion at its retail malls.

“SPH’s core media business is likely to languish further amid a modest economic outlook. Both advertising and circulation revenue fell [while] average newsprint charge-out prices and monthly consumption continued to slide,” added Wei Bin of Maybank Kim Eng.

Wei stated that in light of SPH’s weak media business, Maybank Kim Eng is cutting its revenue forecasts by 2-3% for the next three years and trimming earnings per share estimates by 5-8%.