SPH banks on cost savings to buck dim advertising earnings
Ad revenue slipped 2% in 4QFY15.
Weak domestic spending and lower tourist arrivals have been plaguing the media organisation's advertising revenue, but it is determined to counter it through shoring up earnings.
"Our monthly page monitor of The Straits Times suggests newspaper advertising revenue (AR) contracted 2% yoy in 4QFY15 (Jun-Aug 15) vs a reported AR contraction of 9% yoy in 3QFY15," a report by UOB Kay Hian said.
"However, actual AR contraction could be larger than the 2% suggested by our page-counts (as was the case for 3QFY15)," UOB Kay Hian added.
"Thus far, SPH has managed to shore up earnings – through cost savings – despite a weak AR. We expect SPH's revenue to be flat and minimally impacted if GDP growth is within 0-3%. AR gets impacted materially when GDP growth accelerates beyond the threshold level of 3%, or decelerates into a recession," the report said.
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