SPH's earnings to be driven by improving outlook for Singapore advertising expenditure

Adex will decline at a slower rate of 5% in FY17.

According to DBS, advertising expenditure (adex) should see improvement going forward on the back of an uptick in GDP growth.

“As such, we expect consumption to be more robust. Our economists expect private consumption in Singapore to accelerate from 0.6% in 2016 to 1.7% and 2.7% in 2017 and 2018, respectively. This should support adspend going forward, offsetting the lower year-on-year adspend in January and February 2017,” said DBS.

Here’s more from DBS:

With the improvement in economy, we turn less pessimistic on our adspend assumption. We still expect that adex in FY17F will decline, but at a slower rate, from -7% to -5%.

We noted that adex continued to disappoint in January (- 17% yoy) and February 2017 (-22%) and hence continue to see adspend growth decline but by a slower rate, offset by more positive economy going forward. We raised earnings for FY17F and FY18F by 4%.