SPH's media earnings to be 5% weaker this year

It is unlikely to bottom in the near term.

Singapore Press Holding's media business will continually be badgered by lower ad revenues this year, UOB KayHian predicts.

To recall, total ads for its flagship newspaper fell 13.4% as advertising continued to worsen. The decline was larger than the 12.2% and 3.7% YoY decline in 2Q17 and 1Q17 respectively.

"The significant 13.7% YoY decline in page count points to larger-than-expected weakness in the media business. At the current rate, the decline in revenue is likely to be in mid-teens, instead of the low teens we had anticipated. Adjusting our earnings for this assumption results in a 5% decline to our FY17 earnings estimate," UOB KayHian said.

However, it also noted that media earnings will unlikely reach its lowest point in the near term. Whilst print revenue had always been closely tied to Singapore’s GDP change, and the sequential improvement in GDP numbers over the past few quarters should have resulted in an improvement. But, the brokerage firm noted that the correlation has diverged, pointing to greater structural forces at play.

"A bottoming of earnings for the media business in the near term remains elusive. For now, we have penned a 7.5% YoY decline in print revenue for FY18, and 5% YoY decline in FY19. Every 1ppt decline in print revenue is estimated to translate to a 3 S cent decline in our target price," it said.

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