What a disaster for SPH share price! In my previous article in May, I wrote that SPH share price would likely to face major headwinds in the coming months. True enough, SPH share price suffered a catastrophic meltdown, falling from $2.48 on 12 July to $2.28 on 17 July. This represented a drop of 8% of SPH share price within 5 days.
Obviously, the correction of SPH share price was attributed to its dismal 3QFY2019 results. While its struggle in the media business is well-known to most Singaporeans, what caught most investors should be the startling extent of the business decline.
Operating revenue dropped 1.6% to $246 million for 3QFY2019 while net profits collapsed 44.1% to $26.2 million. The latest results marked the fourth consecutive quarterly decline. No wonder SPH share price rolled off the cliff. On the basis of the strings of poor results, it takes an ardent fan to be bullish with SPH share price.
Question among investors must be whether CEO Ng Yat Chung is the right man to lead SPH out of this ring of fire. Given that Ng Yat Chung only took over the helm in 2017, it is too premature to judge him. Usually I would give a new CEO three years to prove his mettle. However, based on the abysmal performance of SPH share price, investors’ patience must be wearing thin. Since CEO Ng Yat Chung took over, SPH share price consistently fell from $3.00 to the current $2.28 level.
What is the possibility of SPH being privatised? With the consistent fall in SPH share price, should investors run for their lives or keep faith with the Great General?
SPH share price in train-wreck
In my opinion, the outlook for SPH share price is pretty gloomy. The poor 3QFY2019 results was caused by the perennial ailing media business, which had been bruised by technology disruptions and the result of lifestyle change. People are less likely to buy printed newspaper and prefer digital media for consumption of news.
For the record, printed newspaper copies plunged to 486,063 in Q3FY2019 from 554,893 in Q3FY2018. The alarming drop in newspaper circulation is a serious concern for investors because the decline in circulation would lead to much lower confidence among advertisers, who would be less inclined to advertise with SPH. To illustrate this point, printed advertise revenue was down a whopping 12% year-on-year. Against this backdrop, it will take a herculean effort to reverse the business trend and revive SPH share price.
Despite the poor performance of SPH share price, the possibility of SPH being privatised is [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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