This come after SPH saw earnings tumble 45.2% to $28.9 million in for the third quarter ended May on the back of weak advertising expenditure.
Core earnings dropped 17% to $67 million, while revenue fell 11% to $260 million.
See: SPH earnings fall 45% to $28.9 mil in 3Q
“Online disruption continues to dampen the core media business, which is resulting in falling ROE as well as a lower earnings and DPS outlook,” says Yeo. “Readers are shifting away from traditional newsprint, resulting in lower circulation and demand for newsprint.”
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DBS has cut SPH’s earnings estimate for FY18F and FY19F by 18-22%, and lowered its DPS forecast to 16 cents, from 17 cents previously.
Going forward, Yeo believes the outlook for adspend is likely to continue to be lacklustre.
However, Yeo opines that SPH’s share price and DPS could some relief from the potential sale of M1, as well as the spinning off of Seletar Mall into SPH REIT.
In addition, SPH says it has completed the sale of online classifieds business 701Search on June 30, 2017, and expects to recognise a profit of approximately $150 million from the divestment in the next reporting period.
“In our view, valuations at current price are unattractive on falling dividend yield and ROE in addition to potential earnings risks,” says Yeo.
As at 12.08pm, shares of SPH are trading 9 cents lower at $3.02.
