SPH’s push into digital still needs more time to ramp up before it can help to stop the decline in print subscriptions, OCBC said in a note on Thursday.
“We believe SPH’s digital-first strategy hinges on the group’s ability to ramp up its digital circulation count, which would underpin and sustain the appeal and viability of its integrated marketing offering,” OCBC said.
It noted that the daily average digital circulation has risen by 112,000 copies from the second quarter of 2017 through the second quarter of this year, but that circulation revenue dropped 7.5 percent and advertising revenue fell 9.3 percent in the second quarter of 2018.
“The group has introduced a Straits Times Basic Digital package last month, targeting the price sensitive customer segment, and we believe that this, together with similar offerings for other digital publications moving forward, should help to increase digital penetration in a meaningful way,” it said.
The second quarter results were largely in line with forecasts, OCBC said. It said the 11.1 percent on-year decline in print advertising was encouraging because it was narrower than the 21.5 percent on-year drop in the third quarter of 2017.
While the digital strategy would take more time, OCBC pointed to the property segment as propping up earnings.
“With the digital pivot being more medium-term in nature, we believe the group’s property segment will continue to bolster near-term earnings, as evident by it accounting for around 60 percent of the group’s first-half of 2018 profit,” it said.
It nudged its fair value up to S$2.52 from S$2.51, keeping a Hold call. It said that the share is trading at a 2018 dividend yield of 6 percent.
The stock was up 1.61 percent at S$2.53 at 2:31 P.M. SGT on Thursday.