Weak business sentiment lowers spending on display ads.
The growth in Singapore Press Holdings' earnings is largely dependent on its media business, which is highly affected by the city-state's economic prosperity.
According to UOB KayHian, the group's media revenue was down 9%, led by a sharp 14% drop in advertisement revenue to $202m due to declines from display and classified advertisements.
One reason for this is the lacklustre business sentiment lowers spending on display and classified ads, UOB mentioned.
Meanwhile, UOB pointed out that the ad revenue is fairly correlated with Singapore’s GDP, with weak GDP growth numbers usually corresponding with weak advertising revenue.
"With full-year 2017 GDP growth for 2017 expected at 1-3%, ad spending and hence revenue likely will remain weak. Diversification efforts into property and other businesses have yet to supplant earnings from the media segment. As such, overall earnings will continue on its downward trajectory, impacting dividend payout," the brokerage firm said.
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