Analysts fear a knee-jerk reaction from consumers.
After applying measures to cut its costs to the bones, rising its cover prices might be the final ace in Singapore Press Holdings’ sleeve to numb the effects of its cascading advertising revenue.
But the first few months might hurt, according to analysts from UOB Kay Hian, saying while an increase of 20% would imply an additional $32m in revenue, an initial knee-jerk cutback in consumption would dampen the revenue impact.
“Assuming a 10% fall in circulation, the net impact to revenue would be an increase of S$16m. Net profit would increase by S$13m, or 4% of our FY17 S$312m forecast. As people get used to higher cover prices over time, circulation volume should recover but operating costs are always rising,” UOB Kay Hian said.
Despite this, UOB Kay Hian said higher cover charges are the right move, and are more likely to offset rising costs.
“We see the cover price increase as a measure to mitigate rising operating costs as SPH has already cut its media-related costs to the bones. Further cuts will likely affect the quality of its newspapers,” UOB Kay Hian said.
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