Here’s an unexpected boost for SPH’s deteriorating ad revenue

Its advertising revenue fell by 7.6% in Q1.

The media firm is scrambling to find advertisers to boost its media revenue, and it just might get an unexpected jolt if a fourth telco materialises this year.

According to analysts from UOB Kay Hian, a fourth telco would spark a spike in ad spending not only for the incoming telco, but also for incumbents as well as the competition heats up.

“AR was down in particular for property and fast moving consumer goods (FMCG) due to the threat from e-commerce. The other sectors saw a mild contraction: a) recruitment, b) travel, c) office equipment, and d) banking & financials. An uptick was noted in advertising spending in the auto sector due to higher car sales on the back of lower COE prices in recent months,” UOB Kay Hian said.

Meanwhile, as it prepares for hazier ad revenue for the months ahead, UOB Kay Hian says the firm’s earnings will be driven by cost reduction.

“With lower advertising revenue, SPH will be reliant on keeping its cost low to maintain operating margins. Stable staff costs and declining newsprint charge-out price will largely help with this. On the flipside, lower advertising revenue means lower newsprint consumption which, in conjunction with the lower newsprint price, will largely help mitigate the negative impact of lower advertising revenue,” UOB Kay Hian said.