Spotify Killing Radio: Top SCA Shareholder
Southern Cross Austereo’s largest shareholder has warned that Spotify may kill off the future earnings potential for the company, despite shares being “very cheaply priced.”
Allan Gray managing director Simon Mawhinney said SCA shares, which have dropped 32 per cent this year alone, are in for a bumpy ride.
“Southern Cross trades at a very low multiple of earnings,” Mawhinney said.
“We think, sustainably, the company should make around $95 million of pre-tax earnings. And relative to that, it’s very cheaply priced.
“But, of course, the elephant in Southern Cross’s room is, is Spotify going to kill it? And are people going to listen to the radio in five-10 years’ time?
“I guess if it’s 10 years’ time we’re fine and we’ll make our investment back, if it’s five years’ time it’s going to be touch and go.”
SCA shares have fallen 42 per cent since November 2020. They fell a further 2.6 per cent on Friday, closing at $1.32.