sgcarmart, a SPH splurge again?
SPH announced a 60 million purchase of top car sales website, sgcarmart. This is similar to its purchase of hardwarezone, shareinvestor and recently, Chope(a restaurant reservation website). As SPH was slow in starting its own websites, sites like sgcarmart grabbed the first mover advantage and being more nimble than SPH, they continue to grab pole position despite competition from SPH new online websites. As SPH is losing money on its online websites, the only way to stem loss without giving up on its online strategy is to buy out its rivals.
However, this comes at a rich price. sgcarmart has a turnover of about 7 million, it is valued at 43.5 million by Ernst & Young as of 2012. Although it has high profit margin due to its dominant position, growth will certainly slow over the years. But, it is expanding into Indonesia to counter that.
The question remains whether sgcarmart will be different from websites bought by SPH and earn enough money to justify the high valuation. What’s next, propertyguru? Even though SPH has money to spend and more from the upcoming REIT, millions here, millions there, soon you are talking about serious money which should be returned to shareholders rather than spent unwisely.