Friday 29 Mar 2024
By
main news image

Sasbadi Holdings Bhd
(April 28, RM2.23)
Maintain buy with target price of RM2.53:
Sasbadi Holdings Bhd’s revenue of RM48.4 million for the first half ended February of financial year 2015 (1HFY15 [+10% year- on-year]) translated into profit after tax and minority interests of RM10 million and came in above Hong Leong Investment Bank’s and consensus’ full-year estimates, making up for 63% and 59% respectively.

Its second quarter (2Q) earnings are seasonally stronger due to the start of the academic year for national schools in January. The group achieved revenue of RM48.4 million, an increase of 10% year-on-year (y-o-y), mainly due to the stronger contribution from Sasbadi Sdn Bhd — its educational print publishing arm. The second quarter is generally the strongest for the group with the beginning of a new academic year. Profit after tax improved 24% y-o-y, from RM8 million in 1HFY14 to RM10 million in 1HFY15. Its newly commenced subsidiary, Sasbadi Learning Solutions Sdn Bhd, charted revenue of RM1.2 million, which is commendable given that it started operations in January this year.

Sasbadi’s revenue increased 97% quarter-on-quarter (q-o-q). Profit before tax jumped 406% from RM2.3 million in 1Q and RM11.5 million in 2Q. As for the goods and services tax (GST), all books (except magazines) are zero rated under the latest gazette. Sasbadi’s applied learning and online products are subject to the GST. We believe business should remain as usual as education is a necessity and the incentives from the government will sustain demand from its end users.

Risks to our call include: (i) Sasbadi not winning the textbook contract from the Ministry of Education’s migration to the online platform; (ii) spike in paper prices; and (iii) changes in the national curriculum and educational policies. We increase our forecast by 4% to 5% for FY15/FY16 to take into account higher contribution from the print publication and online segments.

We like Sasbadi due to the stability in its business and its long-term catalysts based on the new curriculum for secondary schools from 2017 onwards and potential mergers and acquisitions (M&A). We are optimistic about its long-term earnings growth. Maintain “buy”, with a target price of RM2.53, based on 15 times FY16 earnings per share or about 50% discount (unchanged) to average price-earnings ratio of the education sector due to Sasbadi’s lower market capitalisation and liquidity. Sasbadi has a high growth rate and holds a unique exposure to the education system. — HLIB Research, April 28

Sasbadi-29apr15

This article first appeared in The Edge Financial Daily, on April 29, 2015.

      Print
      Text Size
      Share