Sasbadi rises 5.33% after AllianceDBS Research starts coverage

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KUALA LUMPUR (Sept 29): Shares of Sasbadi Holdings Bhd were among the top gainers in early trade on Monday after AllianceDBS Research has initiated coverage on Sasbadi Holdings Bhd at RM1.50 with a high conviction Buy rating and a target price of RM2.25.

At 9.05am, Sasbadi rose 5.33% or eight sen to RM1.58 with 330,900 shares done.

AlianceDBS Research said Sasbadi was the best proxy to pre-university education industry.

In a note Monday, the research house said that with the proceeds from recent IPO, the group was in prime position to embark on earnings- accretive M&As in the fragmented educational publishing industry.

“In addition, there is huge potential in the untapped education services market, in particular hands-on learning centres that foster creative thinking and innovation, where Sasbadi could be the missing piece of the puzzle in Malaysia’s education industry.

“We forecast Sasbadi’s FY15- FY17 core PAT will expand at 3-year CAGR of 22%, underpinned by earnings accretive M&As. Valuation is undemanding at 11x/9x/7x FY15-FY17 EPS, while yields are attractive at 5-7%.

“We initiate coverage of Sasbadi with a high-conviction Buy, and DCF-derived target price of RM2.25 based on conservative assumptions: 9.5% cost of equity and 1% terminal growth. Our target price implies 16x FY15 EPS, and suggests a total return of 55% from the last close of RM1.50!,” it said.