KUALA LUMPUR (March 20): AllianceDBS Research has maintained its “Buy” rating on Sasbadi Holdings Bhd at RM1.72 with an unchanged target price of RM2.25 and said Continuous product innovation should sustain Sasbadi’s long term earnings prospects.
In a note Friday, AllianceDBS vice president for equity Cheah King Yoong said Sasbadi’s quarterly earnings were impacted by seasonality depending on the start of the school season.
“We understand that for Financial Year August 2015, 2Q (Dec to Feb) is expected to be the strongest quarter for the group driven by the start of new school year for primary and secondary studies up to Form 5.
“The acquisition of Pearson’s publishing rights and production files (IPs) in 2013 has enabled the group to strengthen its position in the publication of upper and post-secondary national school curriculum-based educational materials,” he said.
The research house said that as such, 3Q (March to May) was expected to be its second strongest quarter due to schools reopening in May for Form 6 students.
“Therefore, even though 1Q15 earnings of RM1.6 million accounted for only 9% of our full year estimate, we deem its quarterly results within expectations since this is a seasonally weak quarter for the group.
“We reiterate our Buy rating on Sasbadi, with DCF-derived TP of RM2.25. The stock is trading at undemanding valuations (12.4x/9.8x/8.0x FY15-FY17F EPS). Yield is decent at 4% for FY15,” said Cheah.