• We maintain HOLD and a fair value of RM0.90/share on Sasbadi based on a PE of 22x.
• The group's wholly-owned unit Malaysia Book Promotions Sdn Bhd (MBP) will distribute books from Marshall Cavendish Education (MCE) from this month to September 2020. The two may look to extend the agreement for subsequent periods of two years subject to mutual agreement.

• MCE is a Singaporean company that mainly sells educational materials for primary and secondary education in the country (summed into "K-12"). It is a veteran player with 50 years in the game, and its content has been translated into multiple languages for use in over 60 countries. This includes private and international schools in Malaysia.

• We are mildly positive on the development given the potential for Sasbadi to grow its presence within the niche market of private and international schools here. MCE books to be sold here may include textbooks, workbooks, teacher resources and supplementary materials.

• Earnings from MBP were lumped together with Sasbadi Sdn Bhd in the group's segmental breakdown since 3QFY17. The unit made RM4.5mil in revenue and RM2.2mil in gross revenue in FY16, implying a gross margin of 48% and contribution of 4% to group revenue.

• While the role of MBP may grow in the future, our focus remains on the core units comprising Sasbadi Sdn Bhd and Sanjung Unggul. Recall that sales and margins for the two had declined significantly in the recent quarter.

Source: AmInvest Research - 3 Nov 2017