Results

Above expectations - Sasbadi’s 9MFY08/14 earnings of RM11m came in above expectation, making up 80% of our estimation.

Deviations

Better-than-expected sales from educational publishing segment (both print & online).

Dividends

None.

Highlights

9MFY08/14 review… Sasbadi reported revenue of RM61.9m, mainly driven by their educational print publishing and distribution of applied learning products. Its educational publishing segment alone contributed RM16.1m in 3QFY08/14 (90% of 3QFY08/14 total revenue of RM17.9m).

Despite an underprovision of sales returns for past year paper of RM1.3m, the company managed to arrive at PAT of RM11m for 9MFY08/14.

Online publications… The revenue contribution from its online publication segment picked up in 3QFY08/14, charting in at RM0.7m thanks to the introduction of two new products; Mind Map and Most Essential Exam Techniques (MEET). This reaffirms our view that Sasbadi’s online publications would definitely gain positive traction from its end-users (youth who are generally more technological savvy).

Outlook… On the account of PMR abolishment that will be replaced by PT3 - Pentaksiran Tingkatan 3, we believe there will be a change in its seasonality patterns. Sasbadi expects to record sales from PT3 and post-secondary educational materials in 4QFY08/14 (although 4Q is normally its weakest quarter).

Hence, we are POSITIVE on Sasbadi’s future prospect given its position as the main educational publisher in the country.

Risks

Losing the textbook tender from Ministry of Education (MoE); Migration towards the online platform; Spike in paper prices; and Changes in National Curriculum and educational policies.

Forecasts

We tweaked FY14-FY16 earnings upwards by 5.7- 9.2%, taking into account higher contribution from its educational publishing segment.

Rating

BUY

We maintain our BUY call on Sasbadi due to its strong annual FCF, its decent dividend yield of circa 3.4% and the uniqueness of the company which is closely linked to the country’s education system with defensive yet growing earnings base.

Valuation

Post-earnings revision, target price is revised upwards to RM1.65 based on unchanged P/E multiple valuations of 11.5x CY15 EPS.

Source:Hong Leong Investment Bank Research - 21 Jul 2014