Results

• Below expectations – S asbadi’s revenue of RM16.3m (-7% qoq) translated into PATAMI of RM1.6m came in below ours and consensus’ full year estimation, accounting for 10% and 9%, respectively.

Deviations

• Lower than expected revenue contribution due to seasonality.

Dividends

• Declared 3 sen per share. This accounts for 78% of our DPS estimates. Ex-date on 25 Feb-15, payment on 23 Mar-15. As stated before, management plans to adopt dividend policy of up to 50% of their profit upon listing.

Highlights

• 1QFY15 qoq review… Due to sales of PT3 (Pentaksiran Tingkatan 3), educational materials for post -secondary and teacher education in the previous quarter, revenue dropped 7% qoq. Its educational print publishing and distribution of applied learning products arm, Sasbadi Sdn Bhd, represented 94% of total revenue (RM15.4m).

• Sasbadi Online recorded revenue of RM0.2m; a level which we think is sustainable. We believe changes in the educational policy on e-learning would be a catalyst for the online division.

• Managed to control its expenses, posting a 12% decline from RM5.3m in 4QFY14 to RM4.7m. Achieved higher PBT of RM2.3m (+21% qoq) due to the presence of listing expenses in 4QFY14.

• Note that Sasbadi still has RM10.5m from IPO proceeds which will be used for earnings-accretive acquisition(s) of publishing companies that will complement its current business structure. Overall, we’ re still optimistic on its longterm earnings growth.

Risks

• Losing the textbook tender from MOE;
• Migration towards the online platform;
• Spike in paper prices; and
• Changes in National Curriculum and educational policies.

Forecasts

• We tweaked FY15 – FY16 earnings downwards by 6-6.4%, to reflect lower revenue contribution from its educational publishing and online segment.

Rating

• HOLD
• We like Sasbadi due to the stability in their business and their long term catalysts based on the new curriculum for secondary schools from 2017 onwards and potential M&As. However, in view of the poor results, we tentatively downgrade the stock to a HOLD pending update with the management.

Valuation

• Downgrade to HOLD, with lower target price of RM1.55, based on 12x CY 15 EPS or circa 50% discount (unchanged) to average P/E of education sector.

Source: Hong Leong Investment Bank Research - 28 Jan 2015