Results

• 9MFY15 revenue of RM67.3m (+9% yoy) was translated into PATAMI of RM13.1m (+19% yoy).

• Both revenue and PATAMI came within expectations, with PATAMI accounting for 78% and 77% of HLIB and consensus full year estimates, respectively.

Deviations

• None.

Dividends

• None.

Highlights

• 9MFY15 review… Sales improved by 9% for 9M15 mainly due to improvement in its educational print publishing arm Sasbadi Sdn Bhd (+8% yoy) as well as Sasbadi Online (+113% yoy) and Malaysian Book Promotions (13% yoy). Margins have also improved. EBITDA margin has increased by 2%-pt to 30%.

• 3QFY15 review… Coming from a seasonally stronger 2Q, both revenue and PBT suffered double digit sequential declines. Sasbadi’s turnover and PB T decreased 41% and 63% qoq, respectively, but still increased 5% and 4% yoy, reflecting rising demand for its education content .

• We expect next quarter to be soft for Sasbadi. As stated in our report dated 4th June 2015 “On Course”, it may experience a slight slowdown due to lower spending power coming from GST regime. However, with Sasbadi’s stable business model, we believe business should remain resilient.
• We continue to like the company due to its innovativeness in creating products that cater to the palate of technological savvy youth and its unique exposure to education sector. Share price has done tremendously, increasing 84% YTD vs. KLCI which depreciated 3%. With limited upside to our TP, we downgrade the stock to a HOLD.

Risks

• Not winning the textbook contract from MOE; Migration towards the online platform; Spike in paper prices; and Changes in National Curriculum and educational policies.

Forecasts

• Unchanged.

Rating

HOLD

Positives

• (1) Long term catalysts from potential M&As and new curriculum for secondary schools; (2) Unique exposure to Malaysia’s education system; and (3) Defensive earnings base.

Negatives

• (1) Not winning new textbook cont racts from MOE; (2) Rising paper prices; and (3) Low liquidity.

Valuation

Maintain target price of RM2.72 based on unchanged P/E multiple of 15.5x CY16 EPS. Since potential total return to our TP and projected dividend yield is 3.8%, we downgrade the stock from BUY to HOLD. Additionally, share price has appreciated 84% YTD. Overall, we believe the current valuation is justified and fai r as Sasbadi has a high growth rate and holds a unique education exposure which is closely linked to the country’s education system but has relatively small market capitalization and low liquidity.

Source: Hong Leong Investment Bank Research - 29 Jul 2015