Results

• Achieved FY15 revenue of RM87.4m (+10% yoy) which translates to PATAMI of RM15.3m (+53% yoy).

• Despite revenue being in-line with expectations, PATAMI was slightly below both ours and consensus estimates, making up 92% and 91% for HLIB and streets full year forecasts, respectively.

Deviations

• Lower than expected other operating income.

Dividends

• Proposed a final single dividend of 2.0 sen/ share, subject to approval of shareholders at Sasbadi’s AGM. This brings total DPS to 5 sen/share, in-line with our estimation (dividend payout ratio of circa 33%).

Highlights

• FY15 review… The group’s turnover improved 10% for FY15. Sasbadi S/B (education publisher) was still the largest contributor to the group with circa 83% of total revenue. Additionally, contribution from its newly acquired Chinese textbook publisher ‘Sanjung Unggul’ was finally captured in 4QFY15 where it registered RM4.3m of sales.

• Overall PBT increased 27% yoy from RM16.9m to RM21.4m due to the absence of one off provision of sales return and listing expenses which occurred in FY14 coupled with contribution from Sanjung Unggul post acquisition.

• 4QFY15 review… Sasbadi recorded higher sales both qoq (+7%) and yoy (+15% ). Despit e higher revenue, the group’s PBT was lower qoq by 23% mainly on the back higher expenses as the group increased staff headcount for their business expansion.

• Next quarter would be a slow quarter for the group given end of school year and end of major government exams. Nevertheless, we remain optimistic on its long term growth due rising need for education content, new secondary school curriculum in 2017 and potential M&As. We believe some of the measures in Budget 2016 would be beneficial for Sasbadi in the long term.

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, pending update from management today.

Rating

BUY

Positives

• : (1) Long term catalysts from potential M&As and new curriculum for secondary schools in 2017; (2) Unique exposure to Malaysia’s education system; and (3) Defensi ve earnings base.

Negatives

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

Valuation

• Maintain our BUY call and target price of RM2.72 based on unchanged P/E multiple of 15.5x CY16 EPS. Our positive rating is premised on Sasbadi’s high growth rate and provides a unique education exposure which is closely linked to the country’s educati on system. Target P/E is based on 55% discount to the education sector average in view of its relatively small market capitalization and low liquidity.

Source: Hong Leong Investment Bank Research - 30 Oct 2015