News

• Sasbadi has proposed a private placement and a share split of every one existing share into two shares in Sasbadi Holdings.

• As at 31st August 2015, the issued and paid-up share capital stands at RM63.5m comprising of 127.0m units.

• Sasbadi will undertake placement up to 10% or 12.7k new shares and is expected to raise gross proceeds up to RM6.4m.

• The proposed private placement and share split is expected to be completed by second quarter of CY2016.

• Rationale for share split is to enhance the marketability and liquidity of its shares, making it more affordable and enable a larger group of investors to take part in the growth story of Sasbadi Holdings. Financial Impacts/ Comments

• Neut ral on both transactions. After taking into account the enlarged share base, EPS for FY16 and FY17 will be diluted from 16.9 – 18.9 sen/share to 7.7 – 8.9 sen/share.

• Based on the enlarged base of 279.4m shares and utilisation of placement proceeds, net asset value is estimated at RM0.45 (existing: RM0.74).

• 63% of the proceeds will be utilised to finance future acquisition (s). 19% will be used to pare down borrowings.

• Post exercises, the ex-target price will be adjusted to RM1.30.

• This woul d improve Sasbadi’s trading liquidity thereby resulting in its share price becoming more attractive to local and foreign institutional investors.

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

• Maintained.

Rating

BUY

• We like Sasbadi due to its strong annual FCF, high growth rate, and unique education exposure which is closely linked to the country’s education system.

Valuation

• Maintain BUY with unchanged TP of RM2.80 based on unchanged P/E multiple of 15.5x CY16 EPS. Targeted 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 - 22 Dec 2015