News /  Comments

• Sasbadi announced on Friday, 29th of January 2016 that the proposed acquisition of 100% equity interest in PMI Education has been terminated due to non-ful filment of several conditions.

• As stated in the announcement, the RM1m deposit paid to PMI Education will be refunded to Sasbadi wit hin 7 days starting from 29th of January.

• Financial performance of PMI Education fluctuates between marginal losses and profits over the past 5 to 6 years. With the termination of the proposed acquisition, we believe Sasbadi would be able to invest in a company that would complement its business structure and add more value to Sasbadi.

• We make no changes to our forecast as we have not factored any contribution from the proposed acquisition of Mantissa College (report dated 30th June 2015).

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

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 - 2 Feb 2016