Sasbadi Holdings Bhd (Sasbadi) is expected to stage a recovery post covid-19 in FY21-FY22 as education remains as one of the most important element for human race. The company’s core business which is the print publishing will remain stable in the near future while the digital/online learning segment will be the key growth area for long term. We expect Sasbadi to register core net profit of RM4.0m and RM5.9m for FY21 and FY22 respectively. We have a BUY recommendation on Sasbadi with a target price of RM0.28 based on the average 21x PER and 0.8x P/BV over FY22 FD EPS and BV/share respectively.

Sasbadi has been producing books and educational materials since 1985. Presently, the company publishes a variety of educational products ranging from pre-school to university. Print publishing is the Sasbadi’s largest business segment contributing about 90% of total revenue while the remaining 10% is made up of digital/online learnings and other businesses.

The series of the Movement Control Order (MCO) and cancellation of UPSR and PMR have negatively impacted Sasbadi in FY20 as they reduced the consumer’s demand for the company’s academic products. Nonetheless, the company reckon this as an opportunity by innovating its publications into other products such as new series comprising 27 titles for students from Year 1 to 3, namely Praktis Kendiri Pelajar (PKP) which allow students to learn at home and able to complete the academic syllabus effectively.

Sasbadi viewed the MCO as a catalyst for the digital learning business as students are increasingly adopting digital platforms for learning. The company’s i-LEARN Ace, which has been enhanced with new features for digital learnings is fully aligned with the national curriculum of Malaysia from Year 1 to Form 5 levels. Sasbadi has recently launched the Tutor2U, an e-tuition platform connecting students and teachers from across Malaysia. Tutor2U enable students to choose their teachers to perform live classes. As of 1HFY21, the digital and network marketing revenue grew by a hefty 44% to RM2m.

We expect Sasbadi to register core net profit of RM4.0m and RM5.9m for FY21 and FY22 respectively. The company has proposed a private placement of up to 42.9m shares at an issue price to be determined later. We have imputed the dilutive impact of the private placement into our EPS assumptions. Financial leverage is manageable with net gearing of 21%. We recommend BUY with a target price of RM0.28 based on the average 21x PER and 0.8x P/BV over FY22 FD EPS and BV/share respectively. Our BUY recommendation is premised on recovery play on education sector and potential in digital learning business.

Source: Rakuten Research - 18 May 2021