Sasbadi Holdings Bhd (April 11, RM1.34)
Maintain buy with a target price of RM1.55: The ministry of education recently closed the textbook tenders for the relevant subjects of Year 1 of Sekolah Jenis Kebangsaan Cina and Sekolah Jenis Kebangsaan Tamil (revised Kurikulum Standard Sekolah Rendah syllabus), and Form 1 and Form 4 (new Kurikulum Standard Sekolah Menengah syllabus) in February and early April 2016.
We anticipate the results of the winning tenders to be announced in two to three months, with delivery of textbooks by the end of 2016.
The group’s plan to acquire at least one company per annum is on track. After the memorandum of understanding (MoU) with Southern Publishing and Media Co Ltd in China (the MoU has been extended to May 21 this year), we believe the next merger and acquisition target would be a local publisher that can add value to Sasbadi Holdings Bhd.
We expect an organic growth of high single digit to be contributed mainly by Sanjung Unggul Sdn Bhd. Also, Sasbadi will be likely to produce about 1,400 titles compared to 1,300 titles in the previous year.
The opening of its first learning centre in Kota Damansara will be slightly delayed to the second half of the calendar year 2016. The management is currently reviewing the business model to ensure it will best suit the group. Capital expenditure to be spent on the learning centres is approximately RM500,000.
Despite the second quarter being the strongest quarter for the group, we believe its financial year 2016 (FY16) earnings may be slightly dampened by the slow consumer and business sentiment.
As such, we cut our FY16 earnings by 3% to RM20.4 million. Nevertheless, we continue to remain upbeat on its FY17 earnings excitement.
We like Sasbadi due to its strong annual free cash flow, high growth rate, its innovativeness in creating products that cater to tech-savvy youth, and unique education exposure which is closely linked to the country’s education system. — Hong Leong Investment Bank Research, April 11
SASBADI (5252) - Sasbadi expected to produce 1,400 book titles in FY16
http://www.theedgemarkets.com/my/article/sasbadi-expected-produce-1400-book-titles-fy16
