KUALA LUMPUR: CIMB Equities Research sees the worst is over for Sasbadi Holding whose share price fell by around 30% in the past three months after 4QFY17’s net loss and concerns of further weakness in retail sales.
The research house said on Friday this offers investors an opportunity to accumulate the stock as it looks like the worst is over for retail sales.
Sasbadi is publisher of educational materials mainly for the primary and secondary schools.
“We maintain our EPS forecasts and target price (RM1.32) based on an unchanged 20% discount to 2019F 16 times P/E (our target P/E for the domestic education sector) to reflect its small market cap.
“Catalysts are stronger-than-expected MLM sales. Risks include weak MLM sales,” it said.
Sasbadi’s 1QFY18 revenue was down 5.4% on-year at RM19.5mil, mainly due to 1QFY17’s one-off RM7mil revenue from the sale of Education Lego products and school text books to the government.
“If we exclude 1QFY18’s estimated RM3mil MLM revenue, we estimate that 1QFY18’s domestic retail revenue was up by around 6% on-year. This is positive news for retail sales as FY17 retail sales was down by c.6% on-year due to weak domestic consumer sentiment,” it said.
CIMB Research estimated that 1QFY18’s retail revenue was up 6% on-year at c.RM25.8mil, an indication that the worst is over for the retail division, which is its core business.
“We believe retail sales should pick up this year,” it added.
In the Budget 2018 speech last October, the government said it would give RM300mil worth of book vouchers to students, to be used to purchase school books at selected book shops in 2018. This should help boost Sasbadi’s retail sales.
“The “Chuck Chicken” books are already being sold at major bookshops in the country.
However, the global launch of the books is only expected to happen in the latter part of this calendar year.
CIMB Research has not assumed any earnings for these books but this could be huge due to the growing popularity of “Chuck Chicken” cartoons worldwide.
“We estimate 1QFY18 MLM revenue of around RM3mil vs. FY17’s RM6.1mil revenue. 1QFY18’s average monthly revenue was c.RM1mil vs. only RM500,000 in FY17 and we expect MLM revenue to take off in a big way over the next few months.
“The MLM division already has more than 10,000 members and the company is looking to undertake major campaigns and promotions over the next few months to help boost its membership size.
“With the government’s focus on science, technology, engineering and math (STEM), the company’s plan to franchise its robotics technology education division has great potential, in our view.
“Sasbadi already has a tie-up with University Malaya to certify its robotics education classes. We have not factored in any profits from this division,” it said.
Read more at https://www.thestar.com.my/business/business-news/2018/01/19/worst-over-for-sasbadi-retail-sales/#ziMIB3arp4e0poIj.99
