Stock picks for 2016: Sasbadi Holdings

by **Cals** Mon 04 Jan 2016, 23:23

Stock picks for 2016: Sasbadi Holdings

By Supriya Surendran / The Edge Financial Daily | January 4, 2016 : 9:56 AM MYT

This article first appeared in The Edge Financial Daily, on January 4, 2016.

[size=16]Sasbadi Holdings Bhd ([You must be registered and logged in to see this image.] Valuation: N/A, Fundamental: N/A)

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Since its listing on the Main Market of Bursa Malaysia in July 2014, it has been a busy two years for Sasbadi Holdings Bhd, with a series of announcements on collaborations and acquisitions that are intended to spur growth in the company.

For its financial year ended Aug 31, 2015 (FY15), Sasbadi reported a net profit of RM15.33 million, which was 25.1% higher than its FY14 net profit of RM12.25 million. Revenue for FY15 was also up by 9.9% to RM87.41 million from RM79.51 million, mainly from its education print publishing unit.

The group also declared a final dividend of two sen per share.

In a Dec 11, 2015 note on Sasbadi, Alliance DBS Research upgraded its rating on Sasbadi to “buy” from “hold”.

“We expect the group to deliver FY16 to FY17 earnings growth of 33% and 22% respectively, driven mainly by its conventional book publication and mergers and acquisitions (M&A) activities. Besides that, we believe positive news flow could arise from its regional collaboration and unconventional digital learning products,” said Alliance DBS Research.

On Nov 23, 2015, Sasbadi announced that it had entered into a memorandum of understanding with Southern Publishing and Media Co Ltd, one of the biggest publishing corporations in South China, to explore collaboration in intellectual property rights, digital teaching and learning resources and technology, as well as online teaching and learning platforms.

“There also exists earnings upside potential from its ongoing partnership with PT Penerbit Erlangga, one of Indonesia’s largest book publishers,” said Alliance DBS Research.

Sasbadi inked a licence and service agreement with Penerbit Erlangga in October 2014, which allows the latter to use Sasbadi’s interactive online learning system i-Learn, entitling Sasbadi to royalties from products sold by Penerbit Erlangga using the platform.

The group also announced on Aug 7, 2015 that it was acquiring a 70% stake in Sanjung Unggul Sdn Bhd for RM21 million. The Sanjung Unggul Group is principally involved in publishing books and educational materials catering for students in national-type Chinese schools.

HLIB Research in its Nov 3, 2015 note on Sasbadi said apart from M&A activities, new syllabus and organic growth, the group’s growth in FY16 could also be underpinned by full contribution from Sanjung Unggul.

“Sanjung Unggul controls about 40% to 50% of the Chinese publisher market share,” wrote HLIB Research, adding that over the next two to three years, Sasbadi is looking at acquiring at least one company per year.

In the past year, Sasbadi shares appreciated by 71.7% from RM1.45 on Dec 31, 2014 to close at RM2.49 last Thursday, ahead of the long New Year holiday weekend, with a market capitalisation of RM316.23 million.
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