Sasbadi Holdings Bhd
(March 20, RM1.73)
Maintain buy with unchanged target price of RM2.25. On a recent visit to Sasbadi, management showcased its new products such as interactive bookmarks, and electronic tablets preloaded with 93 book titles designed for teacher training programmes.

Although we do not expect these new products to contribute significantly to Sasbadi in the immediate term, we take comfort that continuous product innovation undertaken by the group will help to improve its competitive edge and sustain its longer-term growth prospects.

Sasbadi’s quarterly earnings are impacted by seasonality depending on the start of  the school sessions. We understand that the second quarter ended February (2QFY15) is expected to be the strongest quarter for the group driven by the start of the new school year for primary and secondary studies up to Form 5. 

The acquisition of Pearson Sdn Bhd’s publishing rights and production files for a list of titles consisting mainly of national school curriculum-based educational materials in 2013 has enabled the group to strengthen its position in the publication of upper and post-secondary materials. 

As such, 3QFY15 ending May is expected to be its second strongest quarter due to schools reopening in May for Form 6 students. 

Therefore, even though 1QFY15 earnings of RM1.6 million accounted for only 9% of our full-year estimate, we deem its quarterly results within expectations since this is a seasonally weak quarter for the group.

The stock is trading at undemanding valuations of 12.4 times, 9.8 times and eight times FY15 to FY17 earnings per share. Yield is decent at 4% for FY15. — AllianceDBS Research, March 20

This article first appeared in The Edge Financial Daily, on March 23, 2015.