This article first appeared in The Edge Malaysia Weekly on November 27, 2023 - December 3, 2023
SASBADI Holdings Bhd is on the prowl for opportunities after coming out of an earnings slump over the last six years.
The education solutions provider, which is in the print publishing and education technology (edtech) space, had a strong FY2023 ended Aug 31 with its net profit growing slightly more than 12 times to RM10.18 million from the previous financial year. Revenue jumped 40% to RM96.63 million from FY2022.
The company is looking forward to its next chapter of growth as it sees many opportunities in the years ahead.
“If we want to grow our revenue, just relying on organic growth will not be enough because we are already a market leader in the space we are in. So, we are looking at mergers and acquisitions (M&A) for growth,” says Sasbadi co-founder and group managing director Law King Hui in an interview with The Edge.
In the past, the group used the M&A strategy to grow effectively from 2014 to 2016, says Law, who believes the time is ripe for acquisitions in the current market conditions.
“The current market situation has actually made it more viable for M&A, simply because there are a lot of smaller publishing companies that lack economies of scale to be hugely profitable,” he points out.
“They also have a problem finding successors for their business. When these owners come to this [retirement] age with no exit plan, they become good targets for M&A. We will make an offer that is fair. I look for a win-win deal.”
Law will not buy into new brands as he is only interested in established brands that have withstood the test of time and have significant market share. He reckons that there are many such companies around.
Sasbadi is aiming for one M&A per year over the course of the next two to three years, simply because the market is ripe for such opportunities. Of particular interest are companies with good intellectual property to provide content for segments that it currently does not have a presence in.
“Now, we are largely in the syllabus-based segment. We do not have a strong presence beyond that,” says Law, adding that Sasbadi is in discussions with two local companies that have “good potential”, but does not reveal the segment they are in.
He is determined that Sasbadi will not buy into “redundant assets” to avoid cannibalisation of segments it is already involved in: the publishing of textbooks, revision books, activity books and test modules in compliance with the national curriculum.
“One area that has room for growth is the early childhood education space, being content for children aged four to six. Revenue from this segment is small, only several million ringgit per year, and we have identified this as a sector for growth from 2024 onwards,” he says.
The group is serious about expanding its reach in the early childhood education space and is in the process of acquiring intellectual property from Integra Creative Media Sdn Bhd, a publisher of children’s books under the Oyez!Books brand for a purchase consideration of RM1 million. The acquisition will add 310 titles of children’s books to its portfolio, as well as 51 raw manuscripts that have yet to be published.
Sasbadi has also entered into an exclusive partnership with BOOKR Kids, an edtech company based in Europe, to distribute BOOKR Class in Malaysia. BOOKR Class is a digital platform that includes animated books, games and other tools to inculcate the love of reading among children.
Under its early childhood education portfolio, it also has Peapod Readers, a series of books designed to help children learn English.
Based on its balance sheet as at Aug 31, the group is in a net cash position of RM3.02 million after taking into account its long- and short-term loans and borrowings.
Whether the group will need to raise funds to feed its M&A appetite depends on the price of the new assets, says Law, who is open to raising funds via debt financing or the equity market. However, he admits that the latter option may be a concern given its closing share price of 17.5 sen last Friday, which values the company at RM74 million. Sasbadi shares were trading at price-earnngs ratio of 7.1 times based on earnings for the financial year ended Aug 31, 2023.
A year ago, it was worth less but its share price has risen about 52% over the past year. Still, it is a far cry from its peak of RM1.07 per share in March 2017.
Notwithstanding its M&A intentions, Law wants to sweat Sasbadi’s existing assets, especially its digital education solutions business where it sees huge potential for growth.
“Technology is also one area where we are proud to say we are leading the pack. We have a full team working that is capable of developing all sorts of digital solutions. So, we are able to respond to the market’s needs.”
Sasbadi plans to roll out a super app in 2024. Its digital solutions have been in the market for some time now, but visibility has been low despite its efforts to market it.
In FY2023, the digital solutions segment contributed RM6.2 million to its revenue, only 6% of the group’s total revenue. The segment’s gross profit amounted to RM2.63 million.
Despite the small revenue contribution, Law views the development of its digital solutions as an investment in future-proofing the company for the changes headed its way. Moreover, he believes the timing is right given the National Digital Education Policy that will be implemented by the government soon.
“Sasbadi does content development every day — that is our bread and butter. We can be a strategic partner for the government in terms of being an edtech solutions provider. Having been in the market for 38 years, we understand education and its pain points, so we can provide the right solution that is practical for the objective of education,” he says.
The competition may be intense in the edtech space with foreign players to contend with, but Law believes Sasbadi’s advantage is that its digital solutions conform to the national curriculum.
“The curriculum is a huge barrier to entry for foreign players. There may be a lot of digital content now, but those are not curated for our curriculum. So that’s our strength — providing content that is safe and in compliance with the current curriculum,” he says.
Law believes its early investment in the digital education solutions space will help the company diversify its revenue stream and set it apart from its competitors. Currently, about 90% of its revenue is derived from its print publishing segment.
The co-founder of Sasbadi is confident that the company is poised for healthy growth again. He observes that the company is “one of its kind” on the stock exchange, with no other company having a similar business listed on Bursa. “We don’t have real competitors [listed on the stock exchange] and with the policy changes to education, we are ready to capitalise on this.”
On the notion that Sasbadi will be rendered irrelevant once the education system moves towards digitalisation, Law says: “When the education system is transformed, the Ministry of Education will still need a solutions partner and they will still need a content partner. Be it digital or print, what is central to it all is the content. That is something that we have 38 years of know-how and expertise in, curating safe content for education. And it is something that cannot be taken lightly.”
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