KUCHING: Sasbadi Holdings Bhd’s (Sasbadi) continuous product innovations will likely support the group’s competitive edge and sustain its longer term growth prospects, analysts observe.
At closing, Sasbadi’s share price rose one sen to RM1.73 with 287,000 shares traded.
Following a visit to Sasbadi, AllianceDBS Research Sdn Bhd (AllianceDBS Research) noted that the management had showcased their 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,” it opined.
AllianceDBS Research also believed Sasbadi is on track to meet the research firm’s full year earnings target.
“Sasbadi’s quarterly earnings are impacted by seasonality depending on the start of the school season.
“We understand that the second quarter of the financial year 2015 (2QFY15) is expected to be the strongest quarter for the group driven by the start of new school year for primary and secondary studies up to Form 5.
“The acquisition of Pearson’s publishing rights and production files (IPs) in 2013 has enabled the group to strengthen its position in the publication of upper and post-secondary national school curriculum-based educational materials.
“As such, 3Q is expected to be its second strongest quarter due to schools reopening in May for Form 6 students.
“Therefore, even though 1Q15 earnings of RM1.6 million accounted for only nine per cent of our full year estimate, we deem its quarterly results within expectations since this is a seasonally weak quarter for the group,” it explained.
Meanwhile, AllianceDBS Research said, the group is well managed with high return on equity (ROE) and superior profitability, thanks to its lean operating structure and complementary business.
It said, its three-year earnings compounded annual growth rate (CAGR) between FY15 to FY16 is expected to be strong at 22 per cent, driven by strong organic growth and earnings accretive mergers and acquisitions (M&A) initiatives in the fragmented educational print publishing industry.
Aside from that, the research firm viewed the group’s diversification into educational services industry via the establishment of applied learning centres will transform the group into a more diversified educational group, which could re-rate its share price over the long term.
AllianceDBS Research also believed that there is a bright structural trend for Sasbadi on the back of an increasing awareness of human resource development as Malaysians march towards high-income nation status by 2020, increased demand for sophisticated educational services & products by middle-income parents, and rising school enrolment rates under MEB 2013 to 2025.
The stock’s valuation is also undemanding while yields are attractive based on 50 per cent payout ratio, the research firm noted.