KUCHING: Sasbadi Holdings Bhd (Sasbadi) a growing market leader in the local educational publishing industry with high return on equity (ROE) and superior profitability, is slated for strong growth ahead after its listing.
AllianceDBS Research Sdn Bhd (AllianceDBS Research) noted that the company, armed with the proceeds from a recent IPO, is in prime position to embark on earnings accretive mergers and acquisitions (M&A) in the fragmented educational publishing industry.
“Sasbadi is a strong and growing market leader in the educational publishing industry with about nine per cent market share, based on apparent annual consumption of RM750 million in 2013, according to estimates from Vital Factor Consulting Group.
“We like Sasbadi’s market lead and lean operating structure (outsources printing and focuses on content development) which creates an edge for the group to compete and grow its market share in the fragmented educational publishing industry.”
The research house says Sasbadi’s competitive edge is hard to replicate, with its key competitive advantage in the print publishing industry built on an experienced and entrenched editorial team, an extensive and established distribution network, a diversified product range, and economies of scale.
“Over the last 29 years, Sasbadi has built an extensive distribution network covering 1,380 distribution points in Malaysia with 570 active dealers,” it explained.
“Coupled with its experienced and entrenched editorial team, this creates a strong competitive edge for the group which competitors and new entrants would find hard to replicate.”
Compared with the only listed rival, Pelangi Publishing Group, AllianceDBS Research believes Sasbadi is in prime position to take the lead to consolidate the fragmented educational publishing industry.
“The former has not been able to generate consistent improvement in business scale/model, ROE, nor profitability, due to its low value-added business model which is integrated with the asset-heavy printing business.
“Meanwhile, Sasbadi’s business model is complemented by the high-margin online publishing operation and distribution of applied learning products. This is evident in Sasbadi’s operating cost structure vs Pelangi’s.
“In addition, there is huge potential in the untapped education services market, in particular hands-on learning centres that foster creative thinking and innovation, where Sasbadi could be the missing piece of the puzzle in Malaysia’s education industry.”
This led the firm to forecast Sasbadi fs financial year 2015 (FY15) to FY17 core profit after tax (PAT) expanding at three-year compound annual growth rate (CAGR) of 22 per cent, underpinned by earnings accretive mergers and acquisitions.