Sasbadi upgraded on growth prospects

By Sherilyn Goh

Local educational publisher Sasbadi Holdings Bhd sees its call upgraded to “buy” by AllianceDBS Research, with a revised target price of RM2.85 from RM2.42 previously, on the back of its growth prospects.

According to AllianceDBS, the growth will be driven mainly by the group’s conventional book publication, its mergers and acquisitions activities, regional collaboration and its digital learning products offering which could see the group delivering earnings growth of 33% and 22% respectively between financial year 2016 and 2017.

“Management believes that the potential of its digital products remain underexplored and have intensified efforts to monetise its products by expanding its product portfolio and improvising its marketing strategy to enhance product recognition,” wrote AllianceDBS in its note published on Dec 11.

In addition, it noted regional collaboration could bring positive upside to the group. A successful collaboration with Southern Publishing & Media Co Ltd is expected to enhance the group’s earnings outlook, whereas its ongoing partnership with PT Penerbit Erlangga, one of Indonesia’s largest book publishers, also provides earnings upside potential.

“We changed our valuation model from discounted cash flow to price-earnings (PE) multiple as we believe the latter better reflects near-term earnings growth trajectory of Sasbadi.

We derive a target price of RM2.85 based on 16 times calendar year 2016 PE, which is at 30% discount to its peers. We believe the discount is justifiable given Sasbadi’s small market capitalisation and low liquidity. The stock deserves a second look for investors wishing to gain exposure to the resilient education sector,” AllianceDBS said.

At 2.45pm, Sasbadi was trading 2 sen lower at RM2.50.