KUALA LUMPUR: AllianceDBS Research said Sasbadi Holdings Bhd’s latest results came within its expectations and remained positive on the publisher earnings prospects.
Sasbadi registered core earnings of RM4.3mil during the quarter, a substantial improvement compared with core earnings of RM2mil recorded in 1QFY16.
The stronger 1Q results were supported by a 48% increase in its topline growth, compared with the corresponding period last year.
“This meets about 18% of our and consensus full- year earnings forecasts, which we deem to be within expectations given that 1Q is a seasonally weak quarter for the group,” Alliance said.
The research house noted that Sasbadi was one of the best proxies to the Malaysian education sector, as it is a dominant player in the domestic educational publishing industry with circa 10% market share.
Alliance said since obtaining the network marketing licence in April 2016, Sasbadi’s management had been actively engaged in recruiting members for the business.
“We gather that the group has so far signed on more than 3,000 members and significant contributions will start to kick in from FY17 onwards.
“We are positive that contributions from its network marketing business has improved to RM1.2mil in 1QFY17 from RM700,000 recorded in 4QFY16. In our earnings model, we have only assumed RM5mil contributions from its network marketing business for FY17, leaving room for further earnings upgrade,” it said.
Alliance has maintained its “buy” call on Sasbadi with a higher target price of RM1.75. pegged to a higher PE of 19 times (previously 17 times) as it narrowed its valuation discount from 25% to 10%, compared to the sector PE of 21 times.
“We believe that the smaller discount attached to Sasbadi’s valuation is justifiable in view of its larger market capitalisation, improved liquidity and superior ROE relative to its peers,” it added.
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