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Thursday, January 25, 2018

Sasbadi- Earnings Recovered

Background

Sasbadi Holdings Bhd ("Sasbadi") is a publisher of educational materials, undertaking print publishing as well as online publishing of educational materials based on the Malaysian National School Curriculum.  It is also involved in the distribution of applied learning products - miniature building blocks and mechanical, electrical and electronic components, as well as devices for measuring and analysing live signals, and software to create measurement and control systems - designed to provide hands-on learning experience to students. 

Diagram: Sasbadi's Main Businesses

Result Update

For QE30/11/2017, Sasbadi reported to a net profit of RM4.4 million as compared to a net loss of RM4.2 million in the immediate preceding quarter (QE31/8/2017). The turnaround was due to higher revenue & lower operating expenses.

The poor performance in QE31/8/2017 was due to a drop in revenue from the academic publishing subsidiaries d- partially due to a seasonally weaker quarter as well as weaker retail market. This decline was only partially offset by the increase in revenue of the online/digital products division - leading to an overall drop in revenue. In addition, the group incurred higher operating costs in QE31/8/2017 due to the consolidation of the United Publishing Group's full quarter results, impairment loss on trade receivables, and increased interest expense arising from higher gearing.

(Note: This latest quarterly result was announced on Jan 18.)


Table: Sasbadi's last 8 quarters' financial performance


Graph: Sasbadi's last 14 quarters' financial performance

Financial Position

As at 30/11/2017, Sasbadi's financial position is deemed satisfactory with current ratio at 3.1x and gearing ratio at 0.50x.

Valuation

Sasbadi (closed at RM0.605 yesterday) is now trading at a trailing PER of 21 times (based on last 4 quarters' EPS of 2.89 sen). However, if we were to exclude the exceptional loss from QE31/8/2017, the 4 quarters' EPS could be raised to 5.0-5.5 sen. Based on a full year EPS of 5 sen, Sasbadi's PER would be 12 times. At this adjusted PER of 12 times, Sasbadi looks fairly attractive.

Technical Outlook

Sasbadi share price is moving within a large expanding triangle. As noted in the past, an expanding triangle is an unusual price pattern where the bulls get more bullish over times while the bears get more bearish as well. At some point, the stalemate must be resolved. Failing which, the share price will move sideways or begin to converge. If we make the fair assumption that the price will stay within the triangle, then the next likely movement is for the share price to rise up to the middle line. Thus the stock could be a good buy at the current price of RM0.60.


Chart: Sasbadi's weekly chart as at Jan24, 2018 (Source: Malaysiastock.biz)

Conclusion

Based on satisfactory financial performance & position and reasonable valuation, Sasbadi is a good stock for long-term investment. 

Note:
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

1 comment:

Investor Mr said...

Hi Alex, I really am inspired by your blog...

With regards to Sasbadi, do you this company has future earnings growth?
I mean, based on technicals it seems to be oversold, and thus set for a rebound.
However, will there be an consistent growth in its revenue? Because when analyzing companies, this is the main question I always ask myself.