SASBADI HOLDINGS BERHAD

MERCURY SECURITIES
SDN BHD
IPO Report
10 July 2014
MAI MARKET
(A Participating Organisation of Bursa Malaysia Securities
Berhad)
SASBADI HOLDINGS BERHAD
IPO Price: RM1.19
“Initial Public Offering – Main Market”
BACKGROUD
Sasbadi Holdings Berhad (Sasbadi), a publisher of educational materials mainly
undertakes print publishing focusing on primary and secondary school education
market. Sasbadi’s history can be traced back to 1985 as a publisher of educational
materials co-founded by Mr Law King Hui (MD) together with Mr Lee Swee
Hang (ED) and Mr Lee Eng Sang (ED) with the aim of publishing quality
educational materials to students in Malaysia.
Our Call
:
Subscribe
Fair Value (FV)
:
RM1.36
FV Upside To IPO Price
:
14.25%
Principal adviser, underwriter :
& sole placement agent
Alliance
Investment
Bank
LISTIG DETAILS
Over the decades, Sasbadi established itself as a reputable publisher of
educational materials in Malaysia under the brand names of ‘Sasbadi’, ‘Sasbadi
Online’, ‘Maya Press’, ‘Orbit Buku’ and ‘MBP Publications.’
Fund Raised (RM’mil)
:
25.2
Shares on Offer (mil)
:
36.0
The group structure is as follows:
New Shares (mil)
:
21.2
IPO Shares (mil)
:
57.2
Ordinary Shares (mil)
:
127.0
Par value (RM)
:
0.50
Mkt Cap (RM’mil)
:
151.1
Est Free Float (%)
:
45%
P/E (FY2013)
:
11.8x
P/B
:
1.8x
POST LISTIG
TIMETABLE
Opening of applications
:
7 July 2014
Closing of applications
:
14 July 2014
Tentative Listing date
:
23 July 2014
DETAILS OF IPO
SUBSTATIAL SHAREHOLDERS
IPO of 57.2Mil shares, representing 45% of enlarged issued and paid-up share
capital of Sasbadiis details as follows:
Issue
Shares
(mil)
Offer
Shares
(mil)
IPO
Shares
(mil)
Law King Hui
:
20.0%
Karya Kencana
:
20.0%
Lee Swee Hang
:
10.0%
Lee Eng Sang
:
5.0%
Institutional Offering
(i)
Selected investors via Placement
23.3
(ii)
Bumiputera investors approved by MITI
12.7
36.0
Retail Offering
(i)
6.4
(ii)
Allocation via balloting to the Malaysian
Public
IDUSTRY OVERVIEW AD PROSPECTS
Eligible Persons
(iii)
Selected investor via Placement
9.2
Total
Prepared by:
5.7
21.2
21.2
36.0
57.2
Edmund Tham / Research Team
Mercury Securities Sdn Bhd
BUSIESS OVERVIEW
The business model is summarized as below:
Sasbadi’s revenue are derived from the following business segments:
Business segments
Descriptions
1.
Educational Publishing
:
Print publishing of National School Curriculum based educational materials mainly
for primary and secondary levels of education as well as supplementary educational
materials and online publishing
2.
Distribution of Applied
Learning products
:
Distribution of applied learning products
3.
Others
:
Mainly supply of electronic dictionaries, publishing of general title books,
distribution of third party publications, and trading of paper
Historically, educational publishing contributed more than average of 87% of its total revenue and grew at an AAGR
21.3% for the past 4 years between FYE 31 August 2010 and 2013. Revenue segments are depicted in the chart below.
2
Mercury Securities Sdn Bhd
IDUSTRY OUTLOOK & PROSPECT
The outlook of the educational publishing industry is dependent on the following key factors:
1. Performance of the education sector
focusing on primary and secondary schools
:
Between 2009 and 2013, overall enrolments in government
funded primary and secondary schools have declined by an
average annual rate of 1.0% . However the decline is not material
as the base comprised an average of 5.1mil primary and
secondary students, providing a large potential marker for
educational material.
2. Government initiatives
:
Favourable government initiatives have positive impact on the
educational publishing industry, e.g.
in 2014 budget,
approximately RM1.7bil was allocated for pre-school
programmes.
3. Population, income and expenditure
:
Growth in population would increase the potential customer base,
Malaysia’s total population is forecasted to grow at an AAGR of
1.3% between 2013 and 2015 to reach 30.5million.
Growth in per capital income and average household expenditure
may result in increased spending on educational materials.
Malaysia’s per capital income is forecasted to grow by 7.8% to
RM34,175 in 2014.
4 Economic conditions
:
Malaysia’s real GDP grew 4.7% in 2013 and for 2014 is
forecasted to grow between 4.5% and 5.5%
FUTURE PLA AD STRATEGIES
The future plans and business strategies are as follows:
1
Acquisition of publishing business
:
Propose to utilise RM11.5mil of the IPO proceeds to part finance
the acquisitions of publishing business that focuses on educational
material for national-type schools (Chinese) and publishing
business focusing on general titles (Bahasa Malaysia & Chinese).
2
Acquisition of office cum warehouse
building
:
Acquire office cum warehouse building with a built up area of
approximately 10k sq ft in Klang valley region to cater for
business expansion.
3
Development
of
educational resources
4
Establishment
centres
of
new
online
:
Currently, Sasbadi has 6 types of online education resources and
intends to continue to develop other new online educational
resources to cater to teaching and learning of various skills such
as listening, thinking and speaking.
applied
learning
:
Establish applied learning centres in areas of high pedestrian
traffic and easy accessibility, such as shopping malls, to provide
training and education to young children, plan to utilised
RM1.0mil from IPO proceed to set up 2 applied learning centres
3
Mercury Securities Sdn Bhd
RISKS
Major risks relating to Sasbadi’s business:
1.
Increased usage of internet for educational purposes
2.
Increased competition from online publications
3.
Changes in national curriculum
4.
Abolishment of national examination
5.
Fluctuations in prices of raw materials
6.
Economic slowdown
USE OF PROCEEDS
The total gross proceeds from the IPO of RM25.2mil to be utilised in the following manner:
Details of utilisation of Proceed
RM’mil
1.
Establishment of applied learning centres
:
1.0
2.
Part-financing of proposed acquisition of
publication businesses
:
11.5
3.
Financing of proposed acquisition of an
office cum warehouse building
:
7.0
4.
Working capital
:
2.7
5.
Estimated listing expenses
:
3.0
Total gross proceed
:
25.2
DIVIDED POLICY
Dividend policy targets a payout ratio of 50% of profit attributable to shareholders.
4
Mercury Securities Sdn Bhd
VALUATIO
At IPO price of RM1.19 per IPO Share, Sasbadi is valued at 11.8x PE based on EPS of 10.01sen for FYE 31 Dec 2013
and representing P/B of 1.8x based on pro forma consolidated NA per share of approximately RM0.68 per share upon
listing.
With 3 decades of operations as a publisher of educational materials, Sasbadi has built its brand awareness spanning two
generation and established track record, network of distribution and large customer base. Improving education indicators
such as growing enrolment, literacy rate and growing population as well as growth in GDP and per capita income augurs
well with the prospect of Sasbadi.
We have a subscribe recommendation with a target price of RM1.36 derived based on 9.6x PE of estimated EPS of
14.16sen for FYE 31 Aug 2014. The target price represents a potential return of 14.2% over the IPO price with a potential
dividend yield of 5.9%.
5
Mercury Securities Sdn Bhd
Income Statement
FYE 31 Aug
(RM'm)
Financial Data & Ratios
2010A
2011A
2012A
2013A
2014E
2015E
Growth (%)
2011A
2012A
2013A
2014E
2015E
Revenue
47.0
60.0
64.8
78.0
85.8
94.3
Revenue (%)
27.5%
8.1%
20.3%
10.0%
10.0%
Gross profit
18.6
24.8
26.9
45.8
42.9
47.2
Gross profit (%)
33.8%
8.4%
70.3%
-6.4%
10.0%
EBITDA
9.6
14.3
16.6
19.7
27.2
31.7
EBITDA (%)
50.1%
15.5%
18.6%
38.3%
16.5%
Operating Profit
8.2
12.8
14.9
17.6
24.9
29.2
Operating Profit
(%)
55.8%
16.4%
18.2%
41.7%
17.2%
PBT
8.2
12.9
14.9
17.7
25.0
29.3
PBT (%)
56.9%
15.1%
18.6%
41.4%
17.2%
Net Profit
6.1
9.5
10.9
12.8
18.0
21.1
Net Profit (%)
56.1%
14.9%
17.1%
41.0%
17.2%
Other Income
0.2
0.2
0.1
0.2
0.2
0.2
Interest Exp
(0.1)
(0.0)
(0.1)
(0.1)
(0.1)
(0.1)
Profitability
(%)
Taxation
(2.2)
(3.5)
(4.0)
(4.9)
(7.0)
(8.2)
GP Margin
41.4%
41.5%
58.8%
50.0%
50.0%
Depreciation
(1.2)
(1.4)
(1.6)
(1.9)
(2.1)
(2.3)
EBITDA
Margin
23.9%
25.6%
25.2%
31.7%
33.6%
EPS (Sen)
4.78
7.46
8.58
10.04
14.16
16.59
Operating
Margin
21.3%
22.9%
22.5%
29.0%
30.9%
-
-
-
-
50%
50%
PBT Margin
21.6%
23.0%
22.7%
29.1%
31.0%
Net Margin
15.8%
16.8%
16.4%
21.0%
22.3%
Effective Tax
Rate
26.8%
26.9%
27.8%
28.0%
28.0%
Dividend payout
6
Mercury Securities Sdn Bhd
Recommendation Framework
Buy/Outperform
The stock’s total return is expected to be +15% or better over the next
12 months.
eutral
The stock’s total return is expected to be within +/-15% over the next
12 months.
Sell/Underperform
The stock’s total return is expected to be -15% or worse over the next
12 months.
Trading Buy
The stocks total return is expected to be 10% or better over the next 3
months
Trading Sell
The stock’s total return is expected to be -10% or worse over the next 3
months.
DISCLAIMER
All information, views and advice are given in good faith but without legal responsibility. Mercury
Securities Sdn. Bhd. or companies or individuals connected with it may have used research material
before publication and may have positions in or may be materially interested in any stocks in the markets
mentioned.
For any enquiries, please contact us:
L-7-2,
%o.2, Jalan Solaris,
Solaris Mont Kiara,
50480, Kuala Lumpur
Tel: 603-6203 7227
Email: [email protected]

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