KUALA LUMPUR (April 27): Sasbadi Holdings Bhd rose 2.5% upon the approval of a direct sales licence by the Domestic Trade, Cooperatives and Consumerism Ministry, which prompted a "buy" call by a research house.
At 12.30pm, it rose three sen to RM1.23 after hitting an intra-morning high of RM1.24 with 113,800 shares done for a market capitalisation of RM343.6 million.
Hong Leong IB Research (HLIB) analyst Mardhiah Omar retained a "buy" call on Sasbadi due to its strong annual free cash flow, high growth rate, innovativeness in creating products that cater to tech-savvy youths and unique education exposure which is closely linked to the country's education system.
However, she counted Sasbadi's failure to win the textbook contract from the Education Ministry, migration towards online platform, spike in paper prices and changes in the national curriculum and educational policies as risks.
Yesterday, Sasbadi said its wholly-owned unit Mindtech Education Sdn Bhd earned the licence for two years under the Direct Sales and Anti-Pyramid Scheme Act 1993.
At the same time, it posted a 20.38% fall in net profit to RM6.64 million in its second quarter ended Feb 29, 2016 (2QFY16) due to lower revenue from book publishing and increased staff headcount for capacity building.
Revenue rose 5.45% to RM33.86 million from RM32.11 million in 2QFY15.
Sasbadi proposed an interim single tier dividend of one sen, payable June 9. The ex-date and entitlement date fall on May 17 and May 19 respectively.
Sasbadi said the increase in revenue was mainly attributable to the consolidation of the results of Sanjung Unggul Sdn Bhd and its subsidiary post acquisition, but partly offset by lower revenue from its academic book publishing.
Mardhiah said the revenue accounted for 34% of HLIB's and consensus estimation which it considered to be in line with the research house's and consensus revenue forecast as the second quarter is usually the strongest for the group.
But Sasbadi's first half ended Feb 29, 2016's profit after tax and minority interests (Patami) came below HLIB's expectations, accounting for 42% and 41% of the research house's as well as the consensus estimation.
HLIB's forecast is unchanged pending a meeting with the management for an update post the 2QFY16 results.
Nevertheless, Mardhiah reiterated the "buy" call with target price of RM1.55 based on price to earnings (P/E) multiple of 18 times for the calendar year 2017 earnings per share.
"Targeted P/E is based on a discount of 40% to education sector. Valuation is justified in our view due to Sasbadi's relatively small market capitalisation and low liquidity," Mardhiah said.
SASBADI (5252) - Hot Stock: Sasbadi rises 2.5% on getting direct selling licence
http://www.theedgemarkets.com/my/article/sasbadi-rises-25-getting-direct-selling-licence
