Sasbadi Holdings Berhad is a Malaysian-listed company that specialises in providing education solutions. Many Malaysians, including me, grew up carrying tons of textbooks and workbooks that were published by Sasbadi to school. Before this, little did I know that Sasbadi is a public-listed company on Bursa Malaysia.
Established in 1985, Sasbadi has a fair share in the early education and national school products market in Malaysia. Over the years, Sasbadi has grown to become a diverse education solutions provider of academic and non-academic printed materials, digital and technology-enabled products, applied learning tools, and a network marketing business.
Here are 10 things I learned from the 2019 Sasbadi AGM:
1. Revenue decreased by 5.7% from RM93.1 million in 2017 to RM87.8 million in 2018. The decline in revenue is due to the Ministry of Education’s (MoE) directive to ban workbooks for Year One to Year Three students, and restrict students in Year Four to Six to one workbook for each of the five core subjects. Nevertheless, Sasbadi’s revenue has been increasing at a compound annual growth rate (CAGR) of 8.1% from 2010 to 2018.
5. MSWG was interested to know more about Sasbadi’s performance in its export business. Law mentioned that they would identify suitable partners in foreign markets with large populations such as China, Vietnam, and Pakistan for its exported content business. Through partnerships, Sasbadi earns passive royalty income by providing partners with intellectual property rights to print, market, and sell Sasbadi’s products in foreign markets. The potential growth is hard to predict as an agreement is signed based on the partner’s perceived strength. As at 31 August 2018, Sasbadi’s revenue contribution from exported contents stood at RM200,000 in 2018. Revenue obtained from the export market will cushion the impacts of seasonality patterns and the shrinking primary school workbook market on the business.
6. A shareholder commented that no dividend was paid out in 2018. Due to Sasbadi’s lacklustre financial results in 2018 and the management’s prudent approach towards spending, Law answered that they would wait for the soft retail market to bounce back before deciding to resume paying a dividend. Sasbadi will distribute half of its yearly earnings as dividends to shareholders in accordance with its policy if it has sufficient funds for operations.
7. MSWG highlighted the RM4.0 million provision for impairment of inventories in 2018 and asked about the measures taken by the management to prevent a similar occurrence in the future. Law admitted that they were not stringent enough in the past two years. They printed more titles and wanted to grow faster based on the general positive economic outlook. Yet school grants were cut and money was not trickling down the system. Consequently, the economy did not recover and Sasbadi’s inventories piled up amidst the poor retail sentiment. Sasbadi has begun to take measures by selling slow-moving titles through discounted channels including their book fairs and Big Bad Wolf Books. Consumers will still buy the books although they are slightly outdated provided that the content remains relevant and the price is affordable. Moving forward, Sasbadi will be more cautious and better manage the risk of overproduction and sales returns so that inventories will not pile up.
8. MSWG also highlighted the 111.8% year-on-year increase in impairment losses on trade receivables to RM3.6 million in 2018. Law explained that local businesses were affected by the poor retail sentiment in the past two years including Sasbadi and its customers. A customer had a slow take-off and faced difficulties selling the slow-moving titles. Consequently, the customer did not have sufficient cash flow to facilitate prompt payment. Moving forward, Sasbadi will adopt more aggressive strategies to collect receivables.
9. Sasbadi’s finance costs incurred from bank overdrafts grew from RM1.1 million in 2017 and RM1.4 million in 2018.To reduce the reliance on bank overdrafts, Sasbadi will become more aggressive in terms of debt collection and consider selling non-core assets including the apartment units in Negeri Sembilan to generate cash flows internally. They may also undertake an equity funding exercise depending on market conditions after considering existing shareholders’ interest. The last potential resort raised shareholders’ alarms as earnings per share would likely be diluted.
10. As the print publishing segment accounted for more than two-thirds of Sasbadi’s revenue in 2017 and 2018, MSWG enquired about the outlook of the segment given the fact that Information and Communications Technology (ICT) for learning and teaching is gaining traction in Malaysia. According to Law, the challenges of implementing ICT-centric education include connectivity issues in rural areas, affordability of smart devices, and cost of replacement for lost devices. He considered the education business a rather defensive industry and the print publishing segment would still be relevant in the near term before the challenges are tackled. I was a bit sceptical when the managing director talked about computer illiteracy among parents, which I think is among the minority as the internet user population in Malaysia surpassed 24 million in 2017. Sasbadi also invested in ICT-related education solutions by developing in-house augmented reality (AR) technology. For instance, i-LEARN Ace Junior was launched in August 2018 in response to the workbook ban. It is a collaborative and interactive learning engagement platform between teachers, students, and guardians that targets Year One to Three students. During a break, Law also enthusiastically showcased to a small group of shareholders how Sasbadi’s AR technology could make learning fun using a smartphone.
https://fifthperson.com/2019-sasbadi-agm/
https://klse.i3investor.com/blogs/kianweiaritcles/2019-02-21-story-h1457068967-10_things_I_learned_from_the_2019_Sasbadi_AGM_Shak_Chee_Hoi.jsp
