$SASBADI / 5252 (SASBADI HOLDINGS BERHAD) – Ready for Back-to-School

🌐OVERVIEW
Sasbadi is a provider of diverse education solutions primarily operating in Malaysia with main operations in (1) Print Publishing, (2) Digital Solutions and Network Marketing, and (3) Applied Learning Programs (ALP) and STEM Education.

🔨OPERATING SEGMENTS
1. Print Publishing
(a) Academic prints
- Publications of workbooks, mock exam exercises, textbooks for MOE, etc.
- Distributed through physical bookstores (Popular), in schools, online platforms (Shopee/Lazada).
- Cyclicality: Primary and secondary school season (start of new academic calender), exam exams.
- Earn government tenders.
(b) Non-academic prints
- Comic books, novels, dictionaries, etc.
- Cyclicality: Marketing and promotional efforts, reading trend.

2. Digital Solutions and Network Marketing
(a)i-Learn Ace platform
- Flagship digital education solution (digitalised and atomised) for students preparing for exams.
- Revenue contribution from level of subscriptions.
- Partnership with BOOKR Kids.
(b)Digital teaching aid
- Targeting teachers.
- Revenue contribution from obtaining contracts from the government.

3. ALP and STEM Education
- Working with LEGO Education to promote hands-on learning through robotics and programming.
- Revenue contribution from annual robotics competitions, and obtaining contracts for robotic sets from schools.


💵 FINANCIALS {refer to attachments]:
*FYE 31 August
1. Financial performance
- A very huge jump in revenue and profits in 2023, especially in their PAT.
- FY23 in net cash position = RM2.6M
- Dividend yield = 4.5% (payout ratio of 32%)

2. Revenue (by Segments)
- Revenue from a customer = RM11.43M (2022: RM9.98M)
o contributed to more than 10% of the Group’s revenue.
- Print Publishing revenue = RM87.55M (91.07% of total revenue)
o Print publishing segment has always been contributing the most.


🔮FUTURE STRATEGIES:
1. Print publication
- Extend their lead in this segment through continued pursuit of product innovation.

2. M&A activities
- Increase their Intellectual Property (IP) portfolio.
- To launch new business segments with significant market share, spurring inorganic growth in short span of time.

3. Early childhood education (ECE) segment
- Partnership with BOOKR Kids, proposed acquisition of IPs from ICMSB.
- Develop ECE classroom solutions that provide standardisation across kindergartens (what with the market now being very fragmented).

4. Digitalisation of education sector
- Clinched two contracts from MOE:
o (1) Supplying and delivering digital solutions for school session usage (RM0.487 mil).
o (2) Service of testing the English language proficiency level of English teachers (RM0.285 mil).
- Capitalise on similar opportunities in tandem with MOE’s launch of the Digital Policy (DEP) on 28 Nov 2023.


🏫 INDUSTRY OVERVIEW
1. Population
- According to DOSM, the population of Malaysia is expected to increase from 28.16 mil (2010) to 41.5 (2040).
- However, a decrease in the younger (0-14 years) and working (15-64) age group is expected from 2010 to 2040.

2. Gross domestic product (GDP) per capita
- The gross domestic product per capita in Malaysia is forecast to continuously increase between 2023 and 2028 by in total $4,222.60 (+32.4 percent). After the 8th year, the GDP per capita is estimated to reach $17,256.63.
- This may drive up the demand for education products and solutions.

3. Government commitments to education sector
- 19% of national budget 2024 RM393.8bil, is allocated for the education sector, with RM58.7bil allocated for the Education Ministry and RM16.3bil for the Higher Education Ministry for RM75bil.
o RM1.9bil will be used to upgrade and maintain schools.
o RM930mil will be used to upgrade dilapidated buildings and infrastructure in 450 schools.
o RM1bil is for the maintenance of all types of schools.
- This may drive up the school’s enrolment rate, especially in rural areas.

4. Digitalisation of education
- While the current policy and Budget 2024 have made allocations for gadgets and the upgrading of Wi-Fi in schools, Malaysia is still hesitant to move into online learning due to hardware and internet availability and allowance of devices in school.

5. Paper raw materials (Management of costs)
- Purchase raw paper materials in bulk in advance, allowing them to preserve margin better through bulk discounts and locking in raw material costs at cheaper prices.
- According to reports, the performance of the Malaysian paper industry has remained stable in recent years, thanks in part to the establishment of overseas operations in Malaysia by Chinese pulp and paper companies. Leading producers in this sector include GS Paper & Packaging, Muda Paper Mills, and Pascorp Paper Industries.


📝 OTHER NOTES:
1. Termination of proposed acquisition of ICMSB’s intellectual property (publisher operating under Oyez!Books (16 Jan 2024).
- CMSB is obligated to refund the deposit of RM100,000.
- The termination is not anticipated to have a material effect on Sasbadi’s earnings and net assets for FYE2024, but will likely affect their ECE segment.

2. Outstanding order book = RM4.7 billion, supporting future growth.
- Sasbadi has consistently been the market leader in the education print industry in Malaysia and it does not seem to be changing anytime soon.

3. Current market cap = RM67.6 million

4. Academic calendar
-From 2022-2025, the start of the academic calendar will be in March.
-But the MOE has announced that it will revert back to January in 2026.

5. Growth in financials
- The increase in financials could most likely be due to the normalisation in school learning after the pandemic.

6. Brief update on 1Q24 (ended 30 Nov 2023)
- Revenue dropped by 17.5% YoY to RM15.3M due to lack of government contract contributions (textbooks and CEFR digital solutions), and lower-than-expected sales contribution from its Shopee partnership.
- However, 1Q24 tends to be seasonally weaker and they expect for sales to improve in 2Q and 3Q before the start of school terms, which will improve it’s print publishing segment.



Sources:
https://cutt.ly/Zw8sFbIy (Inter-Pacifiic)
https://cutt.ly/nw8sFbVx
https://cutt.ly/cw8sFna1
https://cutt.ly/Fw8sFnKj
https://cutt.ly/Cw8sFmes.
https://cutt.ly/uw8sFWE6
https://cutt.ly/9w8sFW45