The following information is extracted from the Independent Market Research Report titled “Independent Assessment of the Educational Publishing Industry focusing on National School Curriculum in Malaysia” prepared by Vital Factor Consulting Sdn Bhd for inclusion in the prospectus of Sasbadi Holdings Berhad dated 7 July 2014.

 

BACKGROUND AND INTRODUCTION

Sasbadi Holdings Group is primarily a publisher of educational materials based on the Malaysian National School Curriculum focusing on primary and secondary education, which is the focus of this industry assessment

 

INDUSTRY OVERVIEW AND STRUCTURE

Overview of the Publishing Industry

Generally, the Publishing Industry covers diverse areas as depicted in the figure below:

 

The focus of this report is on content publishing. In Malaysia, the content publishing industry is mainly focused on print publications in terms of monetary values. As such, statistics for the publications of books and other materials mentioned in this report are mainly for print publishing, unless mentioned otherwise. Similarly, the term publisher is primarily used to refer to print publishing, unless mentioned otherwise.

 

Structure of the Content Publishing Industry

The Content Publishing Industry in Malaysia is generally segmented as follows:

 

Educational Publishing refers to the publication of materials designed to teach or to enable the users or consumers to learn and acquire knowledge and skills through these materials. Educational publishing may focus on specific syllabus, curriculum or course work to obtain some specific learning outcome. It also includes supporting materials to facilitate the learning process or add to the users’ knowledge and skill base. Some examples of educational publishing materials include textbooks, revision guides, workbooks, reference books, sample examinations questions and other prescribed learning materials.

 

Structure of Educational Publishing Industry

In Malaysia, the Educational Publishing Industry is segmented as follows:

 

Educational Publishing of National School Curriculum materials refer to the publishing of materials based on the national school curriculum as prescribed by the Ministry of Education in Malaysia. These materials include textbooks, workbooks, revision guides and other reference and related materials that follow or are related to the National School Curriculum. With the exception of international, expatriate, correspondence and some special education and religious schools, the national curriculum shall be used by all schools including kindergartens, primary and secondary schools in Malaysia.

 

Sasbadi Holdings Group is primarily involved in the business of educational publishing focusing on Malaysian National School Curriculum based materials.

 

Publishing Medium

Generally, publications are stored and distributed through three main media, as follows:

 

Sasbadi Holdings Group mainly uses print medium, but has a small proportion of its contents available online.

 

National Education System in Malaysia

The National Education System in Malaysia comprises the following:

 

Note: The focus of this report is on primary and secondary education.

 

Educational Institutions in Malaysia

In Malaysia, there are three categories of educational institutions:

 

The types of primary and secondary educational institutions in Malaysia are categorised into two major types as follows:

Notes:-

SK = Sekolah Kebangsaan;
SJK (C) = Sekolah Jenis Kebangsaan (Cina);
SJK (T) = Sekolah Jenis Kebangsaan (Tamil);
SABK = Sekolah Agama Bantuan Kerajaan;
SMK = Sekolah Menengah Kebangsaan;
SMKA = Sekolah Menengah Kebangsaan Agama;
SBP = Sekolah Berasrama Penuh.

 

Currently, only primary education is compulsory for all Malaysians.

 

SUPPLY AND DEMAND CONDITIONS

 

Number of Book Titles Published in Malaysia

The supply conditions of the industry can be represented by the number of book titles published in Malaysia, which is registered under the Deposit of Library Material Act 1986.

 

Number of Book Titles Published in Malaysia
  2009 2010 2011 2012 2013 AAGR
2009-
2013(%)
Adult 1 7,609 7,787 9,448 9,554 9,064 4.5
Textbook 2 3,969 4,218 4,638 5,550 6,241 12.0
Children 1 4,189 3,751 3,837 4,095 4,682 2.8
TOTAL 15,767 15,756 17,923 19,199 19,987 6.1

Notes:-

AAGR = Average annual growth rate;
(1) Includes educational and non-educational books;
(2) In addition to textbooks, this category also includes other student materials including workbooks, revision guides and reference books.

Source: National Library of Malaysia

 

Gross Output Value of Publishing Services

The supply and demand conditions of the publishing industry (including educational and non-educational materials) can be assessed by the gross output value of publishing activities, as follows:

 

Gross Output Value of Publishing Services in Malaysia
  2009 2010 2011 AAGR
2009-2011(%)
Publishing Services 741.7 1,018.0 1,184.9 26.4
Note: Includes educational and non-educational publishing. All units in RM million except percentages.

Source: Department of Statistics

 

Import and Export Value of Printed Matter

The import and export values of printed matter can also be used as a proxy to assess the supply and demand conditions for the Educational Publishing Industry.

 

Import and Export Value of Selected Printed Matter (Malaysia)
  2009 2010 2011 2012 2013 AAGR
2009-
2013(%)
Printed Books, Brochures, Leaflets and Similar Printed Matter 1
Import Value 524 483 493 536 487 -1.8
Export Value 559 528 511 502 523 -1.7
             
Children's Picture, Drawing or Colouring Books
Import Value 11 16 11 14 23 21.9
Export Value 2 3 6 3 5 26.1

Notes:-

Includes educational and non-educational publishing. All units in RM million except percentages.
(1) Whether or not in single sheets.

Source: Department of Statistics

 

Household Expenditure

The average monthly household expenditure on various publication materials will provide some indication of their respective demand.

 

Average Monthly Household Expenditure (Malaysia)
  2004/05 2009/10 AAGR
2004/05-
2009/10(%)
Newspapers 1 8.55 9.14 1.3
Books 2 2.78 1.71 -9.3
Magazines and Periodicals 3 2.02 1.53 -5.4

Notes:-

Includes educational and non-educational materials. All units in RM except percentages;
(1) Includes daily and weekly newspapers in any language;
(2) Includes text books, examination reference books, other school books, story books / novels and others such as dictionaries,
self-development books and computer books;
(3) Includes local and imported magazines and periodicals and others such as comics and school magazines.

Source: Department of Statistics

 

Household Use of Internet on Education

Based on the Household Use of Internet surveys conducted by the Malaysian Communications and Multimedia Commission (MCMC):

 

Household Use of Internet
  2008 2009 2011
Education (%) 64.5 46.0 63.5

Source: Malaysian Communications and Multimedia Commission

 

A significant proportion of households with internet access uses it for educational purposes. Greater use of the internet for education would indicate higher demand for online publication materials.

 

SUPPLY DEPENDENCIES

The supply of paper is one of the main raw materials for the print publishing industry in general. As such, the supply dependencies of print publications, including those for educational materials, can be assessed by the following statistics:

 

Production Quantity of Paper

In 2010, there were 175 establishments involved in the manufacture of pulp, papers and paperboard in Malaysia.

 

The production quantity of paper used in print publications is as follows:

 

Production Quantity of Paper in Malaysia
  2009 2010 2011 2012 2013 AAGR
2009-
2013(%)
Uncoated Woodfree Paper 154 161 135 157 184 4.5
Note: All units in thousand tonnes except percentages.

Source: Department of Statistics

 

Import Quantity of Paper

Apart from local sources, publishers may also purchase paper through overseas sources.

 

The import quantity of paper used in print publications is as follows:

 

Import Quantity of Paper (Malaysia)
  2009 2010 2011 2012 2013 AAGR
2009-
2013(%)
Newsprint 143 184 92 161 187 6.9
Uncoated Printing and Writing Paper 88 102 75 127 111 5.9
Note: All units in thousand tonnes except percentages.

Source: Department of Statistics

 

Sales Value of Printing

The sales value of printing in Malaysia is shown as follows:

 

Sales value of Printing in Malaysia
  2009 2010 2011 2012 2013 AAGR
2009-
2013(%)
Printing 522 638 809 1,009 1,097 20.4
Note: All units in RM million except percentages.

Source: Department of Statistics

 

DEMAND DEPENDENCIES

As the demand for educational materials depend on end-users and consumers, the following factors will have an impact on the overall Educational Publishing Industry:

 

In addition, the demand for online educational materials is dependent on the number of online users. As such, the demand dependencies can be assessed by the following statistics:

 

Number of Broadband Subscriptions

Growth in number of broadband subscriptions would provide a bigger pool of potential users of online educational materials.

 

Number of Boardband Subscriptions in Malaysia
  2009 2010 2011 2012 2013 AAGR
2009-
2013(%)
Household 1,972 3,672 4,270 4,338 4,558 23.3
Non-Household 649 1,051 1,417 1,777 1,815 29.3
TOTAL 2,620 4,722 5,687 6,115 6,373 24.9
Note: All units in thousands except percentages; Total does not add-up due to rounding.

Source: Malaysian Communications and Multimedia Commission

 

Broadband Penetration Rate

A higher broadband penetration rate would provide increased opportunities for providers of online publishing services.

 

Broadband Penetration Rate in Malaysia
  2009 2010 2011 2012 2013
Population (per 100 inhabitants) 9.2 16.6 19.4 21.7 22.6
Household (per 100 households) 31.7 55.6 62.3 66.0 67.1

Source: Malaysian Communications and Multimedia Commission

 

COMPETITIVE ANALYSIS

 

Nature of Competition in the Industry

Competition within the Education Publishing Industry focusing on National School Curriculum can be segmented into two levels, namely:

 

Factors of Competition

As with most free enterprise environment, competition within the Educational Publishing Industry focusing on the National Curriculum is based on a number of factors, including:

 

BARRIERS TO ENTRY

 

THREAT OF SUBSTITUTES

 

INDUSTRY PROSPECTS AND OUTLOOK

The outlook of the Educational Publishing Industry is dependent on the following factors:

 

DRIVERS OF GROWTH

Some of the drivers of growth for the Educational Publishing Industry are as follows:

 

MARKET SEGMENTATION, SIZE AND SHARE

 

Market Operator Segmentation

The Educational Publishing Industry in Malaysia comprises two tiers of private publishers based on revenue size. Based on available information as at April 2014, details of the two tiers of publishers are as follows:

 

Note: Revenue used for segmenting operators into two tiers is based on their total revenue, which includes publishing of educational materials, and may also include other related and non-related activities. Publishers above refer to those who are involved in the business of publishing on a regular basis.

Source: Secondary Market Research undertaken by Vital Factor Consulting Sdn Bhd

 

Market Size

 

Market Share

In 2013, Sasbadi Holdings Group had a market share of 6% of the publishing of books, brochures and other publications (including educational and non-educational materials) in Malaysia based on the Group’s revenue from print publications (Source: Vital Factor Consulting Sdn Bhd).

 

In 2013, Sasbadi Holdings Group had a market share of 9% of printed educational materials in Malaysia based on the Group’s revenue from print publications (Source: Vital Factor Consulting Sdn Bhd).

 

* Please read this section in conjunction with Section 7 from page 135 to page 175 of Sasbadi Holdings Berhad's Prospectus dated 7 July 2014.