PRESBHD (5204) - Prestariang - Wins Microsoft MLA2.0 contract
Target RM3.90 (Stock Rating: ADD)
On Friday, we were pleasantly surprised that Prestariang won the bid for the Microsoft MLA2.0 contract. We raise our FY15-16 EPS forecasts by 13-17% to reflect additional earnings from MLA2.0 and slightly weaker earnings from the oil & gas training division. Our target price also rises, based on an unchanged 19.2x 2016 P/E (20% premium over average sector P/E to reflect the potential earnings boost from private placement proceeds). The stock remains an Add. Potential catalysts for the stock include winning the MLA2.0 contract and further newsflow on the PISA accelerated training programme.
What Happened
On Friday, Prestariang announced that it has secured the letter of award (LOA) from the Ministry of Finance (MOF) to be the exclusive Microsoft licensing solutions partner (LSP) to provide Microsoft software under the Master Licensing Agreement (MLA2.0) to all the government agencies in Malaysia. The LOA is effective Feb 2015 and runs for three years. Prestariang was one of nine LSPs (including Prestariang) that bid for the MLA2.0 contract.
What We Think
We were pleasantly surprised that Prestariang was chosen to be the exclusive LSP for the MLA2.0 contract. The company did not indicate the annual contract size for MLA2.0, but our channel checks with industry sources indicate that it should be around US$45m-50m (RM162m-RM180m), if not higher. Assuming a 10% net profit margin for MLA 2.0 (software and training), MLA2.0 could boost Prestariang’s net profit by at least RM16.2m (3.3 sen EPS enhancement). The potential MLA2.0 earnings could be as much as 65% of the group’s expected 2014 net profit, an indication of how significant the MLA2.0 earnings impact would be for Prestariang. In addition, we understand that there is no forex risk for the company as the US$-RM exchange rate would be based at the time of the order. We raise Prestariang’s FY15-16 EPS by 13-17% to reflect the additional MLA2.0 earnings and also take into account the likely lower oil & gas training students this year (assuming 1,000 training students in 2015 vs. our previous assumption of 2,000 students) in view of the current tough conditions in the oil & gas sector.
What You Should Do
Remain invested in the stock. 2015 should be a record year for Prestariang after a disappointing 2014. Newsflow has turned positive since end-2014 when MARA proposed to acquire a minority stake in UniMY, and now the MLA2.0 contract win. Positive newsflow should continue. Ex-cash, the stock is trading at an attractive 9.5x CY15 P/E. The dividend yield also looks attractive at 5.4%.
Source: CIMB Daybreak - 26 January 2015
Target RM3.90 (Stock Rating: ADD)
On Friday, we were pleasantly surprised that Prestariang won the bid for the Microsoft MLA2.0 contract. We raise our FY15-16 EPS forecasts by 13-17% to reflect additional earnings from MLA2.0 and slightly weaker earnings from the oil & gas training division. Our target price also rises, based on an unchanged 19.2x 2016 P/E (20% premium over average sector P/E to reflect the potential earnings boost from private placement proceeds). The stock remains an Add. Potential catalysts for the stock include winning the MLA2.0 contract and further newsflow on the PISA accelerated training programme.
What Happened
On Friday, Prestariang announced that it has secured the letter of award (LOA) from the Ministry of Finance (MOF) to be the exclusive Microsoft licensing solutions partner (LSP) to provide Microsoft software under the Master Licensing Agreement (MLA2.0) to all the government agencies in Malaysia. The LOA is effective Feb 2015 and runs for three years. Prestariang was one of nine LSPs (including Prestariang) that bid for the MLA2.0 contract.
What We Think
We were pleasantly surprised that Prestariang was chosen to be the exclusive LSP for the MLA2.0 contract. The company did not indicate the annual contract size for MLA2.0, but our channel checks with industry sources indicate that it should be around US$45m-50m (RM162m-RM180m), if not higher. Assuming a 10% net profit margin for MLA 2.0 (software and training), MLA2.0 could boost Prestariang’s net profit by at least RM16.2m (3.3 sen EPS enhancement). The potential MLA2.0 earnings could be as much as 65% of the group’s expected 2014 net profit, an indication of how significant the MLA2.0 earnings impact would be for Prestariang. In addition, we understand that there is no forex risk for the company as the US$-RM exchange rate would be based at the time of the order. We raise Prestariang’s FY15-16 EPS by 13-17% to reflect the additional MLA2.0 earnings and also take into account the likely lower oil & gas training students this year (assuming 1,000 training students in 2015 vs. our previous assumption of 2,000 students) in view of the current tough conditions in the oil & gas sector.
What You Should Do
Remain invested in the stock. 2015 should be a record year for Prestariang after a disappointing 2014. Newsflow has turned positive since end-2014 when MARA proposed to acquire a minority stake in UniMY, and now the MLA2.0 contract win. Positive newsflow should continue. Ex-cash, the stock is trading at an attractive 9.5x CY15 P/E. The dividend yield also looks attractive at 5.4%.
Source: CIMB Daybreak - 26 January 2015
