PRESBHD (5204) - Prestariang - Making the grade
Target RM3.36 (Stock Rating: ADD)
At its 4Q14 briefing, Prestariang indicated that the worst is over and 2015 should be a much better year, with earnings growth coming from MLA2.0 and hopefully the PISA Accelerated Project (PAP), which is expected to kick off in 2H15. We maintain our EPS forecasts and our target price, which is pegged to 19.2x FY16 P/E, a 20% premium over our target for the sector to reflect the potential earnings boost from its private placement proceeds. The stock remains an Add. Potential catalysts include securing the PAP project and getting the “IC Citizen” contract extension.
What Happened
At today’s 4Q14 briefing, there were a few positive surprises i) For the first time, the company talked about a new strategic technology business that it has been working on. It has so far invested RM4.5m in this business, which is expected to be a game changer for Prestariang. The company expects to finalise the deal in 2H15. ii) Prestariang has submitted a proposal to the Ministry Of Education (MOE) for the PISA Accelerated Project (PAP) and targets to start implementation in 2H15. 70,000 Science and Maths secondary teachers will be taught higher order thinking skills (HOT). iii) The company hopes to complete the sale of a 30% stake in UniMY to MARA in Mar. MARA is looking to sponsor 500 UniMY students p.a. over the three years. iv) The MLA2.0 contract for distributorship of Microsoft software to all government ministries has already started. The annual contract size should be at least RM140m and we estimate MLA2.0 revenue to be RM160m-180m annually. v) In the next few months, Prestariang is confident of securing contracts worth RM60m annually for extension projects which include the IC Citizen, 3P, MUSE and RBCTS projects.
What We Think
It looks like the worst is over and 2015 should be a much better year. In Dec 2014, newsflow turned positive for the company when MARA proposed to buy a stake in UniMY and in Jan, the company secured the MLA2.0 project. Securing the PAP and the new strategic technology business in 2H15 would provide a further boost to its long-term earnings growth outlook.
What You Should Do
Investor should take advantage of the recent share price weakness following poor 4Q14 results to accumulate the stock. Its valuation is undemanding, at only 11.4x 2015 P/E ex-cash. Dividend yields still look attractive, at just below 5%.
Source: CIMB Daybreak - 27 February 2015
Target RM3.36 (Stock Rating: ADD)
At its 4Q14 briefing, Prestariang indicated that the worst is over and 2015 should be a much better year, with earnings growth coming from MLA2.0 and hopefully the PISA Accelerated Project (PAP), which is expected to kick off in 2H15. We maintain our EPS forecasts and our target price, which is pegged to 19.2x FY16 P/E, a 20% premium over our target for the sector to reflect the potential earnings boost from its private placement proceeds. The stock remains an Add. Potential catalysts include securing the PAP project and getting the “IC Citizen” contract extension.
What Happened
At today’s 4Q14 briefing, there were a few positive surprises i) For the first time, the company talked about a new strategic technology business that it has been working on. It has so far invested RM4.5m in this business, which is expected to be a game changer for Prestariang. The company expects to finalise the deal in 2H15. ii) Prestariang has submitted a proposal to the Ministry Of Education (MOE) for the PISA Accelerated Project (PAP) and targets to start implementation in 2H15. 70,000 Science and Maths secondary teachers will be taught higher order thinking skills (HOT). iii) The company hopes to complete the sale of a 30% stake in UniMY to MARA in Mar. MARA is looking to sponsor 500 UniMY students p.a. over the three years. iv) The MLA2.0 contract for distributorship of Microsoft software to all government ministries has already started. The annual contract size should be at least RM140m and we estimate MLA2.0 revenue to be RM160m-180m annually. v) In the next few months, Prestariang is confident of securing contracts worth RM60m annually for extension projects which include the IC Citizen, 3P, MUSE and RBCTS projects.
What We Think
It looks like the worst is over and 2015 should be a much better year. In Dec 2014, newsflow turned positive for the company when MARA proposed to buy a stake in UniMY and in Jan, the company secured the MLA2.0 project. Securing the PAP and the new strategic technology business in 2H15 would provide a further boost to its long-term earnings growth outlook.
What You Should Do
Investor should take advantage of the recent share price weakness following poor 4Q14 results to accumulate the stock. Its valuation is undemanding, at only 11.4x 2015 P/E ex-cash. Dividend yields still look attractive, at just below 5%.
Source: CIMB Daybreak - 27 February 2015
