Investment Highlights

• We reiterate our BUY recommendation on Prestariang with unchanged forecasts and fair value of RM2.08/share based on sum-of-parts valuation.

• Prestariang announced that it has extended the period to fulfil the conditions precedent under the concession agreement on Sistem Kawalan Imigresen Nasional (SKIN). We note that the group has submitted all necessary documents, and is awaiting the final nod from the government.

• While the extension is for a period of 3 months, we remain optimistic that the approval could come earlier, keeping the group on track to commence SKIN operations in March. Therefore, there is no impact on our earnings forecasts.

• To recap, SKIN is a RM3.5bil project in relation to the implementation of an integrated and comprehensive core immigration system at the national border. The project is a game-changer for the group and the main growth driver going forward.

• While payments are to be made only in year 4, we note that the group can book in revenue from SKIN based on the accounting standards of IC Interpretation 12 (IC 12). Given this, the group is set to register over 3x revenue and net profit growth in FY18F, which we believe is an inflection point for the group.

• We continue to like Prestariang for its: 1) leading position in the ICT training and software distribution space in Malaysia; 2) the award of SKIN, which is expected to beef up net profit by more than 8x from FY16 to FY18F; and 3) recent tie-up with Alibaba Cloud and Conversant Solutions to develop EduCloud, which provides potential new revenue streams.

• At the current price, Prestariang appears undervalued for a solutions provider. The company currently trades at a 1- year forward PE of 12x, while its regional comparables, Chinasoft International and Hexaware Technologies, are both trading at 19x.

Source: AmInvest Research - 9 Feb 2018