• Prestariang’s FY17 core earnings surged by more than 100% to RM22.1m from RM8.9m. The strong growth was due to recognition of the Sistem Kawalan Imigresen Nasional (SKIN) project.

• Overall, FY17 net profit was inline with consensus but below our expectations at 83% .

• On qoq, the group’s PBT grew by more than 100% due to better performance by the Education and recognition profit from SKIN segments.

• We trimmed our core earnings forecast for FY18E/FY19E by 9.9%/7.5% to RM59.7m/RM83.2m as we expect higher opex incurred for SSA segment.

• Maintain our BUY with a lower DCF-derived TP of RM2.45 (from RM2.70). This implies a FY18E PE of 22x before easing to 16x in FY19E.

Earnings surged driven by SKIN project

Prestariang’s FY17 core earnings surged by more than 100% to RM22.1m from RM8.9m. The strong growth was due to recognition of the Sistem Kawalan Imigresen Nasional (SKIN) project. Overall, FY17 net profit was inline with consensus but below our expectations at 83% .

Lower PBT margin for SSA segment

On qoq, the group’s PBT grew by more than 100% due to better performance by the Education and recognition profit from SKIN segments. Despite the increase in total PBT, we noted that Software & Services and Academy (SSA) segments declined by 35% underpinned by higher cost that subsequently led to lower margin recorded (from 14% to 7%).

New contract received

To recap, in Jan 2018 Prestariang was awarded a 3-year contract worth RM222.6m for the supply of Microsoft software license, products and services under MLA 3.0 to all government agencies and Institut Latihan Awam in Malaysia.

Earnings revised

We trimmed our core earnings forecast for FY18E/FY19E by 9.9%/7.5% to RM59.7m/RM83.2m as we expect higher opex incurred for the SSA segment.

Dividend declared

A fourth interim DPS of 0.5 sen (YTD: 2.8 sen) was declared. This implies a full year dividend yield of 1.6% at current price.

Maintain BUY with a lower TP of RM2.45

We maintain our BUY with a lower DCF-derived TP of RM2.45 (from RM2.70). This implies a FY18E PE of 22x before easing to 16x in FY19E. We believe this is fair given the sizeable contribution of SKIN project and continuous improvement of the operational effeciencies of existing business.

Source: BIMB Securities Research - 28 Feb 2018