We believe the recent sharp fall in share prices towards near the IPO level is overdone and valuations are undemanding at 2.76x FY19 P/E (62.5% discount to long term average P/E of 7.37x), supported by positive 109% FY17-19E EPS CAGR and contracts renewal from MoF and MoE post-GE14. The commencement of SKIN has started to recognise into 1HFY18 results. With the share price declined sharply, accompanied by climactic volumes, we anticipate the downside could be limited around RM0.38-0.395, while the resistance will be pegged around RM0.54-0.60. Cut loss will be set around RM0.37.

Company profile. Prestariang Berhad (PRESBHD) is involved in 1) ICT Training and Certification, 2) Software Licensing and Distribution and 3) Education. In 2017, PRESBHD managed to secure a national mega project - Sistem Kawalan Imigresen Nasional (SKIN), which is related to the immigration and border security for the country. Currently, PRESBHD is in collaboration with global partners, which include Imprimerie Nationale, Microsoft, Autodesk, IBM, Oracle and many others; PRESBHD is the largest Microsoft Licensing Solutions Partner in Malaysia.

Contracts renewal post-GE14. In September, PRESBHD obtained RM222.6m contract extension from the Malaysian government to supply Microsoft software licenses, products and services for three years (Feb 2018 – Jan 2021), whereby this master lincensing agreement (MLA) 3.0 could contribute around 25% towards PRESBHD’s revenue. While in early October, the company has received an extension of a contract to supply Microsoft software licence to public institutions of higher learning from the Ministry of Education (MoE) valued at RM11.6m.

SKIN project. SKIN 15-year concession business has officially commenced on 25 April 2018 and it has started to recognise into PRESBHD’s 1HFY18 results.

Climactic volumes near the IPO levels. PRESBHD’s has tanked sharply towards the recent low of RM0.40, while the first day of listing is ranging between RM0.27- RM0.335 (after adjusted for corporate exercises). We believe the huge transacted volumes of 85.6m (vs. 118m on first day of listing) could be seen as climactic volumes and could be a signal of a potential recovery in share price. We opine that the downside could be limited around RM0.38-395, while the potential technical rebound could lift share price towards RM0.54-0.60, followed by LT target of RM0.75. Cut loss will be at RM0.37.

Source: Hong Leong Investment Bank Research - 24 Oct 2018