We caught up with Prestariang's  management  recently  and  did  some  on-the-ground checks to determine the progress of its proposed university. While we do not deny the fact that the stock is exposed to political risks given that over 90% of its revenue is from public sector, we believe the recent selldown in its share price is  rather  unjustified  as  operations  remain  largely  intact.  3QFY12  numbers  would likely be within our expectations with our FY12 target of RM40m. All in, maintain our BUY call with our FV unchanged at RM2.15 based on 10x FY13 PER.  
 
Signing ceremony to be held soon. Management confirmed that the Vice Chancellor for its proposed University of Computing will come onboard by early next week. Though details are still scanty at this juncture, we understand that more information on the newly
proposed venture will be shared by end of this month, pending the official MOU signing ceremony  with  its  academic  partner  as  well  as  IT  industry  partners.  From  our  channel checks, we believe a top-notch tertiary education partner has agreed in principle to help establish  the  proposed  university  while  some  of  Prestariang's  existing  technology partners  with  the  likes  of  Microsoft,  IBM,  Oracle,  as  well  as  Autodesk  would  likely  be involved  in  setting  up  the  curriculum.  As  for  commercial  operations,  we  gathered  that first intake of about 300 students will take place by end-1Q13 with subsequent intake of equivalent size in Sept 2013. We are modeling for RM1.9m and RM6.0m profit at gross level from its university venture in FY13 and FY14 respectively.

Core operations largely on track. On its existing operations, management mentioned that  it  is  working  towards  replenishing  its  existing  orderbook,  which  stood  at  approx. RM130m as of June 2012. Some of the initiatives in the pipeline include rolling out its in-house developed GreenIT solution by end of this year, to renew its existing contract in provision of Autodesk software with Ministry of Higher Education, and to  accelerate the implementation  of  its  self-owned  titles  such  as  proficiency  of  English  language  and potentially halal certification program.

3QFY12  net  profit  of  RM11m.  The  group is  scheduled  to  release  its  3QFY12  by mid-Nov.  Given  its  orderbook-driven  nature,  we  expect  its  3QFY12  core  earnings  to  come within our expectations at RM11m with a likely interim DPS of 3.0 sen. 

BUY.  Despite  the  recent  selldown  in  its  share  price  which  we  attribute  to  its  higher political risk nature of sourcing over 90% of its income from the government ministries, we  are  convinced  that Prestariang's  fundamentals  remain  largely  intact.  In  fact,  we believe  that  a  re-rating  is  in  store  pending  the  formal  conclusion  of  its  proposed university  venture.  Hence,  maintain  our  BUY  call  with  our  FV  unchanged  at  RM2.15 based on 10x FY13 PER.

Source: OSK