INVESTMENT MERIT

9M13 results review. Prestariang Bhd (PRESBHD)’s 9M13 revenue improved by 3.6% YoY to RM88.9m boosted by its training and certification segment which surged 51.8% YoY to RM17.0m as a result of higher number of classes conducted for its "IC Citizen" programs as well as “Programe Pentauliahan Professional” (3P project). The 9M13 net profit rose 16.6% YoY to RM31.4m due to better sales mix as higher earnings contribution from the high margin training and certification projects (with c.70% gross margin). Lower contribution was seen from the Software Distribution and Management segment which comes with c.50% gross margin. Moving forward, the management expects a record year in FY13, underpinned by new income stream from AutoDesk as well as training and certification projects.

Aiming to expand its O&G training segment. PRESBHD had recently acquired an 80% stake in Time Out Skills Academy S/B for RM640k, which is engaged in the provision of niche training and technical skill courses, such as pipefitting, welding and scaffolding for young recruits in the O&G industry. We believe the niche program is one of its kind in the O&G training segment which may enhance the group’s chance to secure more O&G training contracts in the future. We are positive on the move as it may potentially serve as a re-rating catalyst for the group in the future as the scalable business could grow bigger to contribute to the bottom line.

AutoDesk software segment is getting bigger. PRESBHD had recently been appointed as the education partner of Autodesk in Malaysia for handling and supporting AutoDesk softwares for both private and public sectors. This is a major milestone for the group, enabling access into the private sector as it previously only distribute the software to the public sector. In addition, the group was recently awarded a RM20.0m contract to supply AutoDesk Software to the Ministry of Education over three years with gross margin of c.50% from 4Q13 onwards. Management is targeting to double the annual revenue contribution from AutoDesk software to RM60m in three years underpinned by demand of both private and public sector.

Rich valuation for PRESBHD. We value PRESBHD at RM2.64, based on FY14 11.4x PER which is in line with the FBM Small Cap

index valuation. The share price has surged 220% YTD which we believe is near the peak and look toppish, although the stock still offers an attractive dividend yield of 5.2% based on 59% earnings payout. This is in line with its payout of 52%-59% since listing in Jul-11. NOT RATED.

SWOT ANALYSIS

Strength: The largest ICT training and software provider to the Malaysian Government.

Weaknesses: Stronger USD against Ringgit could hurt profit margins.

Opportunities: Growth potential in ICT training for the O&G industry.

Threats: New players entering the market.

TECHNICALS

R1/R2: RM2.60/RM2.75, S1/S2: RM2.40/RM2.26

Comments: Long term technical picture is still up and bullish. But the “Doji” candlestick and the overbought RSI are suggesting that profit-taking sessions might kick in over the short term. As such, we reckon that traders should remain on the sidelines for now and only look to buy on dips towards the RM2.40 support level.

BUSINESS OVERVIEW

PRESBHD is one of the largest provider of information communications technology (ICT) training and certification as well as software license management and distribution in Malaysia. The Group aims to educate youths, adults and lifelong learners to become professionals. It has trained and certified more than 200,000 participants in the ICT and Oil & Gas sectors and distributed and managed more than 2 million software licences since its inception. The Group offers over 60 certification courses nationwide in partnership with Microsoft, Autodesk, IBM, Oracle, CompTIA, EC-Council, Certiport, Prometric, PearsonVue and others.

BUSINESS SEGMENTS

The group offers a wide range of services as below:

ICT training and certification. Provide certified ICT training and certification to professionals, e.g. Microsoft Office softwares training and certification.

Software License Distribution and Management. Distribute software license and managed software solutions as value-added services to clients.

Education and Learning. Provide professional trainning, up-skill and reskill to graduates and professionals with more comprehensive programmes, such as Oil & Gas-related programmes.

Source: Kenanga