Prestariang  has  signed  a  MOU  with  JEF  to  establish  the  Petroleum Academy Malaysia (PAM)  in  Johor.  This is  within our expectations,  as management had previously guided on the setting  up of this academy to  provide  upskilling  and  training  in  the  oil  &  gas  (O&G)  industry. Maintain BUY with higher MYR4.32  FV  (from MYR3.88)  based  on  17.5x P/E of its 12 months forward EPS .

• Joining  forces.  Prestariang  announced  yesterday  that  it  has  entered into  a memorandum of understanding (MOU)  with YPJ Holdings SB, the investment  arm  of  the  Johor  Education  Foundation  (JEF).  The  two parties are  forming  a  joint venture (JV)  to  establish PAM  in  Johor. This O&G  academy  will  provide  upskilling  and  training  for  those  aged between  17  and  25  in  O&G  sector  skills  like  welding,  pipefitting  and fabrication.  Prestariang  will  own  70%  in  the  JV  with  JEF  holding  the remaining 30%.
• Within  expectations.  We  expected  this  MOU  as  management  had previously guided on the fact that Prestariang was already in discussions on the setting up of PAM,  particularly in Johor. This  was  in line with the company’s goal  of  becoming  a  regional  training and certification player for the O&G sector. We are optimistic on this, given that we believe there is  a  gap  to  be  filled  in  terms  of  skilled  workers,  particularly  for  the upcoming refinery and  petrochemicals  integrated  development (RAPID)project  in Johor. We have already taken into account the positive news flows  and  are  forecasting  the  academy  being  able  to  train  2,000  and 3,000  students  for  FY14  and  FY15  respectively.  On  a  side  note,  we understand  that  JEF  will  help  to  secure  the  facilities  to  conduct  the programme.  We estimate that Prestariang will  have to fork out  an  initial outlay of less than RM1m for the setting up of the course materials.    
• Maintain BUY. We reiterate our BUY call on the stock as we believe that positive  news  flows  from  the  O&G  sector  and  the  improvement  in Prestariang’s  university  student  numbers  will  catalyse  a  re-rating  of  its share price. We  lift our FV  higher to MYR4.32 (from MYR3.88),  pegged to an unchanged target P/E of 17.5x on its 12 months forward EPS. Note that its peer SEG International (SYS MK, SELL, FV: MYR0.76) is trading at a 31x 5-year historical P/E.

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Source: RHB