We attended Prestariang’s 2Q15 results briefing hosted by chairman Dato' Mohd Yunus Ramli and COO En Mohd Arif. Maintain BUY, with our TP reduced to MYR2.48 (from MYR2.69, 15% upside). While we laud management’s efforts to replenish its orderbook following recent contract wins and renewals, we see downside risks to our forecasts on a potential delay in its proposed university partnership.
Master Licensing Agreement 2.0 (MLA2) orderbook at MYR76m.Prestariang has secured total orders worth >MYR110m under its MLA2 contract, MYR38m of which was recognised in 1H15. We estimate that its outstanding orderbook stands at MYR76m as at end-June and wouldbe delivered over the next 2-3 years. The Role-Based Training for Civil Servants (RBTCS) training component for MLA2 is set to commence by 4Q15, at an estimated value of 7-9% of its MLA2 contract.
Contract renewals to contribute in 2H15. Management said contributions from the renewal of previously-expired contracts would be more profound in 2H15. Notably, the 3P industry-based certification programme and IC Citizen certification programme re-commenced in May and June respectively. The group also clinched the renewal of its Managing University Software as an Enterprise programme for a period of two years commencing July at a total sum of MYR20m.
Potential delay for university partnership. On its proposed university partnership with the Indigenous People’s Trust Council (MARA), management acknowledged that there have been delays pending the final approval from the Finance Ministry. With its current enrolment base of 100 students, our previous assumption of breaking even by end-2015 seems optimistic should the delay be prolonged. As such, we are downgrading our FY15F-17F EPS by 5.9-7.9%, factoring in a longer gestation period and slower growth in enrolments under its university. We now expect the education arm to break even by 2Q16.
Maintain BUY. We revised our TP to MYR2.48 following our earnings revision based on 20x 2016F P/E. Given the appealing upside of over 14%, we are reiterating our BUY call. Potential roll out of its accelerated training course, known as Enhancing School-Based Learning Assessment in Science and Maths by 4Q15 (pending the official award from the Education Ministry) could spark a share price re-rating.
Source: RHB Research - 24 Aug 2015
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