Following the recent share price run-up, we take the opportunity to downgrade our call on Prestariang to NEUTRAL with our TP unchanged at MYR2.48 (2.5% downside). While we find positives in management’s focus in securing new contracts to help enlarge its earnings base going forward, we believe the company is priced to perfection for now.

Results preview. Prestariang is set to release its 3Q15 results on 25 Nov. We estimate that 3Q15 core earnings would fall within MYR6m-11m vis-à-vis our previous expectations of MYR12m-16m. We believe the shortfall, if materialises, is likely due to further weakness in orders under its Master Licensing Agreement 2.0 (MLA2) contracts, which the group previously inked with the Ministry of Finance and the Ministry of Education. Nonetheless, we expect dividend payout to remain generousat DPS of 1-2 sen for 3Q15.

Job prospects. We expect its earnings momentum to pick up in 4Q15 given that the Role-Based Training for Civil Servants training component of its MLA2 contract has recently commenced. The training component is at an estimated value of 7-9% of its MLA2 contract. Beyond that, we gathered that the group will soon secure the award of the implementation of accelerated training course for the Programme for International Student Assessment (PISA). We now expect official rollout to take place by 1H16 vis-à-vis 4Q15 previously as we understand that the cabinet reshuffling in end-July has prolonged negotiations. On top of that, our channel checks indicate that the proposed partnership with Majlis Amanah Rakyat for its university will soon be finalised, while its tie-up with Unisys (UIS US, NR) could soon bear fruit with the joint venture eyeing to secure a multi-year information technology-related project.

Forecasts. Taking the potential earnings shortfall into account, we trimour FY15 EPS by 14.7% while leaving our FY16-17F EPS unchanged for now.

Downgrade to NEUTRAL. All in, while we find positives in management’s focus in securing new contracts to help enlarge its earnings base going forward, we believe the company is priced to perfection for now. As such, we downgrade our call to NEUTRAL (from Buy) with our TP unchanged at MYR2.48, based on 20x 2016 P/E.