KUALA LUMPUR: Technology services company Prestariang’s Q1 FY17 earnings were below market and CIMB Equities Research’s expectations, mainly due to delays in finalising the Sistem Kawalan Imigresen Nasional (SKIN) project.
It said on Tuesday the earnings were at only 5% of its full-year forecast but it believes the SKIN concession will be finalised by end-2Q17.
“We cut FY17 EPS by 51.2% to reflect delays in finalising SKIN and a major government project,” it said. However, it retained its target price of RM3, which is 27.7% abover the last traded price of RM2.35.
Prestariang’s Q1, 17 revenue was up 7.9% on-year at RM43.9mil while net profit saw 6.7% on-year growth, mainly due to lower investments and interest income in the quarter.
CIMB Research was expecting RM7mil to RM8mil construction profits from SKIN every quarter but the project has yet to be finalised. The company declared a first interim DPS of 0.75 sen, which was below expectation.
On the SKIN project, it said that it expected it to be finalised by end-Q1, 17 but there have been some delays. However, it plans to sign the agreement with Thales as a technology partner in Apr, and we believe the SKIN concession should be signed by end-Q2, 17.
“We forecast 10% pretax margin for SKIN on an estimated RM900mil capex over a three-year period. Hence, we estimate that it will recognise around RM30mil pretax profit annually from SKIN’s construction over the next three years.
“UniMY recorded a RM1.4mil loss in 1Q17, which was not a surprise. On a positive note, the current student base is close to 400 students (which is its breakeven level) after 200 new students enrolled in the April intake.
“In August, there should be another 200-300 new students, which could enable UniMY to squeeze a small profit for FY17.
In January, Prestariang signed an MoU with Conversant and Alibaba Cloud to build an integrated education platform known as “Educloud”.
“We understand that the company is actively engaged in implementing the framework and is aiming for a nationwide pilot rollout this September. The company may need to raise equity funding for this project.
“Prestariang’s net cash balance sheet was at RM90mil or 19 sen net cash per share as at end-March. We do not believe the company is planning a rights issue; thus equity funding would likely be from investors buying a direct stake in SKIN.
“We cut our FY17 EPS forecasts by 51.2% to reflect delays in finalising both SKIN and a major education project by end-June.
“Our target price remains based on a 20% discount to sum-of-parts (the discount reflects Prestariang’s small market cap). The stock remains an Add as we like SKIN’s long-term recurring income potential.
“Rerating catalysts are finalizing the SKIN concession and securing approval for a major government project. Risks are further delays in finalising the SKIN concession,” it said.
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