Prestariang's outlook improved by new initiatives

KUALA LUMPUR: RHB Investment Research has maintained its Buy call and sum-of-parts-based target price of RM2.29 for Prestariang Bhd.

Prestariang is expected to finalise the funding options for its SKIN project by November to fulfil the conditions under the concession agreement, said the research firm.

"We are currently imputing an 80:20 debt-to-equity capital structure, with a total capex allocation of MYR821mil."

The research firm believes the debt portion will involve issuance of Islamic medium-term notes and a drawdown of term loans at potential interest rates of 5% to 7%. 

The equities portion could be in the form of a hybrid equity structure such as preference shares or loan stocks, convertible into ordinary shares when the system officially commissions. 

Pretariang's A$5mil investment in OpenLearning Global Pte Ltd could be a strategic investment to fast-track its EduCloud initiative by leveraging on OpenLearning's cloud platform, says RHB Investment Research.

The research firm expects a soft launch by Q1 2018 as the collaboration is being finalised.

RHB Investment Research added that Prestariang's university may record a reduced loss in Q4 2017 after being in the red since 2013. 

With nearly 600 students in enrolment, it is optimistic that the positive recruitment momentum would bring the unit to breakeven at profit before tax level by 2018.

The research firm advised investors to accumulate the stock with expectations of a successful rollout of new initiatives over the medium term.