Prestariang can still record RM10m net profit despite SKIN cancellation

In a statement yesterday, Prestariang said PSSB had signed the Master Licensing Agreement (MLA) 3.0 with the MoF, expanding the scope of its clientele by including public training institutes as Prestariang

KUALA LUMPUR: Prestariang Bhd can still be profitable and  conservatively record RM10mil net profit in 2019F despite the government’s decision to terminate a RM3.5bil project with the Immigration Department. 

It said on Friday Prestariang indicated that without the Sistem Kawalan Imigresen Nasional (SKIN) project, the net proft of RM10mil was slightly lower than its net profit forecast ofRM11.9mil. 

Prestariang's largest project is now MLA3.0, which involves the sale of Microsoft software to government agencies. The contract runs from February 2018 to January 2021.

“We maintain our EPS forecasts and target price, based on an unchanged asset-based one time price-to-book value (P/BV) after stripping off RM29mil net profit recognised from the SKIN project).

“The stock remains a Reduce. Major de-rating catalyst is no major compensation from the government while a key upside risk is significant compensation from the government,” it said.

CIMB Research said Prestariang organised a meeting on Thursday with sell-side analysts and some fund managers to provide more details on the cancellation of the SKIN project. The meeting was chaired by CEO Dr Abu Hasan Ismail and attended by around 25 analysts and fund managers.

“The CEO said the company did not default on any of the conditions in SKIN’s concession agreement (CA). Before the SKIN project was cancelled, the company said it sent 10 letters to the authorities seeking clarification and renegotiation without any success.

“Prestariang is now seeking compensation from the government based on a specific formula in the CA, which is the net present value (NPV) of the availability charges (similar to power purchase agreements). According to the CA, the government is supposed to pay compensation by July 19,  2019. 

“We estimate a compensation of 75 sen a share to SKIN’s shareholders (Prestariang owns a 70% stake in the SKIN project). Our previous NPV for the SKIN project was RM770mil,” it said.

CIMB Research said Prestariang has 165 employees working on the SKIN project and would need to let them go by 2019. 

Management expects to keep some of the employees who are competent in areas such as cyber security and big data analysis.