KUALA LUMPUR: PublicInvest says it is making no changes to its earnings forecast on Prestariang Bhd following its award of the master licensing agreement (MLA) 3.0 with the government to be its sole Microsoft Licensing SOlution provider.
The research house said it had already factored in the earnings contribution of tHe MLA 3.0, which is an extension and renewal of MLA 2.0 for a period of three years with an estimated contract value of RM222.6mil.
With the agreement, Prestariang will remain the sole Microsoft Licensing Solutions provider for all government agencies and will include Institut Latihan Awam as its new customer, with new added scope of services.
PublicInvest said MLA3.0 made up 63.5% of the software and services sales or delivered revenue of RM29.5mil in 1QFY18.
"Based on rough estimates, it is now likely to contribute sales of about RM70m or 25% of the group sales per annum. Assuming a 10% net profit margin, MLA3.0 could boost Prestariang’s earnings by RM22m (EPS of 4.56sen)," it said.
It added that Prestariang will have foreign exchange currency risks to manage as the Microsoft software is denominated in US dollar.
"US dollar has strengthened to the highest level against Ringgit since Nov 17, trading at 4.1388 yesterday, a 7.2% gain since the low of 3.87 in March. Further
strength in US dollar could suppress its margins as a result of foreign exchange losses," it said.
PublicInvest retained its neutral call on Prestariang with an unchanged target price of RM1.19, which yields a potential upside of 12.2%.
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