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Monday, April 10, 2017

PRESTARIANG BERHAD- Alibaba came before and will concession agreement be signed in April?



PRESTARIANG BERHAD
Share Price RM2.40
Dividend yield: 1.2%


MERITS:

Alibaba.
A lot of excitement are on Alibaba over the past few weeks where some counters up 20% or hitting limit up during the day. This is not a company that have potential to tie-up with Alibaba, but in fact, they had already tied-up with Alibaba in January 2017 on EduCloud. Read more on The Star Friday, 13 January 2017, Prestariang, Alibaba and Conversant form IT tie-up. The Star Thursday, 12 January 2017, Alibaba collaborates with Prestariang.

The CEO said . . . .. "EduCloud will capitalise on our existing footprint, help grow our customer base, and expand our offering to include not just licensing and training, but also online application and services," said Prestariang president and group CEO Dr Abu Hasan Ismail.

See what Public Bank analyst said..... As for the recently-announced EduCloud project, the launching is expected this year though a little more preparatory work is needed at this juncture. It is seen to be creating a lot of excitement for the group over the longer-term as cloud-based systems are still relatively new in Malaysia........


Recommended Buy by few brokers.
Public Bank with Target Price RM2.87.
CIMB Research with Target Price of RM3.00
In March 2017 AmInvestment Research has initiated coverage on Prestariang with a Buy recommendation and a fair value of RM2.60 a share.
RHB (old report) RM2.57 in November 2016. That was before the mini bull run in 2017.




SKIN Project.
Prestariang received a letter dated 15 Nov 2016 from the Government to confirm that the Cabinet has approved the implementation of its proposed National Immigration Control System (SKIN) project. According to Public Bank analyst, they are expecting big earnings jump this year. See what they said.. . .. . . ..  As the National Immigration Control System (SKIN) project is expected to start sometime this year, we see new earnings being recognised during the construction period. Assuming a 10%-15% profit margin, the SKIN project could generate at least RM20m-30m per annum to the Group's bottomline upon commencement.......


Potential catalysts
As reported in The Star Wednesday, 29 March 2017, CIMB said " Potential catalysts are the signing of the contract for SKIN concession"..... " However, following the signing of the agreement with Thales as the technology partner, we believe the concession agreement would be signed with the government in April".


If I understand correctly, Prestariang will earn the construction profit during the construction period. Then 12 years to maintain and operate where they have not gotten the deal yet.


Time for Rebound?
2016 result was very bad. Public Bank analyst said . . .. . .....Nevertheless, we think the worst is over and the company should do better going forward as the SKIN project is going to start this year. We maintain our Outperform stance with an unchanged TP of RM2.87.....


Share price has been beaten down. If Prestariang manage to recover the profit, and add in additional profit from new project, the price may recover.


The price was RM3.20 in early 2016. With most stocks traded exceeding the multi-year high, Prestaring may have potential to trade higher if their profit recover.


The company said,..... The Company viewed its lower profit margin for FY2016 as a short term effect as business conditions in the reporting year were adversely impacted by the delay in several high margin businesses especially in Training and Certification........

Dividend.
The Group continues to maintain a minimum of 50% profit payout dividend policy. They normally pay 4 times a year. Current dividend yield is only 1.2% because of the drop in profit, but as per the forcast made by various analysts, we can expect more than 2% dividend yield for 2017 and onwards.


Price is stabilizinh and steadily on the uptrend



DEMERITS
High PE Ratio
If one would to look at the PE ratio, he may stop reading. PE Ratio is more than 100x, that is why I didn't put in the beginning. LOL.
Based on the many forecasts, it will drop to 20x within the next few years due to strong earnings growth.


Lower Profit and Lower Margin
Past few quarters their profit dropped a lot. Not sure how they can recover.


Delay in projects.
As usual, somehow many projects will be delayed due to unforeseen circumstances. Any delay may cause the delay in profit recognition and impact of stock price.


NOTE: This is not my ususal stock sharing. It just happened I saw Alibaba and potential April signing catalyst. With the 50% dividend payout, it provides some support to share price in case something goes wrong.



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Happy Investing. Cheers.



Reading Material
Statement from the company......
Driving two landmark projects for the nation
Prestariang was awarded 'Sistem Kawalan & Imigresen Nasional' ("SKIN") ~ a Public Private Partnership project valued at RM3.5 billion to be implemented over 15 years through Build, Operate, Maintain and Transfer method. SKIN will be a pathway for Prestariang into servicebased platform businesses by developing competencies in emerging technologies such as big data analytics ('BDA"), Internet of Things (IoT), cloud computing and cybersecurity. At the same time, SKIN will also be a beacon to attract talents while providing a dynamic environment for students under our Talent business to gain leading-edge industry
experience;

And

eduCloud ~ Prestariang signed an MoU with Alibaba Cloud and Conversant Solutions Pte Ltd in January 2017 to jointly build an integrated service-based platform that will transform the digital education landscape in Malaysia. EduCloud will be a single platform to deliver all activities linked to education and related services. These cloud-based services will include campus management, teaching and learning, entertainment, digital payment, and many other services and online applications.


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Dollar Cost Averaging and PEGGY Method. Sharing info on cheap (low PE) company with high growth, low Gearing or Net Cash and High Dividend Yield.

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