PUBLIC INVESTMENT BANK PublicInvest Research Results Review Friday, February 26, 2016 KDN PP17686/03/2013(032117) PRESTARIANG Outperform DESCRIPTION An ICT service provider focusing on ICT training and certification and software licence distribution and management 12-Month Target Price RM2.99 Current Price RM2.83 Expected Return 5.7% Market Main Sector Technology Bursa Code 5204 Bloomberg Ticker PRES MK Shariah-compliant Yes SHARE PRICE CHART 3.50 3.00 2.50 2.00 1.50 1.00 0.50 - Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 52 Week Range (RM) 1.58-3.27 3-Month Average Vol ( 000) 1,396.9 SHARE PRICE PERFORMANCE Absolute Returns Relative Returns KEY STOCK DATA 1M 3M 6M 0.7 14.4 72.3-3.1 15.5 59.9 Waiting For Better Days Prestariang s FY15 net profit fell 25% to RM15.2m, only making up 61.3% and 59% of our and consensus forecasts after stripping out foreign exchange gains of RM1.9m. The lower-than-expected results were mainly due to i) continuous underperformance of the education arm, ii) weaker margins from the software & services and academy segments and iii) a tax expense of RM5.4m. The results were a big letdown as we opine that the tightening of the government s purse strings has affected the education and software spending. Pending more clarification from the analyst briefing today, we maintain our Outperform call with an unchanged TP of RM2.99. 4QFY15 revenue nearly doubled to RM24.3m. Group revenue rose 94.2%. On the other hand, there was no sales recognition for academy as no software trainings were conducted during the quarter. The education segment, which operates the UniMy University, improved from RM0.5m to RM0.7m, led by a higher number of students recruited during the quarter. 4QFY15 earnings jumped 63% to RM3.1m. 4Q earnings were weighed down by i) continuous losses in the education arm and ii) a sum of RM4.4m tax expense was charged in 4Q due to the expiry of the pioneer status on 29 June 2015. The education segment continued to face challenges though with a net loss of RM1.4m. For the full-year, it incurred total losses of RM5.7m vs RM6.3m in FY14. Maintaining our positive views. Despite the unexciting quarterly results, we are positive on the company s outlook driven by two longterm recurring projects, Sistem Kawalan & Imigresen Nasional and the Programme for International Student Assessment (PISA), which will become the new earnings growth drivers for the company apart from existing projects like 3P Industry-based certification, IC-CITIZEN and RBTCS programme as well as Master Licensing Agreement 2.0. Market Capitalisation (RM m) No. of Shares (m) 1,369.0 484.0 MAJOR SHAREHOLDERS Dr. Abu Hassan Bin Ismail KWAP AIA Bhd Franklin Resources % 27.3 12.1 9.7 5.3 KEY FINANCIAL SUMMARY FYE Dec (RM m) 2014A 2015A 2016F 2017F 2018F CAGR Revenue 78.8 115.5 178.6 189.1 186.9 24.1% Gross Profit 38.5 38.4 82.2 87.0 86.0 22.2% Pre-tax Profit 20.2 22.4 55.6 60.3 59.5 31.0% Core Net Profit 20.2 15.2 55.6 60.3 59.5 31.0% EPS (Sen) 4.2 3.1 11.5 12.5 12.3 31.0% P/E (x) 67.3 91.3 24.6 22.6 23.0 Chong Hoe Leong T 603 2268 3015 F 603 2268 3014 E chonghoeleong@publicinvestbank.com.my DPS (Sen) 4.2 3.8 7.2 7.8 7.7 Dividend Yield 1.8 1.3 2.6 2.8 2.7 1 Important disclaimer is provided at the end of this report. PUBLIC INVESTMENT BANK Page 1 of 5
Figure 1: Results Summary FY Dec (RMm) 4Q15 4Q14 3Q15 QoQ FY15 FY14 Revenue 24.3 12.4 16.1 50.9 96.0 115.5 78.9 46.4 Comments Led by stronger software sales, which offset zero contribution from training Cost of sales -13.7-5.9-5.7 140.4 132.2-77.0-40.2 91.5 Gross profit 10.6 6.5 10.4 1.9 63.1 38.5 38.7-0.5 Other income 2.6 0.9 1.0 160.0 188.9 5.9 3.1 90.3 Operating profit 13.2 7.4 11.4 15.8 78.4 44.4 41.8 6.2 Administrative expenses -5.0-4.7-5.1-2.0 6.4-19.8-19.0 4.2 Other expenses -0.5-0.7-0.4 25.0-28.6-1.8-2.2-18.2 Finance costs -0.2-0.1 0.0 - - -0.3-0.2 - Pre-tax profit 7.5 1.9 5.9 27.1 294.7 22.5 20.4 10.3 Taxation -4.4 0.0-1.0 - - -5.4 0.0 0.0 Expiry of pioneer status since 29 June 2015 Net profit 3.1 1.9 4.9-36.7 63.2 17.1 20.4-16.2 EPS (sen) 0.6 0.4 1.0-36.7 63.2 3.5 4.2-16.2 DPS (sen) 1.0 0.5 1.0 0.0 100.0 3.8 4.2-10.5 Ex-date: 09 March 2016 Gross Margin 43.6 52.4 64.6 - - 33.3 49.0 - Pre-tax Margin 30.9 15.3 36.6 - - 19.5 25.9 - Net Margin 12.8 15.3 30.4 - - 14.8 25.9 - Source: Company, PublicInvest Research 2 Important disclaimer is provided at the end of this report. PUBLIC INVESTMENT BANK Page 2 of 5
Figure 2: Segmental Breakdown FY Dec (RMm) 4Q15 4Q14 3Q15 Revenue: QoQ FY15 FY14 Comments Software License Distribution & management ICT Training & Certification 23.4 10.8 7.0 234.3 116.7 94.2 49.5 90.3 0.0 1.1 8.5-100.0-100.0 18.8 27.5-31.6 Education 0.7 0.5 0.6 16.7 40.0 2.4 1.8 33.3 Total 24.1 12.4 16.1 49.7 94.4 115.4 78.8 46.4 Profit Before Taxation: ICT Services and Distribution 9.2 3.5 7.7 19.5 162.9 29.7 29.1 2.1 Education -1.4-1.3-1.3 7.7 7.7-5.7-6.3-9.5 Others -0.3-0.4-0.6-50.0-25.0-1.6-2.4-33.3 Total 7.5 1.8 5.8 29.3 316.7 22.4 20.4 9.8 Source: Company, PublicInvest Research 3 Important disclaimer is provided at the end of this report. PUBLIC INVESTMENT BANK Page 3 of 5
KEY FINANCIAL DATA INCOME STATEMENT DATA FYE Dec (RM m) 2014A 2015A 2016F 2017F 2018F Revenue 78.8 115.5 178.6 189.1 186.9 Gross Profit 38.5 38.4 82.2 87.0 86.0 Other Income 3.1 5.9 3.4 3.8 4.4 Administrative Expenses -19.0-19.8-27.4-27.7-28.0 Other Expenses -2.2-1.8-2.5-2.7-2.8 Finance Costs -0.2-0.3-0.1-0.1-0.1 Pre-tax Profit 20.2 17.0 55.6 60.3 59.5 Income Tax 0.0-5.4 0.0 0.0 0.0 Effective Tax Rate 0.0 31.8 0.0 0.0 0.0 Minorities 0.0 0.0 0.0 0.0 0.0 Core Net Profit 20.2 15.2 55.6 60.3 59.5 Growth Revenue -34.1 46.6 54.6 5.9-1.2 Gross Operating Profit -42.8-0.3 114 5.9-1.2 Core Net Profit -52.0-24.7 >100 8.6-1.4 BALANCE SHEET DATA FYE Dec (RM m) 2014A 2015A 2016F 2017F 2018F Fixed assets 13.1 12.9 16.9 18.5 20.1 Other long-term assets 3.4 5.2 3.4 3.4 3.4 Cash at bank 106.4 128.4 115.6 134.9 156.0 Other current assets 56.7 51.3 81.5 84.1 83.6 Total Assets 179.6 197.9 217.4 240.8 263.0 Short-term borrowings 0.3 0.1 0.3 0.3 0.3 Long-term borrowings 0.8 0.6 0.8 0.8 0.8 Payables 5.5 16.1 13.2 13.9 13.8 Other liabilities 4.1 10.6 4.1 4.1 4.1 Total Liabilities 10.7 28.4 18.4 19.1 19.0 Shareholders Equity 168.9 169.5 199.1 221.7 244.0 Total Equity and Liabilities 179.6 197.9 217.4 240.8 263.0 PER SHARE DATA & RATIOS FYE Dec 2014A 2015A 2016F 2017F 2018F Book Value Per Share 0.3 35.0 0.4 0.5 0.5 NTA Per Share 0.3 35.0 0.4 0.5 0.5 EPS (sen) 4.2 3.1 11.5 12.5 12.3 DPS (sen) 4.1 3.8 7.2 7.8 7.7 Payout Ratio 62.5 122% 62.5 62.5 62.5 ROA 11.2 7.7 25.6 25.1 22.6 ROE 12.0 9.0 27.9 27.2 24.4 4 Important disclaimer is provided at the end of this report. PUBLIC INVESTMENT BANK Page 4 of 5
RATING CLASSIFICATION STOCKS OUTPERFORM NEUTRAL UNDERPERFORM TRADING BUY TRADING SELL NOT RATED The stock return is expected to exceed a relevant benchmark s total of 10% or higher over the next 12months. The stock return is expected to be within +/- 10% of a relevant benchmark s return over the next 12 months. The stock return is expected to be below a relevant benchmark s return by -10% over the next 12 months. The stock return is expected to exceed a relevant benchmark s return by 5% or higher over the next 3 months but the underlying fundamentals are not strong enough to warrant an Outperform call. The stock return is expected to be below a relevant benchmark s return by -5% or more over the next 3 months. The stock is not within regular research coverage. SECTOR OVERWEIGHT NEUTRAL UNDERWEIGHT The sector is expected to outperform a relevant benchmark over the next 12 months. The sector is expected to perform in line with a relevant benchmark over the next 12 months. The sector is expected to underperform a relevant benchmark over the next 12 months. DISCLAIMER This document has been prepared solely for information and private circulation only. It is for distribution under such circumstances as may be permitted by applicable law. The information contained herein is prepared from data and sources believed to be reliable at the time of issue of this document. The views/opinions expressed herein are subject to change without notice and solely reflects the personal views of the analyst(s) acting in his/her capacity as employee of Public Investment Bank Berhad ( PIVB ). PIVB does not make any guarantee, representations or warranty neither expressed or implied nor accepts any responsibility or liability as to its fairness liability adequacy, completeness or correctness of any such information and opinion contained herein. No reliance upon such statement or usage by the addressee/anyone shall give rise to any claim/liability for loss of damage against PIVB, Public Bank Berhad, its affiliates and related companies, directors, officers, connected persons/employees, associates or agents. This document is not and should not be construed or considered as an offer, recommendation, invitation or a solicitation of an offer to purchase or subscribe or sell any securities, related investments or financial instruments. Any recommendation in this document does not have regards to the specific investment objectives, financial situation, risk profile and particular needs of any specific persons who receive it. We encourage the addressee of this document to independently evaluate the merits of the information contained herein, consider their own investment objectives, financial situation, particular needs, risks and legal profiles, seek the advice of their, amongst others, tax, accounting, legal, business professionals and financial advisers before participating in any transaction in respect of any of the securities of the company(ies) covered in this document. PIVB, Public Bank Berhad, our affiliates and related companies, directors, officers, connected persons/employees, associates or agents may own or have positions in the securities of the company(ies) covered in this document or any securities related thereto and may from time to time add or dispose of, or may be materially interested in, any such securities. Further PIVB, Public Bank Berhad, our affiliates and related companies, associates or agents do and/or seek to do business with the company(ies) covered in this document and may from time to time act as market maker or have assumed an underwriting commitment in the securities of such company(ies), may sell them or buy them from customers on a principal basis, may have or intend to accommodate credit facilities or other banking services and may also perform or seek to perform investment banking, advisory or underwriting services for or relating to such company(ies) as well as solicit such investment advisory or other services from any entity mentioned in this document. The analyst(s) and associate analyst(s) principally responsible for the preparation of this document may participate in the solicitation of businesses described aforesaid and would receive compensation based upon various factors, including the quality of research, investor client feedback, stock pickings and performance of his/her recommendation and competitive factors. Hence, the addressee or any persons reviewing this document should be aware of the foregoing, amongst others, may give rise to real or potential conflicts of interest. Published and printed by: PUBLIC INVESTMENT BANK BERHAD (20027-W) 9 th Floor, Bangunan Public Bank 6, Jalan Sultan Sulaiman 50000 Kuala Lumpur T 603 2268 3000 F 603 2268 3014 Dealing Line 603 2268 3129 5 Important disclaimer is provided at the end of this report. PUBLIC INVESTMENT BANK Page 5 of 5