SKIN is no one-trick pony for Prestariang

PETALING JAYA: Prestariang Bhd is considering various alternatives for the equity funding of Sistem Kawalan Imigresen Nasional (SKIN) on top of a placement exercise at the group level, according to AmBank Research.
It said Prestariang Services (PServices), currently a 70%-owned subsidiary of the group and a vehicle for SKIN, is not a sole-purpose, one-off vehicle.
“In addition to managing SKIN, the subsidiary will be actively seeking new contracts, evolving deep practices in key technology areas and expanding into new geographical markets,” the research house said in a report today.
In this case, it said PServices could be treated as a going concern and high-growth entity, which justifies a price-to-earnings valuation metric or discounted cash flow (DCF) with a terminal value (indefinite life) as opposed to a 15-year DCF (definite life) that we currently adopt.
“Applying a 3% terminal growth rate and 9% discount, we estimate the valuation of PServices at over RM1 billion versus our original estimate of RM400 million, which was based on a 15-year DCF.”
Based on this, Prestariang’s sum-of-parts (SOP)-based fair value would be elevated to RM3 per share. However, it is leaving its forecasts and fair value unchanged, until the financial close of SKIN is attained.
“Currently, we gather that the group is in discussion with several institutional investors, and is in the midst of securing the best offer(s).”
AmBank said it continues to like Prestariang due to its leading position in the ICT training and software distribution space. SKIN is expected to beef up net profit by more than eight times from FY16 to FY18F.
It also likes Prestariang’s portfolio of products and services, such as the recent investment in OpenLearning and other advanced technology platforms like EduCloud and SKIN, which will instill confidence and boost UniMy’s intakes going forward; and PServices’ planned expansion into overseas markets, which offers tremendous revenue opportunities.
It reiterated its “buy” recommendation on Prestariang with unchanged forecasts and fair value of RM2.08 per share based on a SOP valuation.