We  believe  Prestariang’s  2H14  earnings  could  be  pressured  further after  a disappointing  1H14  as it had no major contract announcements over  the  past  three  months.  We  also  caution  that  potential  delays  in firming  up  a  strategic  partner  for  its  university  could  translate  into further  near-term  losses.  Thus,  we  trim  our  TP  to  MYR1.60  from MYR2.00 (revised 16.0x FY15F P/E, -2.0% upside). Maintain NEUTRAL.

Potential  headwinds.  Prestariang’s  1H14’s  MYR13.4m  core  earnings made up only 33.9% of our previous full-year estimates  due to slowerthan-expected contract flows  in  this  period.  Since then, we noticed that there  have  not  been  any  major  contract  announcements ,  with  its  last contract  announced  on  Bursa  Malaysia  in  Nov  2013.  In  our  view,  thismay  take  a  toll  on  its  2H14  earnings.  As  such,  we  are  taking  a  preemptive  approach  by  cutting  our  FY14  earnings  forecast  by  12.8%  to MYR28.7m,  or EPS of 5.9 sen, taking  into account weaker contributionsfrom its core ICT licensing, training and certification division . 

University partner.  Our channel checks indicate that there  have been slight  delays  on  the  potential collaboration  of its university with  a  local education-centric partner.  We now  expect the partnership to be  officially firmed up by December (vs  September  previously). We deem this tie-up crucial  in  helping  to  boost  enrolment  numbers  at  the  university,  which booked MYR3.4m in  1H14 core losses. Should there be further delays, we  see  downside  risks  to  our  FY15  forecasts,  as  we  are  currently projecting for the university to return to the black by next year.

New  business  venture.  On  a  side  note,  management  remained  tightlipped  on  the  utilisation  of  its  recently-concluded  placement  exercise, which  has  raised some  MYR70m. We  continue to  believe  that  this  will likely  be  used  to  bring  in  a  new  recurring  earnings  stream  to  the company, given management’s aim of beefing up Prestariang’s recurring income base. We expect more details unveiled come 1Q15.

Maintain NEUTRAL. We adjust our valuation to a  revised FY15F  P/E of 16.0x  (from 20.0x), in order  to reflect our cautious near-term outlook  in view  of  the  company’s  potential  earnings  headwinds  ahead.  With  that, we  lower  our  TP  to  MYR1.60  (from  MYR2.00).  Given  the  limited downside, we maintain our NEUTRAL stance.

Source: RHB