Prestariang‟s 1HFY13 net profit of RM19m accounted for only 42% of our and consensus projections. Though it is slightly below expectations, we remain affirmed that 2H earnings contribution will be stronger, driven by its existing businesses as well as new contributions from O&G training and its home-grown certification programme like IC CITIZEN. Meanwhile, management has proposed a 3.0sen dividend payment, representing a payout of 66%. YTD, the group has declared dividends of 5.5sen, translating into a yield of 3.1%.

Double-digit growth in 2Q. 2Q net profit rose 16.3% to RM10m while revenue also improved about 16% compared to 2QFY12. Both ICT training & certification and software license distribution & management divisions registered better revenue, up 22.0% and 11.2% respectively. For the quarter, Prestariang also delivered and installed the first batch of 162 licensed Autodesk software for a single O&G client. The delivery is said to be one of the largest supplies of Autodesk software for the O&G sector in South East Asia. To-date, it has also trained approximately 255 university and diploma graduates to meet the professional skill-set required by the O&G industry.

Profit margin standing firm. Net profit margin remained firm at 36.8% compared to last year, also stronger compared to the 34.4% in 1QFY13. Though the group incurred a loss of RM1.6m in the education arm, which is the UniMy business, it was however offset by improved contribution from its existing core businesses.

Prospects. Prestariang has recently set up a new subsidiary to spearhead and focus on delivering training and certification as well as software license distribution and management to the O&G sector. Meanwhile, it also intends to roll out its two newly developed home-grown programmes, namely, SMARTGREEN, which introduces ermerging green IT principles and Proficiency in Enterprise Communication for non-native speakers of English for occupational purposes.

Reiterate OUTPERFORM call with a target price of RM2.32. We retain our Outperform call with a target price of RM2.32 based on 10.5x multiple to FY14 EPS, which implies a potential upside of 29.6%. Though the share price has come under selling pressure lately in line with the regional weakness, we suggest investors continue to buy on weakness, banking on its i) cheap valuations, ii) strong balance sheet and iii) attractive earnings growth.

Source: PublicInvest Research - 28 Aug 2013