PRESBHD (FV RM1.48-BUY) 1QFY12 Results Review: All on Track

Prestariang’s 1QFY12 core earnings of RM8.0m were within our expectations at 19.7% of our full-year forecast as we foresee a seasonally stronger 2H12.  The company declared its  first gross interim DPS of  2.0 sen, which translates into a payout ratio of 54.8% for the quarter.  Maintain BUY, with our FV retained at RM1.48, based on an unchanged 8x FY12 PER. At its last closing price of RM0.97, the stock offers an appealing dividend yield of >10% p.a.

Decent quarter. Prestariang registered 1QFY12 revenue of RM27.1m (-26.9% y-o-y,  -17.1% q-o-q) while core earnings came in at RM8.0m (-28.9% y-o-y,  -24.0% q-o-q). At first glance, the 1QFY12 numbers may seem relatively weaker, but this was primarily attributed to the seasonal impact. We had previously highlighted that management intends to smoothen out its earnings this year to minimize the volatility, as 2H of the year tends to be stronger. Hence, we deem its 1QFY12 results in line with expectations, with the core earnings of RM8.0m making up 19.7% of our full-year forecast of RM40.7m.

Go for the yield. The company declared its first interim DPS of 2.0 sen, in line with its previous guidance of paying a dividend every quarter. This translates into a payout ratio of 54.8% for the quarter vis-a-vis 52.4% in FY11. In view of the company’s robust operating cash flow, which we estimate at RM40m-RM45m p.a., we expect it to stick to the generous payouts. The FY12 first interim DPS of 2.0 sen will go ex on 7 June. Separately, Prestariang also announced that its FY11 final DPS of 4.0 sen will go ex on 8 June.    

BUY. No changes to our core assumptions for now as we deem the 1Q12 results in line with our estimates. That said, we are tweaking our dividend payout ratio marginally higher. Our FY12 and FY13 DPS now stand at 10.0 sen and 11.0 sen respectively (from 9.2 sen and 10.3 sen previously) as management has articulated that the company will better reward its minorities. Maintain BUY, with our FV unchanged at RM1.48, pegged at an unchanged 8x FY12 PER. Although the stock has moved up by more than 35% YTD, we see room for more price  upside given its currently appealing valuation vis-à-vis its education peers. To top this off, the alluring  dividend yield of more than 10% p.a. may also appeal to risk-averse investors.

Source: OSK