Wednesday 15 August 2012

Prestariang - 1HFY12 Earnings Up 28.4% Y-o-y


Prestariang’s 1HFY12 core earnings of RM16.7m jumped 28.4% y-o-y on higher contribution from its training and certification division. The numbers were largely in line, at 40.9% of our full-year forecast. That said, we continue to anticipate a seasonally stronger 2HFY12. Management has declared a second interim DPS of 2.0 sen, bringing its YTD DPS to 4.0 sen, implying a payout ratio of 52.8%. Maintain BUY, with our FV retained at RM2.15, based on an unchanged 10x FY13 PER. Based on its last close of RM1.28, the stock offers an appealing dividend yield 7.8%-9.4% p.a. over the next 3 years.
Pretty decent numbers. Prestariang’s 1HFY12 revenue rose to RM50.5m (+9.9% y-o-y), driven by its better-yielding training and certification division, whose contribution almost doubled y-o-y to RM17.3m. By the same token, gross profit jumped 27.0% y-o-y to RM22.7m, with a 600bps margin improvement due to favorable revenue mix. All in, the 1HFY12 core earnings amounted to RM16.7m (+28.4% y-o-y), which we deem in line with our expectations, at 40.9% of our full-year forecast, as we see a seasonally stronger 2HFY12. On a sequential basis, the 2QFY12 revenue of RM23.5m was >100% higher y-o-y but down by 13.3% q-o-q due to the seasonal nature of its income from the software distribution division. Nonetheless, the q-o-q shortfall in the company’s topline was more than made up by the 11.6% improvement in gross margin owing to higher contribution from the more profitable training and certification division. This boosted its core earnings to RM8.7m (+>100% y-o-y; +7.9% q-o-q) for the quarter.  
Generous payout. Prestariang has declared its second interim DPS of 2.0 sen, bringing its YTD DPS to 4.0 sen, for a payout ratio of 52.8%. We expect the company to pay another 6.0 sen in 2HFY12, followed by 11.0 sen in FY13 and 12.0 sen in FY14. This will translate into a lucrative yield of 7.8%-9.4% p.a. over the next 3 years.
Orderbook replenishment likely. Moving into 4Q12, we expect the company to win more contracts as management is looking to replenish its outstanding orderbook of about RM120m. Given that most of the government ministries tend to exhaust their respective budget allocations at year-end, we believe that Prestariang will very likely secure one or two more sizeable contracts before the year ends.
More plans for new university. Management also said it would disclose more concrete details on its proposed university over the next few weeks. This could potentially involve collaborations with IT industry peers in terms of curriculum materials, partnerships with academic peers to enhance the branding of the proposed university, as well as arranging financing for the proposed campus. That said, we expect a flood of positive news to capture investors’ attention in the near term.
BUY. All in, we make no changes to our core assumptions for now as we deem the 1H12 results in line with our estimates. Maintain BUY, with our FV unchanged at RM2.15, pegged at an unchanged 10x FY13 PER. Although the stock has moved up by more than 70% YTD, we see room for more price upside given the stock’s currently appealing valuation vis-Ă -vis its education peers. To top this off, its generous dividend yield of more than 7% p.a. may also appeal to risk-averse investors.

Source: OSK

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