Prestariang
Prestariang Berhad, is an investment holding company, provides information and communications technology (ICT) training and certification courses in Malaysia. The company was founded in 2003 and is headquartered in Cyberjaya, Malaysia.
Product
Offers 40 courses from various technology and software vendors and organizations by providing professional ICT training and certification; and basic ICT training and certification, including third party certification and in-house certification services.
Software license distribution and management business. It has strategic partnerships with Microsoft, Autodesk, CompTIA, IBM, EC-Council, ORACLE, CERTIPORT, PROMETRIC, and PEARSON VUE.
Management
Prestariang is founded and lead by Dr Abu Hasan Ismail. Dr Abu is a veteran in ICT education sector, obtained PHD in Information Technology at University of Sheffield.
Dr Abu is no stranger to the education sector, as he himself is one of the founding members of Multimedia University in 1997. Where he lectured there under the Faculty of Creative Multimedia for three years and later became the first dean at the faculty.
Besides Dr Abu, another strong management team in Prestariang is Dato' Loy Teik Ngan who serve as Independent Non-Executive Director. Dato’ Loy Teik Ngan is also the Group Chief Executive Officer for Taylor’s Education Group. The addition of Dato’ Loy into the board of director of Prestariang will no doubt enhance Prestariang’s value.
DCF Method
Forecasting FCF
|Year |Net Earnings |Depreciation |Capital Expenditure |Change in Working Capital|FCF |
|2011 |34,443,000 |2,132,000 |3,003,000 |-9,841,000 |23,731,000 |
|2012 |42,200,000 |2,612,153 |3,679,314 |-12,057,318 |29,075,522 |
|2013 |49,300,000 |3,051,639 |4,298,345 |-14,085,919 |33,967,375 |
|2014 |56,000,000 |3,466,365 |4,882,502 |-16,000,232 |38,583,631 |
|2015 |58,240,000 |3,605,019 |5,077,802 |-16,640,242 |40,126,976 |
|2016 |60,569,600 |3,749,220 |5,280,914 |-17,305,851 |41,732,055 |
|2017 |62,992,384 |3,899,189 |5,492,150 |-17,998,085 |43,401,337 |
|2018 |65,512,079 |4,055,156 |5,711,836 |-18,718,009 |45,137,391 |
|2019 |68,132,563 |4,217,363 |5,940,310 |-19,466,729 |46,942,887 |
|2020 |70,857,865 |4,386,057 |6,177,922 |-20,245,398 |48,820,602 |
|2021 |73,692,180 |4,561,499 |6,425,039 |-21,055,214 |50,773,426 |
|Average |58,358,152 | | | | |
Assumption for the free cash flow projection as follows • Net earnings are expected to increase by 22% at 2012, 16.8% at 2013, 13.6% at 2014 and by 4% from 2015 to 2021. • Depreciation are expected to increase by 22% at 2012, 16.8% at 2013, 13.6% at 2014 and by 4% from 2015 to 2021. • Capital Expenditure are expected to increase by 22% at 2012, 16.8% at 2013, 13.6% at 2014 and by 4% from 2015 to 2021. • Working capital are expected to increase by 22% at 2012, 16.8% at 2013, 13.6% at 2014 and by 4% from 2015 to 2021.
Cost of equity
Market Risk Premium: 3.59%
Risk Free Rate: 3.21%
Beta: 1 (Not available in publications)
Return = 3.21% + 1(3.59%) = 6.8%
Discounting FCF
|Year |FCF |Discounting Factor |Discounted FCF |
|2011 |23,731,000 |1.068 |22,220,037 |
|2012 |29,075,522 |1.141 |25,490,891 |
|2013 |33,967,375 |1.218 |27,883,561 |
|2014 |38,583,631 |1.301 |29,656,376 |
|2015 |40,126,976 |1.389 |28,878,868 |
|2016 |41,732,055 |1.484 |28,121,744 |
|2017 |43,401,337 |1.585 |27,384,470 |
|2018 |45,137,391 |1.693 |26,666,525 |
|2019 |46,942,887 |1.808 |25,967,403 |
|2020 |48,820,602 |1.931 |25,286,610 |
|2021 |50,773,426 |2.062 |24,623,665 |
|Total | | |292,180,151 |
Discounting TV
|Year |TV |Discounting Factor |Discounted TV |
|2021 |822,639,996 |2.062 |398,956,956 |
Outstanding Shares = 220,000,000
Price of Prestariang = RM3.14
Dividend Method
Prestariang Dividend policy: 50%
Price at Jan 2012 : RM0.76
Market Risk Premium: 3.59%
Risk Free Rate: 3.21%
Beta: 1 (Not available in publications)
Growth rate of Dividend follows perpetuity growth at 4%
Return = 3.21% + 1(3.59%) = 6.8%
PE: 6.83
D1 = 0.08*1.04 = 0.083
PV of Stock Price = 0.083 / (6.8% - 4%) = RM2.96
Relative Method
In the relative method comparison, Masterskill was not taken into consideration as Masterskill is reporting loss. As this will render the PE calculation inaccurate.
Outstanding Shares = 220,000,000
EPS = RM0.16
Price-to-Cash Flow (P/CF) Multiple
|Counter |Market Cap |EBITDA |Weight |(Market Cap/EBITDA) x Weight |
|SEG |1,256,620,000 |75,000,000 |0.706165 |11.83174 |
|HELP |269,880,000 |23,400,000 |0.151661 |1.749152 |
|PRESTARIANG |253,000,000 |5,300,000 |0.142175 |6.786833 |
|MC/EBITDA industry | | |20.36773 |
Price = RM0.49
Price-to-Earnings (P/E) Multiple
|Counter |PE |Market Cap |Weight |PExWeight |
|SEG |13.95 |1,256,620,000 |0.706164653 |9.8509969 |
|HELP |21.59 |269,880,000 |0.151660579 |3.2743519 |
|PRESTARIANG |6.83 |253,000,000 |0.142174768 |0.9710537 |
| | | | |14.096402 |
Price = RM2.27
Price-to-Book Value (P/BV) Multiple
|Counter |Market Cap |Book Value |Weight |(Market Cap/BV)xWeight |
|SEG |1,256,620,000 |315,804,000 |0.706165 |2.809909 |
|HELP |269,880,000 |124,960,000 |0.151661 |0.327546 |
|PRESTARIANG |253,000,000 |98,348,000 |0.142175 |0.365744 |
|MC/BV industry | | |3.5032 |
Price = RM1.56
Price-to-Sales (P/S) Multiple
|Counter |Market Cap |Sales |Weight |(Market Cap/Sales)xWeight |
|SEG |1,256,620,000 |278,293,000 |0.706165 |3.188656 |
|HELP |269,880,000 |108,100,000 |0.151661 |0.378632 |
|PRESTARIANG |253,000,000 |111,839,000 |0.142175 |0.321625 |
|MC/Sales industry | | |3.888913 |
Price = RM1.98
Evaluation of Prestariang
|Valuation Method |Calculated Price |
|FCF Model |3.14 |
|Dividend Method |2.96 |
|P/CF Multiple |0.49 |
|P/E Multiple |2.27 |
|P/BV Multiple |1.56 |
|P/S Multiple |1.98 |
|Average |RM 2.07 |
As at end of 2011, Prestariang were traded at RM0.76. Based on the various valuation method, taking the average, Prestariang is valued at RM2.07.
Risk Factor
As Prestariang is not an established University but only an education institution providing professional certification, below are some of the risk factor to be considered • Do not a university which could create recurring income stream • Rely heavily on partners on Certification program • The company software license distribution and management segment has lower profit margins, compared with the training and certification businesses • Will incur high capex for its planned University setup
Recommendations
It is recommended to BUY Prestariang now at its traded price of RM0.76 as at end of 2011. With its valued price at RM2.07, this represent a premium of RM1.31 or approximately 63.3% over the average of the calculated price
The key plus point of Preataring are, • Recession proof business with a good growth prospect. • Strong orderbook of RM280m • Close relation with industry partners such as Microsoft • In-house developed products • Penetrating more government agencies • Management led by key promoter • Tax-exempt status until June 2015 given its Pioneer Status under MSC • Superior margins driven by focus on professional training and certification. • Trading at a very low PE compare to competitor
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GSM5421
INVESTMENT ANALYSIS
INDIVIDUAL ASSIGNMENT
(PRESTARIANG)
SEMESTER: FIRST TRIMESTER 2012/2013
LECTURER: DR CHEN CHAW MIN
PREPARED BY: LEE JIA FUH GM04647 