KUALA LUMPUR: RHB Research has downgrade Prestariang Bhd to 'neutral' as the stock is fully priced in for now.
"Given the lack of clarity on its potential new recurring earnings stream at this juncture and following the recent surge in its share price, we deem
Prestariang as fully priced-in for now. Based on its last closing price, the stock is trading at 20.2 times financial year 2015 price-earnings.
"Our fair value now stands at RM2.34 from RM2.05, as we revise up our target financial year 2015 forward price-earnings to 20 times from 17.5 times in view
of improved sentiment on a potential new recurring earnings stream.
"Management remains tight-lipped on the utilisation of the funds. We expect this to be unveiled by end third quarter of financial year 2014. Judging from its
past track record, we continue to believe that management is likely looking at opportunities to shore up its recurring earnings base.
"Such a possibility, in our view, has largely contributed to the recent share price jump as investors warm up to management’s move to diversify from its
current contractual earnings base," said RHB in its research notes.
RHB recalls that in mid-2012, management announced its first recurring earnings attempt, via the setting up of a university.
"Unfortunately, as of second quarter of 2014, the university was still loss-making. Management guided that it is exploring the possibility of roping in a new
shareholder within the next 2-3 months to help boost enrolment. The move, if it materialises, would help its tertiary education outfit to break even by end-
financial year 2014 and commence positive earnings accretion come financial year 2015."
"We continue to like Prestariang for its committed management team led by CEO, sturdy balance sheet under its asset-light approach, and potential
diversification into a recurring earnings model."
RHB said following the completion of its 10 per cent private placement, Prestariang’s current share base has increased to 484 million and had raised about RM76 million in net proceeds.