Prestariang acquiring new offices for RM25m

Prestariang Bhd (Feb 2, RM2.22)

Maintain outperform call with an unchanged target price (TP) of RM2.87: In line with the recent entry of EduCloud, an integrated education platform, Prestariang Bhd has proposed to purchase eight-storey semi-detached signature corporate office/retail suites in Cyberjaya for RM25 million to house transformational businesses.

The proposed acquisition will be funded mainly through internally generated funds and bank borrowings. No changes to our earnings forecasts as the financial impact is minimal while we maintain our “outperform” call with an unchanged TP of RM2.87.

The proposed properties to be acquired are part of the ongoing mixed development project known as Star Corporate Park, Star Central@Cyberjaya, which is currently developed by Joyful Star Sdn Bhd, a subsidiary of Emkay Group.

The development of the properties is 55% completed and is expected to be fully completed with certificate of compliance and completion by the first quarter of 2018.

The proposed acquisition is expected to be completed by March 31, 2017, and is not subject to shareholder approvals.

The company plans to fund the proposed acquisition via RM2.8 million in cash and the remainder by bank borrowings.

The group currently has zero borrowings. Upon completion of the proposed acquisition, the company is still in a net cash position with excess cash of RM55 million, which will be retained for the rollout of “Sistem Kawalan & Imigresen Nasional” (SKIN) project starting this year.

Management guided that the proposed acquired properties will be used to house the new transformational businesses of Prestariang and for future business expansion of the group.

We believe these refer to the EduCloud and SKIN projects, which are tipped to be major growth drivers of the group over the next decade.

The group plans to launch EduCloud business on Feb 14, revealing the business model, technology and education players that are involved, corporate structure, equity partners, and estimated investments of the project.

It will be interesting to see how EduCloud will transform the education industry in Malaysia in the big data era, given that it is the first in the Malaysian education sector. — PublicInvest Research, Jan 31

This article first appeared in The Edge Financial Daily, on Feb 3, 2017. Subscribe to The Edge Financial Daily here.