Prestariang ... Pricey Valuations, Diversify Into Recurring Income Base

It is trading at 20.2 times financial year 2015 price-earnings. Given the lack of clarity on its potential new recurring earnings stream at this juncture (July 2014) and following the surge in its share price (24 July 2014), Prestariang as fully priced-in for now.

 

Management remains tight-lipped on the utilisation of the funds. The management is likely looking at opportunities to shore up its recurring earnings base which is expected to be unveiled by end third quarter of financial year 2014.

It is a move to diversify from its current (July 2014) contractual earnings base. 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 from July 2014 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.

Catalysts include potential diversification into a recurring earnings model.

Following the completion of its 10% private placement, Prestariang’s current share base has increased to 484 million and had raised about RM76 million in net proceeds.