This article first appeared in The Edge Financial Daily, on November 24, 2015.

Prestariang Bhd
(Nov 23, RM2.52)
Maintain add call with an unchanged target price (TP) of RM2.82: We maintain our “add” call and earnings per share (EPS) forecasts for financial year ending Dec 31, 2015 (FY15) to FY17 for now due to the lack of details on the project. 

However, we expect a significant upgrade in our earnings estimates once National Immigration Control System (Skin) negotiations are finalised.

Potential rerating catalysts are the finalisation of Skin negotiations and securing of the Programme for International Student Assessment contract.

We should be able to find out more about Skin during Prestariang’s results briefing for the third quarter ended Sept 30, 2015 (3QFY15) on Thursday. The 3QFY15 results are due to be released tomorrow.

Last Friday evening, Prestariang announced that the company received a letter of confirmation of approval in principle from the Malaysian government via the home affairs ministry to implement the Skin, an integrated technology platform to modernise and upgrade core applications and infrastructure of the national immigration system.

Skin’s objective is to enhance national border security. However, no financial numbers were provided in the announcement.

We are excited and bullish that Prestariang clinched Skin, as it should be a game changer for the company and significantly boost its long-term earnings.

No financial information on Skin was released as we understand that final negotiations between the government and Prestariang are still ongoing, but we expect this to be finalised in the next one to two months.

We believe that Prestariang’s investment in Skin will be huge as it is a nationwide project and there are more than 100 immigration points of entry in Peninsular Malaysia and Sabah and Sarawak.

As such, we believe Prestariang’s investment in Skin will amount to RM1 billion or more.

We also assume that Skin will be a concession type of business for Prestariang, as the management has stressed since end-2014 that it is looking to build up its long-term recurring income business model. — CIMB Research, Nov 22