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Prestariang
(Nov 4, RM1.65)
Maintain “neutral” with lower target price of RM1.62:
Prestariang announced on Monday that it had inked a memorandum of understanding (MoU) with MIE Corp Holdings Sdn Bhd to set up a joint-venture company for the supply of manpower to Malaysia’s oil & gas (O&G) industry, particularly for the Refinery and Petrochemicals Integrated Development (RAPID) project in Pengerang, Johor.

We laud the move as it will not only create career placement for its O&G downstream students, it will also help generate ancillary income for the group in the future.

We reduce our target price (TP) from RM1.81 to RM1.62, after adjusting for our lowered financial year 2014 to 2016 (FY14-16) earnings forecasts by 10%-19% due to the delay in replenishing its existing contracts and the longer period taken to turn around its education arm. Our “neutral” call remains unchanged.

According to the MoU, Prestariang and MIE Corp Holdings, a local consortium partner together with CTCI-Chiyoda joint-venture (JV) from Taiwan and Synerlitz (Malaysia) Sdn Bhd, which is also a successful tenderer of a particular package under the RAPID project, agree to establish a 51:49 JV company.

It will undertake the setting-up, operation and management of a business entity to source, acquire, train and supply skilled and semi-skilled workers (both Malaysian and foreign) in relation to the RAPID project and also to the industry in general.

Other studies include the assessment of demand for skilled & semi-skilled workers, cost of hiring in the market, current supply to the market, work permit, health screening, Construction Industry Development Board certificates, accommodation, logistics, training, placement arrangement and fee-based payroll structure.

We expect the second-half earnings to be relatively weaker compared with last year. — PublicInvest Research, Nov 4

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This article first appeared in The Edge Financial Daily, on November 5, 2014.

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