This article first appeared in The Edge Financial Daily on October 25, 2018

KUALA LUMPUR: Prestariang Bhd’s share price, which has been bogged down by market talk of losing a mega e-government project it secured earlier, reversed its downward trend yesterday.

The renewed buying interest emerged following CIMB Research’s note to its clients yesterday saying that Prestariang stands a good chance to retain the National Immigration Control System (SKIN) project.

However, Prestariang has not made any announcement to update the status of the project, neither has it responded to CIMB Research’s note.

Prestariang’s share price climbed 6.5 sen, or 14.3%, to close at 52 sen with 49.46 million shares traded.

Nonetheless, yesterday’s closing was still substantially below the average price of RM1.33 before the selldown that started this month. The stock has sagged 65.8% year to date.

In fact, Prestariang is the worst hit among the Bursa Malaysia-listed companies that are involved in e-government projects or concessions, including MyEG Services Bhd, Datasonic Group Bhd and Dagang Nexchange Bhd.

Uncertainties have cast a pall on this group of companies due to concern the new government would review the existing projects that have been awarded by the previous administration.  

“We believe there is a good chance the new government would approve SKIN soon. It took Prestaring four years to obtain approval for SKIN from the previous government, and the due diligence on SKIN has already been done by the previous government,” said CIMB Research.

CIMB Research highlighted that SKIN is a national security project as the existing Immigration Department’s “MyIMMs” information technology (IT) infrastructure network, which was built in the 1990s, is already outdated.

“There is an urgent need to replace MyIMMs with a new IT infrastructure with the latest technology,” it explained.

Assuming a 6% WACC (weighted average cost of capital), CIMB Research estimates SKIN’s value to be around RM750 million. Given that Prestariang owns a 70% equity stake in SKIN, the concession is worth RM525 million or RM1.08 per Prestariang share, the research note stated.

“Potential rerating catalysts are no delays in the construction of SKIN infrastructure and rise in software sales, while downside risks are delays in SKIN’s construction and continued weak software sales,” commented CIMB Research.

The research outfit maintains an “add” recommendation on the stock but with a lower target price of RM1.89 compared to RM2.05.