KUALA LUMPUR (Jan 26): RHB Research has upgraded ICT training and certification provider Prestariang Bhd (fundamental: 1.95 ; valuation: 0.9) to "buy" with a higher target price (TP) of RM2.21 from RM1.57, after the latter secured a letter of award from the Ministry of Finance (MoF) last Friday.

“We believe the worst is over for Prestariang as we now expect 2015 to be a record year,” said RHB Research analyst Kong Heng Siong in a report today.

“As such, we are upgrading our call to 'buy' (from ‘neutral’) with our TP revised up to MYR2.21 (from MYR1.57), based on a 20x CY15 P/E. This implies a 20%-30% premium to its listed technology peers in the country, which we deem justified given its relatively diversified income stream and focus on businesses with higher margins,” he said.

To recap, Prestariang was appointed by MoF last Friday - via a Letter of Award - to provide Microsoft solutions to all government agencies in Malaysia. The contract is for three years, starting from Feb 2015.

The contract was previously given to seven companies, and Prestariang was one of them. Now, Prestariang will be the sole supplier of Microsoft solutions to the public sector.

Kong noted that this contract could potentially bring in RM150 million to RM200 million revenue annually, based on the combined income of the seven companies involved previously.

“We are taking a more conservative stance by factoring in topline contribution of RM70 million per annum for FY15-16F in view of the government’s increasingly cautionary approach towards reducing spending amidst current low crude oil prices,” he said.

RHB Research has also upgraded Prestariang’s forecast earnings per share for its financial year 2015 (FY15) and FY16 by 12.3% and 19.2% respectively.

“We now expect Prestariang’s core earnings to break the RM50 million threshold in FY15,” said Kong.

As a result, its counter has soared 12.79% or 22 sen to RM1.94 as at 4:17pm, with some 1.92 million shares changing hands. It was also one of the top gainers across the local bourse today.

Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)