MLA 3.0 and software management to drive Prestariang’s growth

KUCHING: After receiving an extension to its Master Licensing Agreement (MLA) 3.0 with the federal government; analysts are confident that Prestariang Bhd (Prestariang) will continue to drive growth through its capability in software management business and future MLA 3.0 reiterations.

To recap, Prestariang Bhd announced on Monday that its wholly- owned subsidiary – Prestariang Systems Sdn Bhd – was granted an extension of the contract to supply Microsoft software licenses, products and services under the MLA 3.0 to all government agencies and a new client, Public Training Institutes.

The contract extension is worth RM222.6 million and will be from Feb 1, 2018 o Jan 31, 2021.

While expected, analysts were still positive on the contract extension as it represented Prestariang’s continued improvement of its execution capabilities in its core businesses.

For FY18, AmInvestment bank is projecting a 25 per cent growth in Prestariang’s software management revenue, premised on its plans to replicate the success of its MLA contracts with other prominent software partners like Adobe and IBM.

“And apart from increasing its product mix, Prestariang also intends to move up the value chain by offering more valueadded services such as cloud computing and other analytics to complement its licensing distribution business,” added the bank.

Similarly, Public Investment Bank Bhd (PublicInvest Research) reckons that the group will be able leverage on their status as a Microsoft Licensing Solutions Partner since 2006 and good partnership with Microsoft to secure more Microsoft- based contracts, especially in the private sector.

At Prestariang’s current share price of RM1.73 (as of Jan 29), AmInvestment Bank opines that the stock appears to be undervalued for a solutions provider.

“The company currently trades at a 1-year forward PE of 12 fold, while its regional comparables, China soft International and Hexaware Technologies, are both trading at 19 fold,” they explained.

And as the materialisation of MLA 3.0 has already been factored in, both AmInvestment Bank and PublicInvest research have decided to maintain their current earnings forecasts and their ‘Buy’ and ‘Outperform’ calls on the stock.

AmInvestment Bank maintains its fair value on the stock at RM2.08 while PublicInvest Research maintains its target price of RM1.85.