Prestariang comes under pressure
Forced selling by major shareholder as speculation persists on SKIN contract
PETALING JAYA: The major shareholder of Prestariang Bhd, Dr Abu Hasan Ismail, saw forced selling of a block of his shares, as speculation persists on the company’s multi-billion contract with the Home Ministry.
In an announcement yesterday, it was said that Abu Hasan’s shares amounting to 3.13% of the company was forced sold to rectify a personal margin position. Abu Hasan is the president and group managing director of Prestariang and still has another 24% in the company.
Prestariang’s share price has fallen by more than 50% in the last month after selling by institutional shareholders, led primarily by Retirement Fund Inc (KWAP). The pension fund had a 13.02% stake in Prestariang in May prior to the 14th general election and has steadily reduced it to 7.82%.
In addition to the selldown, Prestariang’s RM3.5bil National Immigration Control System (SKIN) concession project with the Home Ministry is a subject of speculation, although sources said the company would continue to implement it.
“The project is under review in line with the new government’s stand of ensuring the best value and most efficient cost for all government contracts given out. There could be some adjustments to the scope of work and it is not likely to remain in the present format,” said a source.
The SKIN project is one of the 44 projects done under a public-private partnership (PPP) model, where the private sector funds it and recoups the payment from the government in stages.
Towards this end, the Finance Ministry had previously stated that the PPP project would not be cancelled but reviewed for it to be implemented in a different model.
In its existing form, SKIN is a 15-year concession project which officially started on April 25 this year.
At its closing price of 51 sen yesterday, the stock was down some 70% on a year-to-date basis.
Apart from KWAP, insurance company AIA has also been a heavy seller of the stock, which closed at 51 sen yesterday on a volume of 53.4 million shares.
At this price, it had a market capitalisation of RM250.8 mil, a far cry from the billion-ringgit market cap it used to command.
The commencement of SKIN earlier this year has boosted Prestariang’s earnings over the last two quarters, particularly with flat growth from its bread-and-butter software and licensing segment in the second quarter ended June 30.
For its second quarter, it recorded a net profit of only RM529,000 compared with RM5.82 mil previously. Revenue was almost unchanged at RM55.92 mil.
The poor results were due to lower contributions from the software and services segment.
For the six-month period, net profit was down 22.05% to RM7.04 mil, while revenue was up 29.84% to RM128.68 mil. The better topline was due to contributions from the SKIN project.
The 15-year concession agreement, which was signed by Prestariang’s subsidiary Prestariang Skin Sdn Bhd in 2017, followed the approval-in-principle awarded by the Home Ministry in November 2016.
The SKIN project is a solution to tighten immigration controls. In the first three years (2018 to 2020), Prestariang will develop and deploy the system, and payments by the government to the company will only commence in 2021.
SKIN, which will replace the current immigration system called MyIMMs, is projected to provide the information and communications technology firm an annual payment of RM294.7 mil from year four to year 15 during the maintenance and technical operation phase.
CIMB Equities Research in a recent report remained positive on the stock but reduced Prestariang’s target price to RM1.89 from RM2.05.
“We believe SKIN is a national security project as the existing Immigration Department’s MyIMMs IT infrastructure network, built in the 1990s, is already outdated and there is an urgent need to replace MyIMMs with a new IT infrastructure with the latest technology.
“We estimate SKIN to be worth RM1.08 a share,” said CIMB analyst Nigel Foo in the report.
At the share price of 44 sen on Oct 22, investors were valuing its existing business on 2018 13 times price-earnings ratio and assuming zero value for the SKIN project, said Foo.