KUALA LUMPUR: Prestariang Bhd is considering various alternatives for the equity funding of SKIN on top of a placemet exercise at the group level, said AmInvestment Research.
In its research note on Monday, the research firm reiterated its Buy recommendation with unchanged forecasts and fair value of RM2.08 a share based on a sum-of-parts valuation.
"After clarifying with management, we understand that Prestariang Services (PServices), currently a 70%-owned subsidiary of the group and a vehicle for SKIN, is not a sole-purpose, one-off vehicle.
"In addition to managing SKIN, the subsidiary will be actively seeking new contracts, evolving deep practices in key technology areas and expanding into new geographical markets," it said.
"In this case, PServices could be treated as a going concern and high-growth entity, which justifies a P/E valuation metric or DCF with a terminal value (indefinite life) as opposed to a 15-year DCF (definite life) that we currently adopt.
"Applying a 3% terminal growth rate and 9% discount, we estimate the valuation of PServices at over RM1bil vs. our original estimate of ~RM400mil, which was based on a 15-year DCF."
Based on the above, Prestariang's SOP-based fair value would be elevated to circa RM3 a share. However, AmInvestment Research is leaving its forecasts and fair value unchanged until the financial close of SKIN.
"Currently, we gather that the group is in discussion with several institutional investors, and is in the midst of securing the best offer(s)," it said.
The research firm is positive on Prestariang for its pole position in the ICT and training and software distribution space; SKIN, which is expected to increase net profit by more than 8x from FY16-18F; its porfolio of products and services; and PServices' planned expansion into overseas markets.