Presbhd: SKINned in the Sell-down

Background

One of the many stocks that have dropped sharply in the current sell-down is Presbhd. You may recall, Presbhd - thru its 70%-owned subsidiary, Prestariang Services Sdn Bhd ('PServices') - has secured the contract to upgrade our immigration system in July this year. The cost of developing the system, known as SKIN, is about RM1 billion and the work will take about 3 years. Upon completion, PServices is entitled to collect RM294.7 million a year for the next 12 years.

At this moment, there is no news whether PServices has achieved the financial close for SKIN. In an October report, AmInvestment Bank has gathered that "the group is in discussion with several financial investors, and is in the midst of securing the best offer(s)". AmInvestment Bank is prepared to raise the fair value for Presbhd from RM2.08 to cica RM3.00 once the financial close for SKIN is attained. In September, Public Investment Bank has assigned a 12-month target for Presbhd of RM2.87.

We should not be too surprised by the sell-down for Presbhd as there were signs earlier that one or more of the substantial shareholders had been selling (as pointed out in my earlier report). Having said that, I am quite perplexed as to why the selling is so aggressive at this low price level. Chartwise, Presbhd is now struggling to hold at its long-term uptrend line support of RM1.20-1.25. If this support failed, it can easily drop to the psychological RM1.00 mark.


Chart: Presbhd's weekly chart as at Nov 21, 2017 (Source: Malaysiastock.biz)

Recent Financial Performance

As you can see, Presbhd' financial performance is fairly decent.


 Table: Presbhd's 8 quarters' P&L


 Graph: Presbhd's 19 quarters' P&L

Latest Financial Position

As at 30/6/2017, Presbhd's financial position is deemed satisfactory with current ratio at 3.7x and gearing ratio at 0.3x.

Conclusion

Based on satisfactory financial performance & position, and fairly attractive valuation, Presbhd is considered a good stock for long-term investment. The main concern is the weak technical outlook which may lead to further price weakness in the near term. In view of this, you should exercise careful discretion if you wish to add this stock to your portfolio.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.