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Monday, September 16, 2013

Prestariang overcomes slow start to grow significantly after 2 years


LIFE as a listed company hasn’t been a bed of roses for Prestariang Bhd, but it has certainly been a rewarding experience, as founder Abu Hasan Ismail will attest.

Not unlike his usual self, the ebullient, straight-talking 53-year old was a bundle of energy when StarBizWeek caught up him with at Prestariang’s headquarters in Cyberjaya recently.

“At the time of our listing two years ago, only the smaller research houses looked at us,” he says.

“Things have changed. We are researched by some of the big boys now, so when we knock on the door, we are meeting the decision makers, and not just another fund manager.”

According to people familiar with the company, a foreign investor put in an order for a few million shares immediately after a meeting with Abu Hasan in Singapore.

“The thing about good investors,” Abu Hasan explains, “is that they already know all they need to know about your company. What they want is a personal meeting with you.”

But – he observes, with a bit of irony – some people don’t follow their own advice.

“First they say the day of the gong is the beginning of a long process. Then tomorrow they ask me what happened to my share price (Prestariang fell 18% on its first day of trading). Rome wasn’t built in a day.

“It’s easy to give advice. The difference for me is that I have to deliver. I make sure I listen to everybody. Whether we agree is a different matter,” he laughs.

And deliver he has. Abu Hasan has seen his ICT-based training and software licence distribution firm grow from a market capitalisation of some RM114mil when it debuted on the local bourse to about RM442.5mil currently.

If its latest financials are any indication, Prestariang looks set to end the year on a solid note.

Between January and June, Prestariang trained some 43,000 students in its home grown – and higher-margin – IC Citizen programme, and is aiming to train 46,000 more people by the fourth quarter, taking its full-year trainings to 89,000, a seven-fold increase over last year’s 12,000 trainees.

Prestariang has also emerged as a favourite among analysts for its low valuations and quarterly dividend payouts, which produce a yield of about 6%.

This has stirred institutional interest in the stock, and although Abu Hasan claims not to be distracted by minute-to-minute changes in his share price, he must be glad to see that it has gained 82% for the year to RM2.02 on Thursday, not far from its record high of RM2.24 in July. Abu Hasan has a 41% interest in Prestariang.

Potential in O&G

While Abu Hasan may bristle at suggestions that Prestariang is too dependent on Government contracts, it is likely to remain his core client for some time to come.

This hasn’t escaped the architect-turned-academician-turned businessman.

“If we just relied on one business we’d be dead by now,” he says, adding that the Government accounts for 60% of its sales today, down from almost 100% in 2009.

A greenfield opportunity being pursued aggressively by Prestariang currently is training and certification for the oil and gas (O&G) sector.

“We want to make the same impact in O&G as we have in ICT, where we have trained and certified more than 400,000 people,” Abu notes.

Prestariang is already making headway in its O&G training and certification, a programme analysts say will be hugely lucrative.

To illustrate, it got paid RM4.8mil to train 360 university graduates over three months, which works out to over RM13,000 per student.

Earlier this week, StarBiz reported that Prestariang is poised to win a training, certification and software distribution contract from SapuraKencana Petroleum Bhd on a worldwide basis, according to sources.

The job, valued at some RM20mil, is likely to be finalised soon and will see Prestariang collaborating with software multinational Autodesk.

Should this contract materialise, Prestariang is expected to sign on other O&G players. Indeed, Abu says he is already talking to the likes of Petronas, Malaysia Marine and Heavy Engineering and Technip.

“As the country moves up the value chain, the need for up-skilling and re-skilling becomes greater,” he explains.

“A lot of engineers need re-skilling. Universities are not producing industry-ready graduates. So we sat down and developed the curriculum with the industry.

“The O&G sector is booming because local companies are being given priority and the rights to develop oilfields. It is no longer the case that jobs are outsourced to foreign firms and left at that. Fabrication, for instance, must be done in Malaysia now.”

21st century talent

Meanwhile, Abu is exploring another niche area – talent management.

He can’t yet lay all his cards on the table, but says the new division will act as a feedback loop for Prestariang’s training and education arms.

The group plans to hire an external candidate to run the new business. Its goal, in essence, is to identify gaps in an organisation’s talent needs, and to fill those gaps.

“A company may sponsor hundreds of people for a university education. Do they know where these young minds are headed after graduation?” he asks.

“Are these scholars put in leadership positions? So much effort has been put into sending them to the Ivy League. They must surely be capable of great things.”

Abu Hasan recounts an incident of a student who studied at Oxbridge, only to return to Malaysia to be asked to sell mobile phones.

“The company couldn’t find a place for him. And it continues to be the case. They are not managing this wealth of talent.”

With talent management, Abu envisages Prestariang cornering both the demand and supply side of the talent business.

“Our talent managers will consult companies on their current and future talent demands, and feed the information back to the training arm. Any university or school can produce talent, but how many are in sync with what the industry needs?”

Turning around UniMY

UniMY, Abu Hasan readily admits, didn’t get off to a flying start. Even though red tape was an issue, he isn’t one to point fingers.

Prestariang’s boutique software engineering and computer science university, touted as the first of its kind in Malaysia, had aimed to secure 600 and 1,200 students for this and next year, but fell short, enrolling only a dismal 24 students for the first intake.

This despite the fact that UniMY was launched in January and had received 400 applications. Prestariang has since lowered its target to 200 students for this year and 600 students in 2014.

UniMY has incurred losses of RM2.9mil thus far and stands to lose another RM2mil in 2013, analysts project. Nonetheless, Abu Hasan believes the losses will not be significant to Prestariang’s overall group profits for the current financial year.

It has to sign up 200 or more students to break even, which means a turnaround is not possible until next year, he says.

Late official approval for UniMY – which came in July, the same month it was to have commenced its first intake – and the exacting standards of its academic partner Melbourne University were cited as reasons for the choppy start.

Although that episode was humbling, Abu Hasan says he is grateful for the support of his board members. His independent director Datuk Loy Teik Ngan, also the group CEO of Taylor’s Education Group, whom Abu Hasan would later jet off to meet in a silver Porsche, had assured him that “this is normal”.

“You are on the right path, he told me,” Abu Hasan smiles.

To accommodate the 3,000 students UniMY expects to have by 2016, Prestariang also intends to firm up expansion plans by the end of the year for its facilities in Cyberjaya.

In tandem with Prestariang’s asset-light model, Abu Hasan says the company hopes to get someone to either build or own the campus in a manner that would not necessitate a large capital outlay from Prestariang.

Consummate entrepreneur Abu Hasan doesn’t like how his company is lumped into the education sector.

“They like to put us in these boxes, but we have no equivalent on Bursa Malaysia,” he quips. “From day one people didn’t understand our business model.”

Still, he finds some comfort in the fact that Prestariang has been an “underdog” for a long time, which has “kept us out of the limelight and allowed us to do our work”.

As a parting shot, Abu Hasan’s advice is not to put too much stock into quarterly peaks and troughs, but to keep your eye on the prize.

“We’re here for the long term. I’m sure I’ll see you again,” he quips. And with that he promptly calls for his secretary, jumps back to his desk and gets back to work.

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