Prostasco on the rise with better prospects

Protasco Bhd has seen its share price gaining some 59% in the past year to close at 27 sen. The stock is likely to rise further based on bullish technical readings, supported by higher profit trajectory as business activities gain momentum.

It is inching closer to its 52-week high of 34 sen seen recently, a huge jump from its low of 16 sen. Protasco could climb to challenge its resistance hurdles of 36.5 sen and 41 sen.

There were much excitement when the company announced early in May that it has received an offer Star Teenagers International Group Ltd (STI) to buy its unit Ikram Education Sdn Bhd. The counter surged as much as 10% to 27 sen, its highest since Dec 28, 2023.

Hong Kong-based STI has paid an unspecified earnest deposit for the acquisition, Protasco said in an exchange filing. STI will have three months to conduct due diligence on Ikram Education, which owns the Infrastructure University Kuala Lumpur (IUKL).

Investors need to be cautious as thisl is not a done yet. “A detailed announcement regarding the proposed disposal will be made upon execution of the share sale agreement between the parties. If Protasco manages to sell its eduction are, it will help narrow its losses.

The education segment has been loss-making since the Covid-19 pandemic in 2020, with a loss before tax of RM3.4 million in FY2020, RM6.6 million in FY2021, and RM15.3 million in FY2022, as student population fell. For FY2023, the education segment saw its loss before tax narrow to RM9.03 million due to lower lecturer fees and lower operating expenses. Revenue climbed 3% to RM25 million from RM24.24 million, due to higher international student fees and franchise fees.

The engineering company managed return to the black in the financial year ended Dec 31, 2023. It reported net earnings of RM6.7 million in FY23 versus a net loss of RM29.4 million in the previous year. Revenue surged 28% to RM1.13 billion from RM883.94 million.

However, the group registered a higher quarterly net loss of RM6.2 million in 1QFY24 compared with RM1.7 million a year ago. Protasco said it expects to show a profit trajectory for FY24 as business activities gain momentum going forward. Based on its book value per share of 60 sen as of end-Mar 2024, the stock is currently trading at a price to book value multiple of 0.52x.

Its core businesses are in the areas of road maintenance, property development, engineering & consultancy services, construction, trading & manufacturing of road and construction material, clean energy and hotel & hospitality.

The heightened interest in the stock could signal good news or some development on the disposal exercise. But it could very well be a drag on the counter should nothing materilise after 3 months of the announcement.