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OCK 'buy'

18 Apr, 2017
The Star Online
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OCK Group

By UOB Kay Hian Research

Buy (maintained)

Target price: RM1.05

THE maiden profit contribution from its Myanmar tower business and the possibility of building more network towers in Vietnam are likely to deliver OCK Group Bhd’s commendable growth prospects.

UOB Kay Hian Research which was optimistic on OCK due to its focus on tower business, expected the company’s tower earnings in Myanmar to come from the first quarter of financial year 2017 (Q1’17) onwards. To note, OCK is principally involved in the provision of telco network services.

The research house also raised OCK’s forecast core net profit of FY2017-2019 by 4%-6% on the back of positive investment holding income namely management fee and lease rental, recognised by OCK since 2016. OCK’s core net profit in 2017 and 2018 were expected at RM34.5mil and RM39.6mil, respectively.

“OCK can deliver about 620 and 650 units of towers to Telenor Myanmar in Q1’17 and Q2’17 respectively. Additionally, we expect the management to complete the handover of 920 towers by year-end.

“We expect Myanmar tower earnings to pour in from Q1’17 onwards, after three quarters of start-up losses in 2016 of RM2.3mil. In fact, the Myanmar tower company generated a small profit in Q4’16. We estimate the Myanmar tower business to lift Q1’17 net profit by RM1.1mil, thereby contributing about 13% to 2017’s net profit,” said UOB Kay Hian Research in a note.

Apart from that, the research house anticipated that the Myanmar government-owned Myanmar Post and Telecommunication’s plan to ramp up network expansion, will result in OCK’s greater asset efficiency.

At present, the Myanmar government is focusing on wide network expansion in the coming years, in order to provide greater network accessibility. UOB Kay Hian Research said that MPT is interested in at least 100 of OCK’s tower sites and is aiming to sign long-term lease agreements ranging between 10-12 years within the next few months.

On its part, OCK plans to build more network towers going forward. The telecommunications network solutions provider aims to to hold 3,081 towers across Malaysia, Myanmar and Vietnam by end-2017.

With the listing of its South-East Asia-based tower business on the cards, OCK intended to build a portfolio of 5,000 towers via brownfield acquisitions and greenfield projects.

UOB Kay Hian Research reiterated its “buy” recommendation on OCK’s shares and lifted the target price marginally higher to RM1.05, in tandem with its earnings upgrade.