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RHB Research says it continues to like the stock for its attractive growth prospects
01 Jun, 2017
The Star Online



By RHB Research Institute

Buy (maintain)

Target price: RM1.05

RHB Research Institute expects OCK’s revenue momentum to increase from higher lease rentals and the consolidation of Southeast Asia Telecommunications Holdings Pte Ltd (Seath), its 60%-owned brownfield tower company in Vietnam.

Maintaining its “buy” rating with an unchanged target price of RM1.05 on OCK, RHB Research says it continues to like the stock for its attractive growth prospects and management’s focus on driving recurring earnings. The brokerage’s target price for OCK is based on 10.1 times the group’s estimated earnings for the financial year ending Dec 31, 2018, which is still below its peers in Indonesia which are trading at more than 12 times forward earnings.

In general, OCK’s recently released financial results were in line with consensus and RHB Research’s estimates.

For the first quarter, OCK reported 11.5% year-on-year (yoy) increase in core earnings against a 35.8% yoy jump in revenue. Overall results were lifted by the maiden contribution from Seath, which was consolidated from mid-January, and higher lease rentals from the build and lease towers in Myanmar.

According to RHB Research, a recent check with management showed that Telenor Myanmar (TML) has reverted on a few of the earlier “recalibration” of more than 200 sites under the initial build and lease contract (920 sites). OCK has since handed over 610 sites (as at end-April) to TML.

It notes that state-owned Myanmar Post and Telecommunications, the state-owned telecommunications operator, is now a second tenant on some 90 sites, which should drive stronger recurring lease rentals. OCK is hopeful of better tenancies with ongoing discussions with other telcos.