Initial Public Offering - 4 July 2012
OCK Group Subscribe -  Fair Value: RM0.43

Investment Highlight

• One-stop solution provider for telecommunications network. OCK Group provides one-stop turnkey solutions ranging from network planning, design and optimisation, energy management, infrastructure management, and provides managed services to clients. Feature of the Group as one-stop solution provider is understand to be the Group’s main competitive strength.
• Rising demand for telecommunications network services. Demand for telecommunications network service is expected to be supported by the continuing penetration of broadband in Malaysia and increase in internet users.
• Established market reputation. OCK has been operating since 2000 and its customer base covers most of the major telecommunication operators in Malaysia which include DiGi, Celcom, U Mobile, YTL, and P1. Furthermore, it also a partner of technology providers such as Alcatel-Lucent, Ericsson, Huawei, NEC, SIAE and ZTE for their telecommunications projects in Malaysia.
• Experienced human capital in a highly technology oriented industry. Management team of OCK Group is comprised of highly experienced personnel with average more than 10 years experience and some personnel have also served as previous management team in its technology partners and providers.
• Good working relationships with technology providers. The Group has established long standing working relationships with Alcatel-Lucent, Ericsson, Huawei, NEC, and ZTE which have strengthen the Group’s project tenders.
• High barrier of entry. Significant initial capital requirement and high technical competency are limiting new players from entering the market and thus lower the competitiveness of the industry.

Valuation & Recommendation

• Subscribe with a fair value of RM0.43. We peg the Group’s at 8x FY13F EPS of 5 sen, which is at the upper range of 6-8x PE for small cap valuation. Our fair value represents an upside of almost 20% from the offering price of RM0.36. We like the stock for its commendable earnings growth and the business model is not well represented in any of the listed companies except its peer, R&A Telecommunication.

Background
OCK group is a market player in telecommunication network services which provides services to major telecommunications operators and co-operate with technology providers in Malaysia. Besides that, the Group also built a synergy business with international network equipment manufacturers for facilitates its business operation by applied with the latest technology and secure supplies as well as collaboration with these major manufacturers.

Source: JF Apex Research - 4 July 2012