We continue to like OCK for its attractive growth prospect and growing recurring revenue stream. BUY with a TP of RM0.750. Stock valuation appears attractive following the 35% retracement YTD. We like OCK for its: (i) healthy cash-flow on the back of escalating recurring income trend, (ii) ability to ride with the passive infrastructure sharing trend, (iii) EBITDA margin expanding trend, and (iv) potential growth through M&A activity. Key share price rerating catalyst will come from spin-off of its towerco unit (OCK SEA towers) and earnings-accretive towerco mergers & acquisitions. 

OCK ventured into Vietnam's telecommunication tower in January 2017 through a 60%-owned Southeast Asia Telecommunications Holdings Pte Ltd ("SEATH"). SEATH is the largest independent base transceivers station (BTS) owner in Vietnam, with 1,998 telecommunications towers (as of the end-CY17 and accounted for c.19% of independent tower market share) geographically dispersed throughout Vietnam. The group's tower portfolios mainly comprised of Ground based (87%) and Rooftop Based (13%). All the towers are backed by long-term lease rentals (c.5-10 years) from major mobile network operators in Vietnam (i.e. MobiFone, VNPT and Vietnamobile). 

Vietnam's 3G subscriptions penetration rate has surged to 34% (or 41.3m subscribers) in the year 2017 from 25% two years ago and projected to cross the 50% ratio by 2021. The country has started to roll out the 4G/LTE services last year hence anticipating that more towers would be required to accommodate the latest technology. All these stringent regulations are barriers of entry for the new comers. 

Moving forward, SEATH is aiming to focus on business growth via acquisition and we understand that the group is having a discussion with several towercos to acquire another 550-600 tower assets by year-end. 

Source: Rakuten Research - 11 Oct 2018