OCK To Gain From Second 5G Network Rollout By Editor -February 5, 2024
Kenanga believes OCK does not intend to slow down the expansion of its tower portfolio after having achieved its target of owning 5,300 towers across Malaysia, Myanmar and Vietnam. Moving forward, the house notes in the near-to-medium term, the group targets to secure additional telco towers in the following markets, Malaysia: 150-200, and Vietnam: 500. It said the group is on track to attain the latter, after having secured approval to acquire an additional 120 towers in Vietnam recently.
Meanwhile, in terms of geographical expansion, OCK is mulling over the option to apply for a tower license in Laos. This may potentially be the next frontier for OCK following its previous ventures to Myanmar (2015) and Vietnam (2017). Riding on 5G roll-out momentum in Malaysia, OCK is expected to continue to benefit from sustained deployment of the first 5G network in Malaysia. This would be via involvement in the roll-out of an additional estimated 2,500 5G sites in 2024 (2023: c. 5,000 sites). Moving forward, for Malaysia’s upcoming second 5G network, Kenanga believes that OCK may also gain from: (i) co-location at its existing tower sites, and (ii) construction of new build-to-suit (BTS) towers. This is underpinned by OCK’s track record and involvement in the successful roll-out of 5G sites for the first network. Furthermore, the house adds that new BTS sites are required to expand Malaysia’s 5G coverage footprint.
The group is also eyeing 5G in Indonesia as well, looking at 15%-20% topline growth in Indonesia, largely driven by higher scope of works for network-managed services (NMS). Additionally, to a smaller extent, the group expects growth to be boosted by new fiberisation contracts. To recap, in 3QCY23, OCK’s market share of NMS in Indonesia dwindled QoQ to circa 29%, based on coverage of 32,125 sites (2QFY23: 45%; 49,200 sites). This was partly due to consolidation and rationalisation of tower sites by Indosat to avoid duplication. This was after the latter’s merger with Hutchison 3 to form the second largest telco operator in Indonesia.
On the bright side, NMS contract values have increased due to wider job scopes that include enhanced ‘comprehensive and active” components. As such, this translates to margin expansion and hence higher profitability. Moving forward, OCK expects the award of higher value job orders to sustain, particularly if Indonesia ramps up the roll- out of 5G. At this juncture, according to OpenSignal, Indonesia’s 5G network availability is 1%, which implies significant room for expansion.
Bottom Line Boost
OCK is aggressively bidding for new projects to replenish its order book, which amounts to circa RM278m as at end-Sept 2023. Amongst others, this includes: (i) a large scale solar power plant in East Malaysia, and (ii) contracts to provide 5G solutions in Malaysia (e.g. installation of systems that apply artificial intelligence such as smart CCTV networks). Hence, these new contracts are expected to boost FY24 bottomline, alongside expected interest cost savings. To recap, in end Nov 2023, OCK issued the first tranche (RM400m) for its RM700m Sukuk Murabahah program (MARC rating: AA-). In Jan 2024, OCK utilized the sukuk proceeds to refinance or pare down the bulk of its USD-denominated debt. As a result, the group expects to recognize quarterly interest savings of RM1.5m-2.0m.
In spite of the ongoing political upheaval at Myanmar, it is business-as-usual for OCK’s operations at Myanmar. Moreover, lease payments for its towers billed to local mobile network operators (e.g. MyTel) remain timely. As such, this dispels concerns that OCK may need to recognize impairments on its assets in Myanmar, which has estimated book value of USD100m. Nevertheless, OCK does not intend to increase its investments in Myanmar until the political situation stabilizes. Whilst there are some restrictions on the repatriation of funds from Myanmar, the group remains unperturbed, as it intends to plough back its profits into the market.
Consistent dividends in future? The group alluded to the possibility that it may formulate a new dividend policy in the near term. In addition, moving forward, OCK targets to declare dividends once every year. This is underpinned by: (i) robust operating cash flows, (ii) a firm balance sheet, and (iii) enhanced liquidity from its new sukuk program. For the same reasons, OCK does not plan to secure equity funding for expansion in the near-to-medium term. To recap, in recent years, OCK paid dividends sporadically, including in FY17 (0.9 sen) and FY21 (0.5 sen).
bye bye 60 cents.. All IB and fund managers start accumulating this counter. Finally Mother and son fly to the moon. No more selling pre4ssure from LTAT
why OCK will fly?..coz already got green light form foreign research analyst!!..when you heard foreign fund will come in, they will look to counter which has been recommended only.. not the speculative one.
after 7 day straight gap-up session from 58 to 68 cents. Its requires to cool down and take a breath. Less fun fair but still gave good $$$.😁😁. Tomorrow would be the last opportunity for those who hv missed the previous wave. Next would be landed at 72 - 75 cents!
This co. Involve in the current hot theme play of 5G, Data centre n Renewable energy, and its strong growth trajectory n good covering from various IB, presumeably this co. is as good as proxy for short n long term play!
OCK Group Berhad has been experiencing some challenges recently, with its stock performance lagging in the short term. However, the company's outlook for the next month appears cautiously optimistic, thanks to several key developments.
Firstly, OCK has a strong order book worth RM220 million, which is expected to support its earnings throughout 2024. The company is also actively expanding its presence in the telecommunications sector, particularly in tower leasing, where higher tenancy ratios are anticipated due to new 5G network deployments. Additionally, OCK has been securing new contracts in the data center sector, including three new contracts valued at RM32.5 million, which could provide a boost to its revenue in the near term.
Furthermore, the company's diversification into solar energy and digital solutions is also gaining traction, with positive projections for growth in these segments. These factors collectively suggest that while OCK has faced some recent setbacks, the potential for recovery and growth remains strong, particularly if it continues to capitalize on its new projects and market opportunities(
High capex business and constantly in need of new capital. it is hard to turn into a dividend stock. many have stuck into this stock and the only bull is RHB. I believe RHB is the banker of OCK
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
hhhiii123
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Posted by hhhiii123 > 2024-02-15 22:30 | Report Abuse
i exit the share with good profit, definitely will look back, Mersec doesn't mean bad thing lol