OCK GROUP BHD
By Kenanga Research Outperform (maintained) Target price: 95 sen
OCK’s proposed collaboration with ISOC Infrastructures Inc (ISOC) to pursue the telecom tower business in Philippines is a welcome development.
According to Kenanga Research, the move could enhance OCK’s recurring revenue stream. But the brokerage is not making any change to its earnings forecasts for OCK for the financial years (FY) 2018 and 2019 yet.
“The execution of the MoU is not expected to have any financial impact to the group in FY18.
“Nevertheless, we understand that management is hoping for a positive contribution on its earnings in the future should the projects be finalised and commercialised,” Kenanga Research explained.
The brokerage maintained its “outperform” call on OCK, with an unchanged discounted-cash-flow-driven target price of 95 sen.
“The recent share price weakness could provide bargain hunting opportunities to long-term investors given the group’s intact prospect.
“We continue to like OCK for its healthy cash flow on the back of escalating recurring income trend, ability to ride with the passive infrastructure sharing trend, EBITDA margin expanding trend, and potential growth through M&A activity,” Kenanga Research said.
OCK on Wednesday announced that its subsidiary OCK Vietnam Towers Ptd Ltd had entered into an exclusive one-year MOU agreement with ISOC to pursue opportunities to acquire, install, operate, maintain and manage telecom tower assets in the Philippines.
Besides, the collaboration would also allow both parties to explore opportunities in the new towers’ roll-out/greenfield projects and potential sale-and-leaseback project from mobile telecom operators.
Kenanga Research said Philippines’ telecommunication industry has tremendous potential for growth, according to the management, given its lowest telecom towers per capita at 152 towers per one million capita vs the Asean’s average of 579. Besides, Philippines’ 4G access is also the lowest at 59% vs the Asean’s average of 72%.
It noted that OCK would expect the collabo- ration with ISOC to provide the group an advantageous platform to penetrate the Philippine market and drive the group’s future business growth.