By Phillip Capital Management Sdn Bhd
Stock pick: OCK Group Bhd
OCK is one of the gems in the mid-to-small-cap universe. Although small, OCK offers huge growth potential.
The main gist of it is its plan to develop a recurring income business model, riding on the shift in focus by telco operators from capital expenditure (capex) on non-core competencies such as network infrastructure to operating expenditure in order to streamline their cashflow.
At present, OCK owns and leases 240 transmission sites to U-Mobile, P1 and Celcom, and that will provide earnings visibility for at least the next 10 years.
Presently, there are about 23,000 telco sites nationwide; hence, there is latent potential for OCK to acquire and lease them back to telco operators. Recently, OCK also managed to grab a small pie of the T3 extension projects (30 out of 400 sites) for rural tower construction.
Although small, we see the win potentially opening up more doors for OCK to secure similar contracts, moving forward. It is also growing into tower managed services where it maintains 4,000 sites for Maxis, which would provide relatively regular income.
With telco operators having completed most of the 3G coverage, these players have since moved into the 4G long-term evolution or LTE space, where they plan to roll out more than 5,000 4G sites collectively. This definitely offers huge business opportunity for OCK.
We also like OCK for its stout growth regionally, namely in Cambodia (800km fibre optic cable-laying), Indonesia and recently, Myanmar. Its biggest move into regional territory was the acquisition of a 85% stake in PT Mulia, an Indonesian tower maintenance company which is currently maintaining about 7,500 sites and is targeting to increase this to 20,000 sites within the next three years. This alone will raise financial year 2015 (FY15) earnings by 15% on top of enjoying recurring cash flow.
Source: The Star