Summary

• OCK Group Bhd (OCK) 4QFY22 core net profit gained 59.0% YoY to a single quarter record high of RM10.0m, driven by better contribution across all 4 business segments. Revenue for the quarter rose 33.2% YoY to RM186.1m.

• For FY22, cumulative core net profit climbed 32.6% YoY to RM33.7m. The reported earnings came in line, accounting to 103.6% of our core net profit forecast of RM32.5m and 91.0% of consensus forecast of RM37.0m.

• As at FY22, OCK owns and manages over 5,300 telco sites across Vietnam, Myanmar, and Malaysia that will provide recurring income stream over the long term. We expect the group to register more than 5,500 telco sites in FY23f. As of end-FY22, tenancy ratio across each geographical segment remains stable with Malaysia (1.2x), Myanmar (1.4x) and Vietnam at (1.3x) that will generate long term sustainable income.

• Locally, OCK remains committed in the delivery orders from the JENDELA programme and the rollout of the 5G network. We gather that the 5G network services having achieved 47.1% population coverage at end-2022, surpassing DNB’s target at 37.9%. With the new Malaysian government in helm, the rollout of the national 5G network is expected to speed up and remains on track to meet DNB’s target of achieving 80.0% of 5G population coverage by 2024.

• Geographical diversification remains in place with the group looking to tap into the telecommunications industry in Laos and Philippines. Should the move come into effect, this will cement OCK’s position as a key telecommunication network services player in the region.

• As of end-2022, OCK operates 22 solar farms with a combined capacity of 12.4MW in the green energy segment. The group will remain active in seeking to acquire additional sites in bid to reduce the reliance from the telecommunication network services segment whereby contributed c.90.0% to total revenue in FY22. We reckon that the measures to spur the renewable energy sector under the revised Budget 2023 also bode well for OCK.

Valuation & Recommendation

• Given that the reported earnings came within expectations, we made no changes to our earnings forecast. We maintained our BUY recommendation on OCK with an unchanged target price of RM0.48.

• We adopt a sum-of-parts (SOP) approach as we valued its telecommunication network services and green energy & power solutions business segments on a discounted cash flow approach (key assumptions include a WACC of 7.3%, terminal growth rate of 3.0%). Meanwhile, we ascribed a target PER of 13.0x to both its fullydiluted trading and mechanical & electrical engineering services businesses, based on their potential earnings contribution in FY23f.

• Risks to our recommendation include rising raw material costs. OCK’s business is heavily dependent on steel that accounts for slightly below 40.0% of the group’s costs of construction in FY21. Any project delay could also impact its income growth and cash flow as the group is operating in a capital-intensive industry.

Source: Mplus Research - 1 Mar 2023