OCK has filed an application for a case dispute arbitration in China, which is expected to be resolved within the next 9 months with a higher prospect of winning. BUY with a TP of RM0.750 Stock valuation appears attractive following the 47% retracement YTD. We continue to 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. 

OCK announced that an application for arbitration has been filed to the China International Economic and Trade Arbitration Commission (CIETAC) in Shanghai, China on Monday against Nokia Shanghai Bell Co., Ltd (formerly known as Alcatel-Lucent Shanghai Bell Co., Ltd) and Branch of Alcatel-Lucent Shanghai Bell Co., Ltd. The dispute arose from the breach of subcontract agreement in April 2014, where the subcontracted works and/or supply of materials or services in relation to USD5.49m Greater Mekong Telecommunication Backbone network project located in Cambodia. 

Despite a partial payment, it still failed to pay the remaining aggregate outstanding progressive payment and the variance amount of USD2.93m. Management believe the arbitration case is likely to be resolved within 6-9 months and stands a strong chance to win after consulting various legal parties. 

We reckon recent share price weakness was mainly due to the upcoming shariah-compliance status review (in November) given that the group had failed to meet the financial ratio benchmarks coupled with the review of the sector's regulation landscape and the introduction of the National Fiberisation and connectivity plan, which is set to change the telecommunication operators' capex plan and subsequently affect infrastructure providers' (i.e. OCK) prospects moving forward. 

Source: Rakuten Research - 21 Nov 2018