OCK Group Bhd (OCK:0172) is a telecommunications infrastructure services provider with principal activities include (i) Telco Network Services, Engineering, (ii) Procurement, Construction, and Maintenance (EPCM) Services, (iii) Telecommunications Site Management, and (iv) Renewable Energy Solutions. We expect OCK to register net earnings of RM58.7m and RM61.4m for FY24 and FY25 respectively. BUY with a TP of RM0.83, based on a 16x PER (5 years average) over FY24 EPS.

The implementation of 5G technology creates significant growth opportunities for OCK, leading to increased demand for its telecommunications infrastructure services, including construction, upgrades, and maintenance of towers and fibre optic networks. The expansion of 5G networks may necessitate additional investments in site management and maintenance services, contributing to OCK's revenue streams. OCK is set to capitalise on the evolving telecommunications landscape with the widespread adoption of 5G.

To enforce its position as the largest Telecommunication Network Services Provider in Malaysia, OCK is able to strategically respond to Jendela's initiative to increase 4G coverage and transition into 5G. As of 31 Dec 2023, OCK has an outstanding order book of RM250m.

The global shift towards sustainable energy solutions presents significant market opportunities. OCK currently owns and operates 29 solar farms with a total combined capacity of 14MW. Looking ahead, the company's strategy is to expand its renewable energy division via increasing capacity by 10MW by FY24, from the collaboration with state governments. This strategic expansion underscores the pivotal role of the renewable energy division in propelling OCK's growth trajectory in the foreseeable future.

Our BUY recommendation is premised on the company's growth prospects, including expansion plans within the telecommunications and renewable energy sectors, as well as opportunities presented by initiatives like Jendela and the transition to 5G technology. We are cautious about the above-average net gearing of 0.63x; however, the interest cover ratio of more than 7x signifies the company’s robust debt management capabilities, mitigating concerns surrounding its debt position.

Source: Rakuten Research - 20 Mar 2024

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