We remain optimistic on OCK’s prospects for 2H14, as we expect new projects and its  existing  orderbook to  keep  it  busy.  Management  said MCMC may possibly announce the award of the Time 3 programme this month. We are positive that management is exploring the opportunity to expand  its tower business into Myanmar given the higher demand for towers, but discussions remain ongoing for now. Maintain BUY. 

Firing on all cylinders in 2H.  We remain optimistic on OCK’s prospects for 2H14, as management guided  revenue from site maintenance  from a major  cellco  involving  3,800  sites  and  maiden  revenue  from  its Indonesian  acquisition  will  begin  this  month.  In  addition,  other  notablejobs  that  will  keep  the  group  busy  are  mechanical  and  engineering (M&E)  work  for  two  contracts  worth  MYR54m,  fibre  trenching  work  in Cambodia  (MYR20m),  as  well  as  engineering,  procurement  and construction (EPC) work for three solar rooftop farms (MYR8m).

Awaiting the news from MCMC. While the Malaysian Communications and Multimedia Commission (MCMC) has taken its time with regard to the award of the 1,000  new telco towers to be built (the first  phase will involve  400 sites), management indicated  that the  award may  possi bly take place this month.  In any case, OCK has an orderbook of 70 telco sites to be fulfilled by year-end, thus expanding its portfolio to 310 from 240.  

Regional  aspirations.  We  gather  from  management  that  OCK  is  in discussions with a local partner in  Myanmar to explore the possibility  of entering  the  telco  tower  business.  Prospects look  positive,  considering that  Telenor (TEL NO, NR), one of the  only two telecom license holders,has  set  an  ambitious  90%  population  coverage  target  by  2016,  which implies a huge need to roll out new telco sites, although political risk and the lack of infrastructure are potential risk factors to look out for.   M&A  possibilities.  With  a  MYR150m  sukuk  facility  in  place  and MYR50m  in  cash  raised  from  the  recent  private  placement  exercise, management is exploring the possibility of acquiring more telco sites as well as solar farms to boost its recurring income. 

Investment  case.  We  maintain  our  BUY  call  on  OCK,  with  an unchanged TP of MYR1.65,  based on a target  FY15  P/E of 18.5x.  We like  OCK  for  its:  i)  strong  growth  prospects,  ii)  diversification  into  less developed foreign markets, iii) growing  recurring revenue base, and iv) above-industry average ROE.

Source: RHB