We remain positive on OCK’s growth prospects.  We maintain  our  BUY call  and  MYR1.65  TP,  which  represents  a  14%  upside.  Domestically, despite some delays, management is hopeful of MCMC awarding the 1stphase of the TIME 3 extension  in the coming weeks.  It  remains upbeat on venturing into Myanmar, and indicated that discussions are showing progress.  Besides  that,  OCK’s  transfer  to  the  Main  Board  is  on  track and will likely take place in November. 

News  from  MCMC  should  come  soon.  Despite  some  delays, management  is  hopeful  that  in  the  next  coming  weeks,  the  Malaysian Communications  and  Multimedia  Commission  (MCMC)  will  award  the 400 sites  to  be built  under  the  1 stphase  of the  TIME  3  extension  that involves  a  total  of  1,000  sites.  Recall  that  submissions  for  the  tender have closed in mid-April. 

Pleasant surprise in domestic site maintenance business.  We were positively  surprised  to  learn  that  management  expects  to  secure  an additional 500 sites from a major cellco to do site maintenance work,  for which  OCK  already  handles  3,800  sites.  We  note,  however,  that  the incremental impact to FY14 earnings will not be material, but may result in earnings accretion of approximately 3% in FY15. 

Regional  aspirations  updates.  Management  said  OCK  is  making progress in discussions with a local partner to set up a joint venture telco tower  business.  While  we  understand  there  are  already  four  foreign tower  operators  in  Myanmar,  management  expects  local  knowledge  to be a key factor in ensuring success. The relatively ambitious coverage targets  set  by  the  two  telecom  license  holders  imply  that  the  tower operators need to ensure they have the necessary capabilities to deliver as  scheduled.  We  believe  that  having  local  knowledge  may  help  OCKmitigate  the  risk  of  lack  of  infrastructure  as  well  as  political  risk.  The initiative into Myanmar may, however,  be capital intensive.

Transfer to main board.  Management said OCK’s transfer to  the  Main Board remains on track, and may take place in November. 

Earnings forecasts. Maintained.

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)  di versification  into  less developed foreign markets, iii) growing  recurring revenue base, and iv) above-industry average ROE.

Source: RHB