OCK  has received the LOA for  Phase  1  of the USP  Timeline 3 project. Maintain  BUY  and  MYR1.06  TP,  a  29.3%  upside.  The  award  is  keenly anticipated, with the group expected to be busy over the next two years from a  good pipeline of telco site deployments. OCK  is  also submitting its bids for the recently opened tender for Phase 2/3 of the  USP project,which closes in mid-December. 

Closing the year on a high note.  OCK  has received a  letter of  award (LOA) from the Malaysian Communications and Multimedia Commission (MCMC)  for  a  portion  of  the  Universal  Service  Provisioning  (USP) Timeline 3 contract for the construction of 400 telco sites in under-served and rural areas under Phase 1. 

Phase  1  contract.  Although  details  are  sketchy,  we  gather  that  OCK was  awarded  a  MYR30m  contract  to construct  a  combination  of  tower and cell sites  located mostly  in Kelantan  that  are to be completed within six  months.  The  award  should  further  boost  the  revenue  contribution from  its  telco  network  services  segment  in  FY15  (>60%  of  group revenue),  a  key  earnings  driver.  We  do  not  rule  out  OCK  undertaking additional  works on a sub-contract basis  for  other USP recipients,  given its good track record of tower builds.   

On a  roll.  We understand  from management that  OCK  recently bagged a  sizeable  frame  contract,  valued  at  MYR100m,  for  the  installation  of 1,000  LTE  sites  nationwide  for  a  local  telco.  The  group  is  also  in  the midst  of  submitting  its  proposals  for  Phase  2/3  of  the  USP  project involving a further 600 sites  (61 clusters),  where bidding  closes in midDecember. 

Forecast.  Our earnings forecast remain unchanged,  as we had  earlier factored  in  the  USP  awad  and the frame contract.  The latest contractsshould  keep  the  group  busy  over  the  next  two  years  and  help  drive  a projected  FY14-16  revenue  CAGR  of  37%.  Key  risks  to  earnings  areweaker-than-expected margins and higher than expected opex. 

Maintain BUY. We like OCK for its strong earnings growth prospects,  its focus  on  growing  its  recurring  revenue  base  and  its  exposure  to  less mature  but  high  growth  emerging  markets.  Our  TP  is  unchanged  at MYR1.06,  pegged  to  18.5x  FY15F  EPS,  which  offers  over  a  29.3% upside from current levels.

Source: RHB