FY14  earnings  hit  a  new  high  since  its  IPO,  beating  our  expectations. Maintain BUY based on an unchanged TP of MYR1.06 (17% upside). Our forecast  is  under  review  pending  a  meeting  with  management  later today.  We remain bullish on its earnings growth prospects, which aresupported  by  an  orderbook  of  MYR400m,  geographical  diversification and focus in growing its base of recurring revenue.

Above  expectations.  OCK  Group’s  (OCK)  4Q14  core  earnings  of MYR7.3m (+60% YoY/+141% QoQ) brought FY14 earnings to MY16.4m(+20.5% YoY),  making up 109% of RHB’s core earnings forecasts.  Note that  its  quarterly  and  yearly  revenue  and  core  earnings  were  at  theirhighest since its IPO in 2012.

Results highlights.  FY14 revenue grew  a  robust  23% YoY,  driven by: i)  the  stronger  regional  contributions  from  a  fibre  laying  contract  in Cambodia  for  Alcatel  Shanghai  Bell  and  the  consolidation of  PT  Putra Mulia  (PMT)  (an  85%-owned  Indonesian  tower  maintenance  outfit)  in 4Q14. Revenue from telco network services jumped 51% (+77% YoY in 4Q14),  from  ongoing  LTE  related  site  deployments  and  engineering, procurement and construction  (EPC)  contracts. The solar business saw its  revenue  surged  43%  QoQ  on  qualifying  Feed -In-Tariff  (FIT)  quota booked during the quarter.  Sequentially, 4Q14  core earnings more than doubled  (+141%)  due  to  the  same  reasons  above.  Overseas  revenue now makes up 9% of group revenue from almost zero a year ago. 

Outlook  and  prospects.  We  remain  positive  about  OCK’s  prospects given the strong potential within the managed network services segment in  Indonesia  and  Malaysia,  LTE  deployments  domestically  and management’s  commitment  to  grow  its  recurring  revenue  base.  There are  significant upside  to  revenue  and  earnings  in the longer-term  from the towerco venture in Myanmar, currently at negotiation stage.

Maintain BUY. We make no changes to our earnings forecasts pending a  meeting  with  management  later  today.  FY17  projections  have  been introduced.  We  keep  our  BUY  recommendation  and  TP  of  MYR1.06 based on target  18.5x PER to FY15 EPS.  Key risks to earnings and our view are: i) project execution risk, ii) lower-than-expected margins and iii) delays in contract awards.

Source: RHB