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
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Created by kiasutrader | Jun 14, 2016
Created by kiasutrader | May 05, 2016