DO YOU LIKE THIS BIZ MODEL?

INDEPENDENT TOWER OPERATORS

Listed companies in                            Indonesia                      USA            

EBITDA                                                85%                              60%           

Tenancy                                               1.8X                              2.5X            

Rental                                                  USD18k/yr                USD21k/yr

Investment cost per tower                   USD100k                   USD225k

Internet Penetration                             Low                              High

ROE                                                     26%                             10-20%

Indonesia's internet penetration in 2014 is 22% and the region is 30%.

Each country has different capital, revenue and cost structures.  E.g. Indonesia Independent towers gearing is about 2-3x.

Big players in Malaysia is edotco.  Wait till you see how much they paid for the towers in Myanmar and Indonesia.  Again, different structure for different countries.

WHAT ARE ADVANTAGES OF THIS BIZ MODEL?

1.  Long term secured contract with Telco operators.

2.  High profit margin (depends on gearing)

3.  EV/EBITDA = 6-8x, strong cash flow (also depends on tenancy growth)

4.  Tenancy ratio growth for Myanmar and Vietnam is high

5.  Biz is simple, building telco tower is not as complicated as properties (risk of cost overrun is higher)

WHAT IS THIS ST(OCK)?

In Indonesia, you can look at TBIG and TOWR.  Both are Independent Tower Operators.  However, the size is a lot bigger than OCK.

WHAT IS THE BIG DEAL?

1.  Not many aware or familiar with this type of biz model.  Because, non was listed in Malaysia.

2.  No proven record in Malaysia, unless edotco get listed, a good reference can be made.  Hence, opportunity is there.

3.  Fundamentally, this stock has done 3 acquisitions, 2 private placements and 1 rights issue over last 2.5 years, and the price is NOT reflected yet.

4.  Foreign brokers is beginning to notice this st(ock).  One just started coverage in June and another, as non-rated.  I wonder, foreign brokers is beginning to like small cap stocks.

5.  Given time, 2-3 years, it can be great investment.

WHY CONSIDER THE WARRANTS?

It is about 3.6x lower than the mother share 22 sen vs 80 sen.  Is a great leverage, with 4.25 years to go, upside is great.  Not sure it can match TGuan's warrants (200-400% up if we buy early).

Sadly, my fund manager disallow me to buy its warrants, as it is their company policy that all clients are not allow to buy warrants (which I strongly oppose).

DISCLAIMER

Just sharing some vital information.  Not a recommendation.  Further more, I am definitely not teaching people to be a GREAT INVESTOR.

ADD ON 5 SEP 2016

It is not easy to find a growth stock with such a great biz model and sustainable income.  And what makes it more interesting, there is only ONE (listed) in Bursa at the moment.  

OCK becoming the Independent Tower Operator for ASEAN is materilising in Myanmar (potential of USD220m investment) and Vietnam (USD50million).  

Over the last 18 months, OCK has raised RM700m from shareholders, placees, banks, private equity partner. and others.  In any businesses, it is not difficult to expect a payback period of 7-8 years for such capital intensive biz.

Hence, in order to reap the benefit, both the Myanmar and Vietnam deal, which is yet to be reflected in the value of the company, provide a great leap in years to come.  

For investor to participate now and expect to double their money in 12 months time, will likely be disappointed.  The tower biz, takes an average of 7 years of payback period.  Imagine, OCK will be investing this RM700m capital in the next 12-48 months, what will be the returns in 2020.

At 5 September 2016 price of 80sen, and its warrants 22sen, it is a great bargain.  Why? The two deals can easily add about 60% market cap in the next couple of years as calculated by analysts with a flat tenancy growth while in reality, the growth in tenancy ratio as guided by management is likely and significant. 

At the moment (past 3 months), market is going side way and this is a great time to accumulate.  I must warn everyone that I have interest in this shares and warrants, and please do your own homework if keen to invest.