1) Very relevant question. Its better for an interested investor to find out for himself or herself rather than from an unknown writer. Until one is satisfied with the answer, I believe, one will be sceptical about the collection.

2) Why, why, none of the analysts brought it up? There are 5-6 of them, some are foreign analysts. Surely such a big figure cannot escape them right? How are they to convince their clients (fund managers that invest tens of millions). If I am the client, I better make sure it is repayable. Approximately RM200m trade receivable outstanding. Interested investor must find out for him or herself. Can call the analysts or IR? or CFO? Let me know please. Tx.

1. For long term investor, buy only when company announce new projects, otherwise, TP is only 20sen away or perhaps, another 10-20sen if they announced great results this coming quarter.

2. For traders, if your TA said buy, no brainer, buy. Forget about FA.

In order to give a view of buy or not buy - you really need to know the background of the investors. Said if he bought at RM1.14 (lowest), He should be selling to lock in some profit (Unless he know that more projects is coming). So, there is not straight forward answer until you know the background of person on what is his holdings, what is his expectations, what is the horizon, and his risk profile.

Accumulate a bit as OCK W is oversold position.

Accumulate a bit at 25 sen.

OCK can add more value to the Vietnam deal than the private equity. Besides the sustainable assets at a decent price (EV/EBITDA is only 8X), the growth on tenancy ratio is great. With possible upgrade and consolidations of the telco towers, there are rooms of opportunity for OCK.

Once OCK completed the PP, the deal (SPA) and the loan for the Vietnam deal, there is a good chance of rerating. There will be good upside even at 26 sen. Execution is the key. Don't buy and expect it to go up the next day, keep it for a while (a year or two).

Not sure there is a similarity trend, Gadang did a pp at 1.80, a few weeks/months after completed the PP, now Gadang is 2.50. The guy who took up Gadang PP is laughing to the bank. Both OCK and Gadang has growth potential, the only difference, OCK has more sustainable assets going forward. OCK Warrant at 26 sen, still look attractive, as you pay a third of the mother share, but share the same growth excitement.

Effective from 2017, OCK Group will have about 3,000 towers (Myanmar + Vietnam + Malaysia). An addition of 500 towers each year from 2017-2020 for Myanmar. By end of 2020, OCK will have about 5,000 towers. Hence, growth from 2016 to 2020, grow from 1,000 to 5,000 (5x growth in 4 years).

Most analysts were conservative and were using a tenancy ratio of 1.0 time (on Myanmar, excluding Vietnam as no analyst report since the announcement of the Vietnam deal). However, based on management view, Myanmar tenancy ratio can goes up to 1.8x, as mentioned in CLSA report.

With the purchase of Vietnam towers, EV/EBITDA of 8-9x with tenancy of 1.25x and management is of the view that it can improved up to 1.45x in the next few years.

UOB Kay Hian TP of RM1.30 on a sunny-day (3,000 towers + tenancy ratio of 1.15x) & with the latest acquisition of Vietnam SEALTH, and expected tenancy ratio from both Myanmar and Vietnam, the NEW assumptions should be (5,000 towers + tenancy ratio of 1.45-1.80x), the upside is GREAT.

This is a medium term stock (3-5 years) as the initial years, earnings is coming in slowly (due to interest on loan and depreciation). The earnings will improve yearly as the loan is repaid gradually from the rental of towers. Another area that analysts missed or being conservative, is that the growth in tenancy ratio, which according to the management, it can grow as high as 1.8 times for Myanmar and to about 1.5 times for Vietnam brownfield project, which already giving about 1.25 times.

Growth comes from:
1) rental yield from more towers every year

2016 2017 2018 2019 2020

Myanmar 920 1420 1920 2420 2920

Tenancy 0.4 1.0 1.3 1.5 1.8

Vietnam - 1938 1938 1938 1983

Tenancy ratio - 1.27 1.32 1.37 1.42

Malaysia 133 150 160 170 180 (assume slow growth)

2015 2016
2) Solar (MW) 3.3 5.0 (Room to go up, depends on utility company)

3) maintenance of towers & upgrades

Indonesia growing double digits
Myanmar gradual growing as towers getting old
Vietnam growing after acquisition

4) Loan interest will be reducing as it is paid down

Loan for Myanmar project USD40.2m (7 years)
Loan for Vietnam project USD30m (7 years)
Existing Loan raised RM80m (information not available, RM40m is current)

Vietnam deal of EV/EBITDA of 8x, appears reasonable.

Prior to sub prime, most American have not seen or experience housing price dropping. This is because, prior to sub prime, they did not provide so much debt (first problem) and further geared up with Derivatives (2nd and the main problem). Since then, big chunk of the "bad debt" were swept from the private sector to the public sector. Housing has since rebounded back to prior 2007, and investors are happy. Will there be round 2 of crisis? I think likely. Stock investments in Bursa will be tougher to navigate, as more pot holes are created, so, investor need to be more vigilant and careful to avoid the pot holes. Another "notion" we have been sold all this while is market always goes up in the long run, hmmmm, I doubt the older Japanese will agree with you. Give it a thought.

Last few trading days looks like overbought based on RSI.

Upside for the OCK warrants is better at 83 sen vs 23 sen. 2-4x by Dec 2020 is possible.

OCK warrants expire in Dec 2020, there is another 4 years 6 months. Due to the transformation of OCK from maintenance to build and lease model, from 2017 onwards, OCK will have much improved biz model, not only contribute high cash flow (EBITDA >65%), sustainable (22 years contract) and also good potential of growth (improve in tenancy ratio of the towers).

After 920 towers completed end of this year or first quarter of 2017, they will need to build another 500 towers each year from 2017 - 2020.

In addition, OCK is getting the brownfield towers in Vietnam as well. Thats why it is raising up to RM80m as equity. Issue at PE of above 20x to buy an asset with payback period of less than 8X, I think it will contribute positively to the Group (the earnings will be more than offset the dilution).

In about 4 years time, the warrant could be 2X, 3X or 4X?

Accumulated a bit at 23 sen.

Hard to find strong cash flow (EBITDA = 65%), sustainable (12+5+5 years contract) and potential growth (improve in tenancy ratio) for Myanmar (execution risks are reduced since Dec15). Plus Vietnam deal.

Port delays of 2-3 weeks are tolerable and can be mitigated by planning ahead. As for monsoon, experience contractors (I believe, they are mainly locals) should be aware of weather conditions in Myanmar, after all, this is not the first time contractors are building telco towers.

Similarly, if you build a fun park in Malaysia, surely you should know some off seasons, or rainy seasons, surely the management have done a survey. A plus minus 1-2 months for this type of project is tolerable.

Hi Zai Zai,
Where to get the funds?

1. The first 920 towers funding is in place, rights issue (RM132m) plus loan (RM160m).

2. As for the remaining 2,000 towers to be built in 4 years, it is about RM600m (or RM150m p.a.)

3. Assume 40:60, equity debt ratio, it need to raise RM60m equity and RM90m loan p.a. in 2017, 2018, 2019 and 2020

4. The RM60m equity each year, can come from:

(a) Trade debtors less trade creditors @ 31 March 2016 is about RM120m.

(b) Once the 920towers completed, it will bring in EBITDA of about RM35-40m each year.

(c) The major shareholders (also major warrant holders, say 40%), will want to maintain its shareholdings, hence, likely to exercise its 40% warrants. 246m warrants x 40% x 71 sen = RM70m.

(d) Additional cash flow can come from completed 500 towers in 2017, 18, 19, 2020, which is about RM15m p.a.

Hope that answer your question. Actually you can call up the CFO of the company to ask, I am only speculating, or rather guessing. And, likely the new CFO will use my "guessing" to answer your question. Try it, and let me know.

"A big question for minority shareholders is probably whether the anticipated robust earnings growth will offset the impact of the dilution." (last sentence from The Edge Issue 1118, July 11-17 of 2016)

Let us answer this big question (that The Edge or the analysts raised):

1. It is pretty simple, Myanmar build and lease back project, average project payback period is 6.5 years.

2. Hence, the EV/EBITDA = 6.5X

3. Assuming all OCK warrants are converted, cash raised is RM187m (246m warrants x 71 sen exercise price). Therefore, the EV/EBITDA is 6.5X.

4. The Indonesia listed telco towers provide EV/EBITDA is 12-18x.

5. A very rough comparison is, there is upside to the 6.5x to at least close to 12x, if we were to compared with Indonesia (since there is no listed Malaysia telco tower yet).

6. So, the big question, is after all not that big. The earnings growth (with higher tenancy ratio), will definitely offset the impact of the dilution. Even if there is no growth, the sustainable cash flow, and low EV/EBITDA, there are very good potential upside if the warrants are converted.

7. The risk of execution in Myanmar was also mitigated after OCK had built about 50 towers and is accelerating it.

8. Time for RERATING? Have to wait for the sifu of i3 to press the button, like Bornoil.

"A big question for minority shareholders is probably whether the anticipated robust earnings growth will offset the impact of the dilution." (last sentence from The Edge Issue 1118, July 11-17 of 2016)

Let us answer this big question (that The Edge or the analysts raised):

1. It is pretty simple, Myanmar build and lease back project, average project payback period is 6.5 years.

2. Hence, the EV/EBITDA = 6.5X

3. Assuming all OCK warrants are converted, cash raised is RM187m (246m warrants x 71 sen exercise price). Therefore, the EV/EBITDA is 6.5X.

4. The Indonesia listed telco towers provide EV/EBITDA is 12-18x.

5. A very rough comparison is, there is upside to the 6.5x to at least close to 12x, if we were to compared with Indonesia (since there is no listed Malaysia telco tower yet).

6. So, the big question, is after all not that big. The earnings growth (with higher tenancy ratio), will definitely offset the impact of the dilution. Even if there is no growth, the sustainable cash flow, and low EV/EBITDA, there are very good potential upside if the warrants are converted.

7. The risk of execution in Myanmar was also mitigated after OCK had built about 50 towers and is accelerating it.

8. Time for RERATING? Have to wait for the sifu of i3 to press the button, like Bornoil.

added a bit at 80.5sen, after the announcement of private placement (up to RM80m) to purchase brownfield towers in Vietnam as well as obtaining loan of USD40.2m from Myanmar. Even though we pay about 80sen, about 40sen are liquid assets (net cash + debtors).

OCK is gradually transforming into a telco tower biz, with strong (EBITDA > 65%) and sustainable (>10 years) cash flow due to locked in contract for 22 years (12+5+5) and possible upside on tenancy ratio.

The estimated effect will be positive, issue at PE 25.65x, buying the towers with payback period of about PE 6.66x, the private placement enhance shareholders' value per share.

@Apollo, thanks for the warning.
Other research firms that cover OCK are RHB, Inter-Pac, Malacca Securities and CLSA.
1) I look at stocks from different perspective (sometime), I use their report as reference to check my own calculation
2) Market cap of OCK today is about RM650m at 82 sen, it has about net cash (include trade debt) of RM300m.
3) Actually, I like the tower company biz, the one in Myanmar (sustainable, good EBITDA @ 65%, high profit margin) which hopefully they will build up to 3,000 towers (920 towers to complete by end of 2016)
4) The private placements of RM64m lately used to purchase brownfield towers in Indochina (speculated to be in Vietnam)
5) Growth in LTE & network maintenance in Malaysia and Indonesia (18% market share in both countries).

Frankly, I am looking at a horizon of at least 2-3 years, as OCK is implementing (3), (4) and (5). I prefer the warrants due to leveraging on the mother, with 2-4times upside.

Disclaimer: It is just a theory, a stock theory (not a recommendation to buy, sell or hold).

According to the analyst, the private placement (PP) of 10%, will be used for acquisition of brown field towers in Indochina. Let's assumed they raise RM60m from PP, loan another say, RM140m (30:70), total capital = RM200m.

Another assumption, if the rental yield is 10%, the total return is about RM20m (before interest and tax). We give it a PE of 15x, after interest and tax, say RM11m, this will add in another RM165m into the market capitalisation. Return on equity is 11/60 = 18% p.a. (further improve its margin and sustainability of the company). The return will comes in immediately as it is a brownfield project. (The company trade debtors is about RM230m, if collected, can use to reduce loan or for remaining Myanmar project). As long as the debt is productive, it is ok.

At 24 sen, it is reasonable with most analysts gave OCK a value at about RM1.00, the warrant at 10% premium will be about 32 sen. A 33% upside or more. Just a view. Not a buy, sell or hold call.

Despite 97% of RM630 billion are all domestic debt, about RM300 billion or 45% are held by foreign investors. What will happen if the foreign investors decides to get out of Malaysia if there is a worldwide shock in the financial markets? MoF is only telling one side of the coin. So, don't be overly confident on that Mr MoF.

private placement money for expansion, depending on the return, hope is a good investment in Indochina.

Follow Mr Tong Kooi Ong, sell some to take profit. Price move up too fast in a short period.

Buy 18.5 sell 21.5 gain 3 sen or 16% (2 weeks). Not too bad.

Few things to consider/determine:
1. Is the company earnings moving to higher levels - next couple of years (due to sustainable structure competitiveness advantage)
2. Did the share price already OUTRUN the fundamental due to sentiment.

Accumulate. Black Scholes method is about 31sen (For info only). Accumulate because OCK's tower biz is materialising. Agreement sign in mid Dec 2015 (RM323m), rights issue (RM132m) completed at late 2015. Premium fluctuate between 8-12% (i have seen some with 50-100% premium but the mother share upside is not very attractive), with 4.5 years tenure, risk reward is POSITIVE.

Kenanga gave its plantation value about RM41m based on USD7,500 per ha x 3.80 x 1,500 ha. Total ha is about 5200 ha, so another RM41m x 3,700/1500 = RM101m upside when the remaining 3,700 ha reach maturity in a few years time.

Kenanga EV/EBITDA for Gadang is also very attractive for FYE16-18, between 2.5x to 3.5x. FYE16 PE is 5.8x, while small cap construction stocks is about 10x, so upside is 4.2/5.8 of 72% (in 2-3 years).

No worries @moneySIFU I was just giving my view on the assumption made by xxx analyst. xxx analyst forecast is based on a one year tenure, while I use a longer tenure. He/She assume build and lease back of about 1,000 units of telco towers while I assume 3,000 units.

The analyst gave 21sen per share for the 1,000 units of towers based on DCF of 10 years (WACC 9.7%, TG 1.5%) and gave a target price of 102 sen.

Since I assumed all 3,000 units to be completed, hence, the TP should be RM144 sen. (21sen x 3) for 3 years period (while analyst only forecast for 2016). Btw, the stock is OCK. Warrant provide higher upside, come together with higher risk due to 4.6 years left to maturity.

Good analysis. Do you have PE or P/BV for our local banks vs Singapore Banks. It will provide a wider perspective from a regional point of view on the valuation (although it is not completely apple to apple comparison).

SC did not even say a single word

Initially I was bullish with Protasco, especially the 100 acres of freehold in Kajang (near the MRT station). The oil and gas deal and the directors fiasco is too much for me and also fed up of eloquent silence from SC. I did calculate the one off loss of the deal, about RM80m, about RM0.20 per share. I dislike to invest in company where integrity of the directors is questioned. (like Benalec). I started purchasing Protasco when it was around 90 sen (due to high dividend yield). In fact, I added more when I found out they are developing the Kajang land plus the oil and gas craze, knowingly, maximum damage is limited. I can understand, if you made a mistake, you lose the 10% deposit, but I don't like it when the entire RM80m was gone and our SC police did even said a word. It is a blessing for me, the replacement proof to be good.

It should be dated 10 Nov 2014 instead of 4 Nov 2014. Prices between 5 to 9 Nov 2014 is not available in i3 charts. It is for illustration only (not much differences (I hope), My fund manager did not ask for a sell in Wellcal. perhaps, there is further upside.

Good article. Thanks to Piggybank.

Palm oil output in Malaysia, the world's second-largest producer, is estimated to fall by 2 million tonnes from a year earlier in the oil year ending September 2016 due to the effects of El Nino, leading industry analyst Dorab Mistry said. (Malaysia production in 2015 is about 20 million tonnes).

So, technically speaking, it is conservative to assume production will drop 10%. As for whether how much it will go up, it will depends on more factors, i.e. speculators, Indonesia production, currency, sentiment, etc. I am not estimating the price of palm oil, like share price, can go up or down based on sentiment and many other factors.

I seriously don't know how much drop in production, but, that is based on another expert, it says 10-15%. I used 13% based on one expert said. I suppose it depends on where exactly they are planted. One of the reason prices goes up is because inventory is expected to fall 13% during El Nino. If there is no effect on production, then, he is not an expert. Lets confirm this "expert" based on historical records during El Nino (on production not price).

Other facts: export tax 5% & foreign workers levy also went up.

accumulate.

If they can sell the toll concessionaire, the value will be unlocked.

@Malacca Securities, please relook into the number of shares in issue.

Someone is keen on their toll concession again. The last time, the buyer is willing to pay RM395m and assume the loan of the concessionaire (about RM800m). If able to sell, the company is worth much more.

Just an additional info:

Trade Debtor RM133m (claim to be collectable in 3-4 months)
Rights issue in Dec RM145m
Available Islamic Loan RM150m


Why: RM1.0 billion project in Myanmar, build and lease back (12 yrs). Expected return 12-18%.

My Rating: BUY/ACCUMULATE

New business that will contribute significantly in 2016 and 2017 from build and lease back (12 years) with Telenor of Myanmar up to RM1.0 billion contract. Payback period is 5-7 years. This project will easily double the current profit in two to three years time. A high growth stock, with great biz model on build and lease back towerco.

market cap vs net asset value = RM590m vs RM2,200

OSV (Associates)
Very hard to value this company due to making losses. Hence, from NTA perspective, assuming write off of associates RM700m (associates = RM1.3b v market value of associates RM0.6b).

Dry Bulk + Tankers (invested)
Estimated value = RM2.0 b, due to substantial drop in charter rate of USD25k per day to USD8k per day, tankers value provision say 50% = RM1.0b


ROUGH VALUE OF MAYBULK ASSETS

Net asset value = 2.2b - 0.7b - 1.0b = RM0.6b which is close to the share price.

UPSIDE

Depends basically on the recovery of BDI, but based on 2015 figures, another year of blood bath for 2015, i.e. losses of about RM70m. Going forward, if BDI continue to suffer in 2016 (likely), hence it will have another year of RM100m losses.

SO, lets see.

Look for capex last 5 years and ROIC. This will provide a better view on expansion plan and real return. I hv wrote about Padini many months back, I remember their capex was high (indicates expansion) and ROIC of 38%.

Fear is a choice.

CEO of DIGI welcome the government new policy. Over reaction from the market? nothing new.

I suppose defensive stock is less cyclical (not speculative) and lower beta. Agree, during crash, everything drops. Even utilities stock like TNB, but, when market recover, their share price will come back unlike speculative stocks (without earning support), will remain collapsed.

the built-and-leaseback deal in Myanmar (RM323m) is better than I thought. If things go well, Telenor still have remaining RM700m worth of project in Myanmar (as reported) post 2016. This contract is a major catalyst/contributor for OCK and propel OCK into the Asean market.