Although the price has not reflected it, the company's fundamental is significantly more favourable than the financial-community appraisal of this company currently. - Philip Fisher

Where does the improving fundamental comes from? Myanmar + Vietnam

1. Built 650 towers in Myanmar with sustainable recurring income (tenancy of 1.3x) + bought 1,983 towers in Vietnam
2. To built another 600-800 more (secured) + new tenancy (Myanmar + Vietnam)
3. EBITDA margin will improve gradually, towerco biz will become a significant contributor
4. Continuing growth in tenancy ratio (negotiating with Ooredoo Telecom, the 4th telco in Myanmar) - a big boost to the Revenue Growth and EBITDA Margin

(Estimated Effective Equity IRR is about 13-16% for towerco biz)

rkg, it is more suitable for towerco (accepted by the market) to use EBITDA multiple for estimating its valuation. Repayment of loan and interest is also in USD. Net impact may be marginal (natural hedge, especially during the initial years).

I prefer to focus on EBITDA because towerco biz eventually will be significant, hence, using EBITDA multiple for valuation estimates is reasonable.

Courtesy from Mr Tong
http://klse.i3investor.com/blogs/kianweiaritcles/144665.jsp

UOB KayHian SOPTP (value) of OCK is RM1.192 billion.

Q3 of Myanmar revenue is RM13.6m. Q4 , with higher tenancy ratio, may achieve RM15-16m (rough estimates). Fundamentally getting stronger by the Q. Q4, normally is the highest Q, may represent above 50% or more contribution.

DY is 5%.

PE range is 8-13x, coming FYE is 8x (net of RM512m net cash).

Business prospects is good (Yamaha - local and Vietnam).

Estimates of EBITDA 2016 to 2019 is RM67m, RM90, RM113m and RM134m. (UOB)

CAGR for EBITDA (2016 to 2019) = 24% p.a.

Value will continue to improve as long as EBITDA continue to grow steadily - coming from tenancy ratio growth and expansion of number of towers.

UOB gave a value of RM5.6m (calling it notional interest saving) for the assumption of fully converted warrants (which raised about RM187m or 264m warrants x 71 sen exercise price) for calculation of SOPTP.

Therefore, its TP of RM1.05 is based on 1.135b shares (warrants fully converted) instead of existing shares of 871m.

In reality, rarely warrant holders fully convert into mother shares when trading at premium. In OCK's case, most holders are non-financial institutions or they are not related to substantial shareholders, which make it more unrealistic to convert at a premium.

Why analysts choose to follow theory (assume fully converted warrants) instead of something more realistic? They can also said, if warrants not converted, the TP will be RM1.3x? Just work out another realistic scenario for "poor investor".

Myanmar's towerco figures is encouraging (from UOB). Revenue Q1 8.5m, Q2 8.5m, & Q3 13.6m, Q4 = ???

For those who are not familiar with Capital 21 project. Gadang only contribute the land in the JV, in return, given a 16.7% share of GDV of the entire project. Based on initial agreement, the total share of GDV is up to RM300m, but later adjusted to about RM320m due to higher adjusted GDV.

GENERAL STATEMENT
Many are talking about Johor properties are 10 or 20 years ahead of its time, including some Johorean who stayed in there (General statement).

FACTS
However, what they are not aware is, about 70% of the share its entitlement will be paid to Gadang upon completion of the Non-HDA component, i.e. the retail segment of the project, which is expected to be launched by August 2018 (As per Capital City Limited, the developer of the project). Hence, major chunk will be recognised by August this year or plus minus few months of delay.

FACTS
The share of profits (on GDV) is based on construction progress. It has nothing got to do with how well the project does after one day or 10 years later. Even Capital City failed after a few years, Gadang would have received all its portion on the share of profits (as per management in the minutes of AGM - within 2 years).

FACTS
Gadang has about RM3-4 billion of GDV to be launch over the next few years despite the low unbilled sale on the property. Hope this clear the misunderstanding.


Valuation does not determine the share price.

Very good observation. I have the same concern two years ago. Surely analysts cannot miss that (elephant in the room). It's best you hear it from the management, either via an AGM, all call up the CFO/management or read the AR. Serious investors must be satisfied that this issue can be resolved.

Some investor "guru" said, don't look only for undervalued stocks, also look for growth (with moat) in a company. In the long run, the fundamental of the company will be reflected by the share price. If you do a careful research of Ekovest, despite the noises (on BM and IWC acquisition), the fundamental of the company is improving, Duke 2 started to collect toll, Duke 3 (SPE) is 40% completed, EkoCheras Mall may start collecting rental, secured new contracts like RoL etc. Taking into account of its PEG, its selling now RM1.10 for a song.

Do have a look at the last AGM's minutes on 8 Nov 2017 in Gadang's website, the management said there is about RM260m to be recognised over next 2 years. This may be the game changer for Gadang for 2018.

Those who love roller coaster will love Ekovest.
1) Up from 93 to 118 - 25 sen up
2) Down from 118 to 108 - 10 sen down
3) Up ? Down ?
Enjoy the ride as long as you know the final destination is about 200sen and above. Evokest is like IJM Corp & Gamuda many many years ago, from contractor, diversify into property, and then, toll roads. If your kids are going to university in 5-8 years time, this company can give a CAGR of 15-20%.

Some seminar said, focus on growth stocks (e.g. KESM) rather than undervalued stocks (I agree). Some see Gadang as an undervalued stocks, actually it is a growth stock as well (but fall under the unpopular sector at the moment). 1-3 years down the road you will know. What is the point of investing in growth stocks when it is fully valued (i.e. taken into account future growth into the price)?

1) Agree, dwindling property billings is a concern, similar to its dwindling construction contract in 2016 of about RM600m. They are launching about RM500m before FYE2018 and also planning for another GDV of RM3-4b in the pipeline (including Kwasa Land and others)

2) Yes, many are concern that its property segment may have a "drastic" drop from FY2017 (as it contribute close to 50%) due to poor property market sentiment. The concern are valid, however, it was clearly disclosed during the AGM, Capital 21, the billed sales is about RM43m, and there is about RM260m yet to be recognised (in the minutes),

3) In fact going forward, the Group segment earning structure could be 45:55:5 for Construction:Property:Concession Assets. Look at Scientex, its property segment grown way pass its original manufacturing segment with earning contribution of 2:1. Even for IJM Corp or Gamuda, in their earlier years, they went through this stage, where property is part of their segments, and concession assets also came in. We should look at how the Group allocation of their resources and profit margin (which shown they are competitive) and the momentum of growth they are creating.

4) The management already disclosed in the minutes of its AGM, RM60m recognised and about RM260m to go over next 2-3 years on Capital 21 alone. Well, when a stock is unpopular, it may take more time to appreciate this issue, meanwhile, the darlings of the market now is Oil & Gas. Who cares about property? Isn't it an opportunity, do you buy when the market is hot? or when no one care?

It is clear the internal restructuring is to prepare for listing the towerco biz. Perhaps, to use some of the IPO proceeds to acquire new brownfield towers in SEA, attaining its medium term growth of 5,000 towers. At the moments, OCK has about 2,800 towers, and contracted another 600 towers. All it takes is to buy another 1,600 towers, either organic growth or via acquisition.

it may be unpopular now at RM9.75, given time, this counter can gave you a CAGR of 12-13% for at least 4-5 years. Simple principle, hard to follow.

Is 76 sen a bargain? Exercise price is 48 sen. Total cost equal to 124 sen, expiry June 2019. If we are confident that the share price will touch RM1.50 within next 18 months, I think this is a bargain.

LKH said FYE 2018 earnings definitely (yes he said definitely) is better than 2017. Perhaps he is confident because of Duke 2 + EkoCheras Mall (additional income) + construction.

Risk reward issue.

1. Evokest WB highest was 135 sen, lowest is 48 sen, dropped 87 sen. (now 78 sen)

2. Gadang WB highest was 74 sen, lowest was 37 sen, dropped 37 sen (now 48 sen)

3. UMWOG highest was RM4.68, lowest was 28 sen, dropped RM4.40 (now 45.5 sen) + so many oil and gas company dropped more than 70%.

4. Volatility is part of the game. Those with "sustainable & growing earnings," the price will will come back eventually, perhaps, timing will be an issue to some. Those without, wither away.

If I am in edotco, I will propose a take over of OCK at RM1.30 to RM1.50 per share (since now the share price is low) on the pretext of its expansion in Myanmar and Vietnam. Or gradually, mope up all the warrants over next one or two years, making it an associated company (by converting into shares).

Analysts is projecting EBITDA of about RM145m in FY2019. Paying EBITDA 10x, valuation is about RM1.4b or RM1.70 per share. Far more cheaper than paying very high for other acquisitions.

Just an idea.

Up again today to 118 sen. Came down very fast, up also very fast. EGM in early Feb.

Similar to Gadang, Ekovest and some other "good shares", warrants are down due to weak market sentiment (June to Dec 2017) and "unpopularity", not because of deterioration of fundamentals, on contrary their fundamentals have improved.

At 25 sen, OCK Warrants is trading at only 6% premium and expiry is 3 years to come, while we know that they are:

1) going to build more towers for Telenor + Mytel (total 600 towers)
2) gradually improving tenancy ratio for Myanmar and Vietnam
3) intention to expand via M&As or organic growth from about 2.8k (600 secured) towers to 5k towers.

risk and reward judgement.

Added some OCK WA at 25 sen.

Gadang warrants up 10 sen from 38 sen in a week (26%)
Ekovest warrants up 17 sen from 55 sen (31%)
OCK warrants up xx sen from 25 sen?

Edotco listing will helps more investors to understand towerco business.

https://asia.nikkei.com/Markets/Nikkei-Markets/Malaysia-s-Axiata-Group-May-List-Edotco-Unit-In-500-Million-IPO-This-Year-Report

Edotco did a private placement in April 2017, selling its portion to INCJ & Khazanah based on EV/EBITDA for FY16, using a EBITDA multiple of 12.5x.

OCK's tower biz, focus on its EBITDA growth. You can check the EBITDA growth in some of the analysts reports.

Edotco IPO will help re-rating of Axiata, hopefully, by then more investors will understand towerco biz.

Even though it went up from 93 sen to 102 sen today, it's still super-undervalue.

This is similar to WCEH, total cost of construction of RM6b, while Ekovest's Duke 1+2 = RM2b (Duke 1 collected toll for many years, Duke 2 collecting toll recently) and Duke 3/SPE under construction = RM4b.

Sooner or later gap between the price and value will reduce. Frankly, tower biz model is less risky than Toll, IPP or other infrastructure which has higher construction risk (takes 3 years) & tower biz has the ability to increase its tenancy ratio if their price are competitive.

One of OCK's moat is their capex competitiveness that allow them to be competitive in pricing and win more tenants (improve in tenancy ratio + building new towers for MPT).

Once investors research more about tower biz, they will be convinced. Unfortunately, Malaysia does not have listed towerco to compare, hopefully edotco will be next.

Gadang PE (net cash) is about 7x. CAGR for PAT is about 12-15% next 2-3 years. PE will go down to about 5x. Some small construction stocks traded at around 12-15x. It's undervalued.

A quick and simple way to value OCK.

1) Tower biz (Market Accepted method is using EBITDA Multiple 10X)
2) Non Tower biz (Telco services + Solar Energy) using PE of 15x

1) EBITDA generated from tower biz by 2018 is estimated about RM60m. So, 10x EBITDA is RM600m. (refer analyst reports)

2) Non tower biz is expected to make around RM28m in 2018. So, the value is about RM420m.

3) Total estimated value is RM1.020b. NOSH = 871m shares. Estimated intrinsic value is RM1.17 per share. Both (1) and (2) is growing, value will grow accordingly. <AES excluded>. Upside from 90 sen is about 30%. Timing wise, nobody know.

Ekovest is super-undervalue. Time will tell.

First interim dividend 1 sen. Final dividend = ? Not bad for a growing company.

Construction order book is about RM2b. Can last for 3 to 3.5 years. Expecting about RM0.5b new contract per p.a..

Properties will do well next few years with RM3-4b GDV (growing) - like Scientex, properties is trading at PE of 7x (with PAT of RM260m for property segment - double the size of manufacturing). Capital 21 will bring in cash flow of about RM200m, next two to three years.

Next 3 years average PAT p.a. is about RM130m. Market Cap today is RM730m @ RM1.11. Prospective PE is only about 5.6X. Undervalue. Accumulate.

Whoops, let me correct it. Thanks.

Whoops! It's Shahril (not Wahid). Mixed up with PNB took over SILK. Let me correct it. LOL.

Flinstones@ your estimation of EkoCheras Mall is reasonable.

So, Construction segment is about RM2b, Properties should worth about RM2b (including Cheras Mall), SUKE is about RM1-2b.

"The trick in investing is to sit there and watch pitch after pitch go by and wait for the one right in your sweet spot and when people are yelling "swing, you bum!" ignore them.

Focus on the cash flow from the tower business. Accounting useful lives of 20 years for towers is high, hence, lowered the EPS but cash flow will be higher.

For the first few years, profits are lower because of interest on loans. Once the repayment starts, profits will gradually goes up. Similarly, once the additional tenancy ratio fully recognised, cash flow + profits will improve.

Excluding the tower business segment (Myanmar and Vietnam), OCK actually traded at undemanding PE of 9x and ROE of 12%.

You can take a look at

https://klse.i3investor.com/blogs/sosfinance/142149.jsp

market cap (net of cash RM60m) = RM638m. Average estimated profit after tax p.a. for next 3 years is about RM130m. Prospective PE of 4.9x. Added some at RM1.07. (Concessionaire assets is growing from 31.5.2014 of RM28m to RM100m as at 31.8.2017 + more on completion of mini hydro in Sumatra + PV solar panel in KK).

Chrismas present? 80-100% growth in new towers (expected in less than a year - as per report from Kenanga). AES project will contribute additional CF, new tenancy targeted to grow from 1.26x to 1.30x by end of 2017. Additional RE in progress? Let's see if price will catch up with fundamental by year end.

makemoney1@, thanks for the report from Kenanga @ 20 Oct 2017, with TP 1.05

However, Kenanga used the assumption of enlarged share capital of 1.135b (871m+ warrant conversion of 264m), but does not include the conversion cash inflow in the computation of Adjusted EPS.

Existing EPS = 34.5m
Warrant conversion
cash 264m x 0.71
= RM187m
Interest savings 6% = 11.2m

Adjusted EPS = 45.7m (A)

Adjusted share cap = 1,135m (B)

Adjusted or Fully Diluted EPS = 4.03 sen (A/B)

PE = 88sen/4.03sen = 21.8x (instead of Kenanga used PE of 29x) for FY2017.

"Creating Momentum For Growth" - AR2017. I believe the management can deliver 15-20% CAGR for FYE17 to FY20. (EY+DY)/P/BV >10x. At such a low PE and reasonable Growth, I accumulated more. Will have a positive preview in the 1Q.

Announcement of 27 Sept 2017
http://www.bursamalaysia.com/market/listed-companies/company-announcements/5555713

JV in engineering services. AES project. 60:40 (OCK owns 40). No mention of figures.

smart move by the company and director.

Good biz, good management + good price. And Good luck.

Accumulate @ 123. With or without new projects. Very low compared with peers & sector PE. If you can wait for FD, one year interest of 3.90%, treat it like an FD, likely you will exceed that. DY is 2.4%, likely to be >10% with low risk.

a) The non tower biz is seasonal. First half average is 30%.

b) The basic EPS (practical - 871m shares) is much higher at RM1.37 than the Fully Diluted EPS (theory - 1,135m shares) used by analysts to determine their target price of RM1.05 per share. It is unlikely warrant holders will convert with a 10% premium (with 3 years 3 months to expiry)

c) fundamental growth has capacity to improve over next 2-4 years at least, due to expansion (to 5,000 towers from 2,800) and improvement in tenancy ratio, and cost optimisation for the towerco biz in Myanmar and Vietnam.

Yes, more and more institutionals are holding OCK. Based on its latest Annual Report, the top 30 shareholders, about 75% is held be institutionals & major shareholder. Hopefully they are in for long term. Towerco biz has high capital, but also has good growth potential from higher tenancy ratio over time. First few years normally profits are lower, due to depreciation and interest, and gradually increasing its tenancy ratio.

warchest@ asked, PE so high, why?

http://sosfinancialplanning.blogspot.my/2017/08/sos-at-least-30-upside-for-ock-group.html

FYE2018, EV/EBITDA multiple will be c. 7x. Market paying 12.5x EV/EBITDA

@warchest, so high PE, why?
Hope the attached explains....
http://sosfinancialplanning.blogspot.my/2017/08/sos-at-least-30-upside-for-ock-group.html

Thanks VFTRADER, growth will comes from

1. MPT 90 co-tenant
2. MyTel 70 co-tenant
3. MyTel 300 build-to-suit
4. Telenor 300 remaining to be built
5. SEATH (Vietnam) - adding 200-300 BTS p.a.
6. Possible M&A of new towers

Monitor the EBITDA and its growth. The closest "tool" for measuring OCK. So far, it is in line with analyst "estimates". 2H will be better (EBITDA), based on historical record.

So, don't use the wrong machines and expect a different results. Some "voters" uses "weighing machines" and some "investors" uses "voting machines", you will have conflicting results.