OCK GROUP BHD: (MYR0.59) Raising cash for its green energy business
Maybank IB Retail Research

OCK proposed to undertake a private placement of up to 113.6m shares, representing 10% of its issued shares to third party investors to be identified later. The proposed exercise is expected to be completed by 1Q20. Based on an illustrative issue price of 55sen per placement share, the group will raise up to MYR62.5m.

The proceeds will be utilized for: 1) development and acquisition of green energy assets (MYR57m); 2) working capital (MYR5m); and 3) expenses related to the private placement (MYR0.1m). This fund raising is crucial as the group might not have room to obtain more borrowing to grow the green energy business as its net gearing was at 0.9x as at end-Jun 2019.

OCK has plans to grow its green energy business as current contribution from this segment is rather miniscule. In 1H19, the green energy segment contributed only 6% and 4% to its revenue and PBT respectively. It was reported that the group is interested to bid for projects under the large scale solar (LSS3) scheme by the Energy Commission.At present, OCK owns 11 solar farms in Malaysia, generating a combined total of 5.9MW of energy under the Fit-in-Tariff (FiT) scheme. Meanwhile, the outcome of the bidding exercise under the LSS3 will be announced by year-end. Note however that the competition for LSS3 is intense.

For OCK, the telecommunication network services (TNS) segment is the key contributor. In 1H19, TNS segment contributed 86% to its PBT. Its outlook lies with the development of the Mobile Network Operators (MNOs). OCK sees prospects from an aggressive geographical expansion from one of the MNOs, which will allow OCK to build its tower portfolio. In Malaysia, the group owns in excess of 424 towers.

OSK should also benefit from MNOs’ plan to outsource internal managed services. Currently, OCK is managing more than 28,000 telco sites in Malaysia and Indonesia. In addition, the group is set to ride on government’s effort to raise broadband penetration and speeds under the National Fiberisation and Connectivity Plan, in which the MNOs will seek to upgrade their infrastructure capacity and investments.

Brokers are positively biased on the stock with three Buys and one Hold. The mean target price is MYR0.69. The stock currently trades at 18.4x FY20 consensus EPS of 3.2sen, lower than its 3-year historical average P/E of 23.4x. Note that warrants are not included in the EPS computation as they are out-of-the-money.

Why u say EPF took profit and buy back? can it be they buy first to push up the price then sell more to take profit?

EPF buy and sell... can someone tell me is that done on the same day 24 July... ?