"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.
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?
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).
23 August (22 sen) to 18 Oct (25 sen). For trader is not bad. For investor, a bit too low for me. Depends on your time frame of investment. I remember one writer said, once you jump in and out of a good "compound interest" bus, you may not gain as much as you suppose to.
For trader is different, they go in a few loads warrants, and they get out in a few loads as well. Different strategy as compared with investors.
@zoomboom, wow, you got on the train very early (3 yrs). I just started after the baby (warrants) was born in Dec 2015.
So, its only 10 months for me. A lot of things have happened between Dec 2015 and now:
Myanmar deal finally signed,RI, PP, Bank Loan Approved for Myanmar, PE partner (CapitalAsia Telco) with OCK for Vietnam Deal, about 300 units delivered in Myanmar, coming EGM to approve Vietnam deal.
Company financial position is definitely strengthened significantly, however, share price only up about 12 sen from 70 sen. Its warrants will be a great leverage for the growth (another 4 years 2 months to go). By Aug next year, I hope the warrants can gain at least 50%.
Will try to grab more at 23 sen. Potential will be great as the towers in Myanmar are sub-tenant out to other operators, therefore increasing its tenancy ratio. (accumulate - within your plan)
One of XLSA favourite. Lately, CredoX favourite. Last week, FS watch list. UOX also think it has potential. Below 24 sen, great upside. One of my favourite, not because of XLSA, CredoX, FS or UOX favourite, because upside is >100% (the warrants).
1. Accumulate when low volume. Project IRR is above 16%. OCK own 70% & with good chance of tenancy growth & >10 years leaseback period.
2. EPF buy Ekovest's toll road & was guaranteed only IRR of 10% for 10 years and only for 40%, cannot even control the cash flow or dividend. [There are pros and cons of holding in associate level.]
3. Business model is not comparable although both has high EBITDA.
Both OCK n Ekovest are Potential future cash Cow... I own both... Personally, I think OCK wa would provide you much better return due to high gearing, further more the business is recession proof... the only different is ekovest got huge publicity n but big shark pushing behind.... OCK still stay undercover n ignore by most ppl...
Go for medium to long term. 1-5 years. Earnings from the investment in Myanmar and Vietnam will only comes in significantly 2Q and 3Q 2017. Accumulate a bit at 21.5sen.
come to think of it, i wonder how the ah longs know .... suddenly so many sms asking to take personal loan... coincidence?.. lol...
no la zlyc bro, i don't dare to take loan and trade.... i play safe... only what i can afford hehe..
my gut feel the price now is sibeh nice to enter some and keep. (for those that takde la)... Q4 report come March should be nice.... traditionally.... betul tak zlyc bro? u sudah angkat loan beli berlambak ke?.... me holding the free warrants since day one... didn't pay a sen for this lol...
funda, haahaha... high and dry huh?.... lol... i know the feeling...
Zoom, yeah. calm and steady... I already get ready for long term play, preparing some bullet to average down if this wa drop drastically (can't resist myself, LOL)....
bro zoom, i enter OCK quite "Late", join the ship somewhere around middle of 2016. straight away bought warrant,haha.... too bad didn't notice OCK much earlier
and I top up too much during few fake breakout :P that's why my average price for son is around 25cent... anyway I am still confident with it, and get ready for plan B in case market crash kick in...
i'm waiting for this counter about 2mothn to buy in, and finally have my first step on this ock wa with 0.195 ...same straight go to warrant, not yet for mother
funda bro, don't worry, its never too late punya. from my short experience, 3 tahun ada... lol... opportunities always come ... - these come in the form of fear... whether globally or locally... look on the bright side - the overseas profits belum kick in fully yet :-).
Kkevin2625, welcome to the boat. warrants don't expire till 2020. plenty of time to long term this. Just make sure don't all in or invest not using your own money (borrow) then u can long term with good sleep.
@funda: yes as i know a bit of the company since day 1 and holding very tight. (some very loose... haha short term play). This share you need not to monitor closely and keep you sleep well. I can smell some good thing coming pretty soon again.
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Posted by sosfinance > 2016-07-10 04:10 | Report Abuse
"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.