• Malaysia tenancy ratio to rise to 1.6-1.7x (from 1.5x), following U Mobile's appointment as the 2nd 5G network operator
• Secured a Wi-Fi upgrade contracts for a public university of late; actively tendering more contracts under MCMC
• Maintain BUY rating with an unchanged SOP-derived target price of RM0.85

Prime beneficiary of 2nd 5G network and MCMC projects

U Mobile's appointment as the 2nd 5G network operator could see additional 3,000 new sites to be set up, driving Malaysia's tenancy ratio to 1.6-1.7x (from 1.5x). This development is expected to benefit OCK's managed services business, with potential to secure 2,000 new managed sites from U Mobile. OCK recently secured a RM7m contract from Malaysian Communication and Multimedia Commission (MCMC) under USP fund project to replace Wi-Fi system in public universities as part of the first phase programme. The group is in the midst of tendering for another MCMC projects for the construction of a telecommunication infrastructure for army base camps, with potential contract value of RM80m. TNS orderbook currently stands at RM587m, while its segment tender book is valued at RM102m.

Polishing the green energy and power solution segment

In Dec24, OCK announced its investment in Solarpack Suria Sungai Petani (3SP), a developer, owner, and operator of a 116MW solar farm. The project, awarded under the LSS3 program in 2022, is backed by a 21-year power purchase agreement. This adds on to OCK's portfolio of 30 solar farms with a combined capacity of 14MW. The deal is slated to be completed by 2Q25, bolstering its green energy and power solution segment, which currently accounts for 5% to the group revenue. OCK is currently pursuing opportunities under Corporate Renewable Energy Supply Scheme (CRESS) program, targeting 200MW of capacity in phases over 5 years to support data centre operations through third-party energy access.

Maintain BUY with RM0.85 target price

We reiterate our BUY rating with an unchanged SOP-derived target price of RM0.85. We expect earnings to grow 65% YoY in 2025 driven by robust project pipeline for its TNS segment. Key catalysts for 2025 includes the deployment of 5G towers by U Mobile and the projects from the MCMC and a sizable RM1.1bn total bids. Key downside risks include unforeseen delays in project deployment and execution and weaker-than-expected results and margins.

Source: Philip Capital Research - 3 Feb 2025