INVESTMENT MERIT
- Strong 9M12 results. OCK’s 9M12 net profit
of 10.0m was accounted for 93.5% of our full-year NP estimate (Please refer to our OCK’s IPO
note dated on 5 July). The better than expected 9M12 result was mainly boosted
by its Telco network service's division, which revenue has recorded at RM77.9m
vs RM88.7m for the full FY in our earlier estimate. Margin wise, the
group’s EBIT and PBT margin of 15.7% and
13.0%, respectively, were within our expectation. OCK also announced its maiden 0.5 sen dividend in conjunction
with its 3Q12 result. For the full FY, we understand that management intends to
distribute 1.0 sen dividend, translate to a dividend yield of 2.2% and payout
ratio of 14.4%.
- Aiming higher in FY13. Moving forward, the
group is targeting to build 100-150 telecommunication towers in FY13 with an
aim to achieve 20%-30% YoY revenue growth, according to the recent press
report. We also understand that OCK has started to approach some bankers to
finance the abovementioned expansion plan.
- Target to transfer to Main Market in 2013. After
successfully listed on ACE Market in July 2012, we understand that OCK is now aiming
transfer to Bursa Malaysia Main Market in 2013. The transfer of listing will
improve the group’s company profile and increase its chances in clinching more
deals in the future.
- Raised FY12-FY13 earning's estimate. Post 9M12 result, we have raised our OCK net
profit forecast by 17.7% and 13.5% to RM12.6m and RM15.4m, respectively, after
imputing higher revenue assumption for its telco network services
division.
- Valuation remains undemanding. OCK is currently trading at 7.5x FY13 PER,
which is higher as compared to an average 6.7x FTSE bursa Malaysia small
capital index (“FBMSC”) forward PER. We
value OCK at RM0.48 with a TRADING BUY recommendation, based on a targeted
FY13 PER of 8.0x. We believe the group desired a higher PER due to its
undemanding PEG ratio of 0.3x vs FBMSC’s average of 0.6x.
SWOT ANALYSIS
- Strength:
Covers more than
90% of the
major technology providers in
Malaysia. The largest Tier-1 Market Player.
- Weaknesses: Small market capitalisation.
- Opportunities: Capitalising on the trends in
telecommunication infrastructure collaboration.
- Threats: Regulation and political risks.
TECHNICALS
- Resistance: RM0.46 (R1), RM0.50 (R2)
- Support: RM0.44 (S1), RM0.40 (S2)
- Comments: OCK's share price had been
trading mostly sideways since the IPO in July.
The indicators have also flatlined in recent months. A break out in
either the RM0.46 resistance or the RM0.44 support should offer some direction to
the stock. Until then, we expect the stock to remain rangebound.
BUSINESS OVERVIEW
OCK Group Bhd (“OCK”, BURSA CODE: 0172) was was established
in 2000 which principally involved in the provision of telecommunications network
services. The group are able to provide turnkey solutions, which include
design, build and maintain all means of telecommunications network
infrastructure for its telecommunication clientele. In addition, the group
completed implementation works for major local cellular network operators,
including Maxis, Celcom, Digi, U Mobile, P1 and YTL.
The top three largest customers for the group were Digi,
Ericsson and Huawei that accounted for 16.5%, 13.0% and 9.0% respectively to
the group’s total revenue of RM88.3m in FY11.
BUSINESS SEGMENTS
Its principal activities are mainly categorised into four
segments, namely - Telecommunications Network Services Solutions contributed more
than 70% to the group’s total revenue of RM102.8m in 9M12 to its targeted
telecommunications clienteles.
Trading of Telco And
Network Product. Trading telco
network equipment and materials e.g. Antennas, Connectors
- Green Energy And
Power Solution. Supply of power
generation equipment e.g. Gen-sets , Transformers.
- M&E Engineering
Services. Provision of M&E Engineering Services in collaboration with
construction companies on a sub-contract basis. Particularly cater for
non-telco sector customers.
Source: Kenanga
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