KUALA LUMPUR: OCK Group Bhd is poised to have positive growth as it rides on demand for telco towers locally and stands to benefit from the 5G rollout in Malaysia.
Kenaga Research said OCK was on track to meeting its target of beefing up its telco tower portfolio by 1,100 units in 2022 comprising 800 units in Vietnam, 200 units in Malaysia and 100 units in Myanmar.
"While thus far in FY22 it has only completed 400 units (mostly in Vietnam), we are not perturbed as typically it only takes three to six months to erect a telco tower and we understand that construction pace is gathering momentum with the re-opening of economies.
OCK currently owns a total of 4,800 telco towers comprising 3,000 units in Vietnam, 1,200 units in Myanmar and 600 units in Malaysia.
Kenanga Research said OCK's tenancy ratios were stable at 1.42 times, 1.33 times and 1.1 times in Myanmar, Vietnam and Malaysia respectively.
Typically, the tenancy ratio is lower in Malaysia than Vietnam and Myanmar as OCK is a "latecomer" in the Malaysian market, compared to being one of the first movers in Vietnam and Myanmar.
Furthermore, the higher tenancy ratio in Vietnam is due to its acquisition of towers.
The firm sees an uptrend in OCK's tenancy ratio in Malaysia as 150 units of its telco towers in Malaysia have been identified for the 5G rollout in Malaysia.
"Year-to-date, its new telco infrastructure jobs secured stand at RM165 million comprising largely telco infrastructure works under Phase 1, Jendela (expansion of 4G coverage) as well as initial works (such as site preparation) under Phase 2, Jendela (5G deployment).
"Looking ahead, OCK expects more telco infrastructure works to be dished out by Digital Nasional Bhd (DNB), the SPV entrusted with the rollout of 5G in Malaysia, comprising 3,000 to 4,000 5G telecommunications sites within this year itself, as well as by other mobile network operators (MNOs).
"We believe OCK is likely to close 2022 with new jobs in excess of the current level of RM165 million," it added.
The firm maintained its "Outperform" call on the stock with a target price of 45 sen.
Kenanga Research likes OCK for the tremendous growth opportunities in the telco infrastructure space in Vietnam and Myanmar which are still relatively under-served especially in the rural areas.
OCK is also well positioned to benefit from the Jendela programme including the 5G rollout in Malaysia and its earnings stability and visibility with about three quarters of its revenue being recurring from telco tower maintenance (55,000 towers of which about 80 per cent are in Indonesia) and telco tower leasing.