KUALA LUMPUR: OCK Group Bhd is expected to see robust earnings growth to continue in FY23, supported by the company's outstanding orderbook of RM386 million and aggressive domestic 5G site deployments.
In a note today, RHB Research said the stock offers resilient earnings with more than 50 per cent of revenue and 70 per cent in gross earnings from the regional towerco business.
OCK Group's contracting revenue posted a strong rebound in FY22, up by 56 per cent year-on-year (YoY), driven by projects related to Phase 1 of the National Digital Infrastructure Plan (JENDELA).
Fiberisation revenue surged 68 per cent YoY while cable trenching works for Tenaga Nasional Bhd fuelled the 4-fold rise in maintenance and engineering or maintenance and engineering (M&E) services revenue.
RHB Research noted that OCk Group is upbeat on further contract/project wins in the subsequent quarters, with the government bringing forward the 5G population coverage target of 80 per cent by the end-2023 from end-2024.
"This implies around 3,600 additional sites are needed over the next 12 months," RHB Research noted.
Further, RHB Research also noted that OCK Group's site leasing business contributed 29 per cent and 74 per cent of group revenue and earnings before interest, taxes, depreciation and amortization (EBITDA) in FY22.
Malaysian towerco EBITDA saw the the strongest growth of 21 per cent YoY as tenancies rose from 1.15 to 1.41, supported by new 5G leases from Digital Nasional Bhd (DNB).
"We see the towerco business charting steady growth on the back of the outstanding built-to-suit sites in Myanmar for Mytel (82 sites) and brownfield site acquisitions in Vietnam (target of 800-1000 sites in FY23), notwithstanding some foreign exchange volatility," the bank-backed research firm said.
Having secured the towerco license in Laos, OCK Group is discussing new builds and site acquisitions with mobile operators, with project awards likely to take place in the second half (2H) of 2023.
"We lift OCK Group's FY23-24 core earnings by 1-7 per cent, mainly to factor in stronger revenue growth and margin assumptions.
"We maintain 'Buy' with our target price is RM0.60 per share, upped slightly after rolling forward our base year to FY24.
"Other share price catalysts include unlocking its towerco business and value accretive M&As," RHB Research noted.