RHB has maintained a BUY recommendation for OCK Group Bhd with a new SOP-based target price of Rm0.56 from RM0.58, 40% upside with c2% FY22 yield.
It said that OCK is well-positioned to benefit from a rebound in site contracting revenues, from 4G site expansion and 5G rollout (regardless of the Government’s 5G policy outcome).
RHB said that the group’s strong recurring revenue and EBITDA of >60% and 70% provides a good earnings downside buffer. Key downside risks: Delays in site rollouts, execution, and weaker-than-expected earnings.
The stockbroking house said that it expects a strong recovery in domestic contracting revenue (parked under the TNS segment) in FY22, given the outstanding orderbook of over MYR280m – a new high (58% of FY21 revenue).
It said that this consisted of universal service provision (USP) clawback projects and the satellite broadband wireless access (BWA) contract (MYR115.2m) under the National Digital Network or JENDELA programme.
RHB said that domestic TNS revenue grew 9% in FY21 after declining for three consecutive years while contracting revenue stabilised (4Q21: +3% YoY). OCK is in discussions with Digital Nasional (DNB) for additional colocations and new 5G sites, having inked co-locations on 32 sites so far.
To meet its 5G population coverage target, RHB said that DNB is targeting to roll out 7,500 new sites by end-2024, from 4,000 by the end-2022