RHB Investment Bank Bhd (RHB Research) maintained its BUY call on OCK Group Bhd and raised its target price to RM0.74 from RM0.72, implying a potential upside of 95%, despite the group’s latest quarterly earnings falling short of expectations.
The research house said OCK’s third-quarter net profit rose 12.4% quarter-on-quarter and 104.5% year-on-year to RM11.2 million, bringing nine-month core earnings to RM27.3 million, up 32.3% from a year earlier. However, the results accounted for only 64% of RHB Research’s full-year forecast due mainly to weaker-than-expected digital revenue and billings.
Despite the earnings miss, RHB Research expects momentum to strengthen in the first half of FY27, driven by the crystallisation of several digital projects, including smart city initiatives, disaster management systems and fibre network projects, as well as potential awards under JENDELA Phase 2.
The research house noted that revenue growth and improved profitability were supported by a stronger project mix. Gross profit margin reached a quarterly high of 29.1%, helped by rising contributions from data centre-related works under its subsidiary EI Power, whose revenue surged 37% quarter-on-quarter and 60% year-on-year.
Telecommunication Network Services revenue also increased 31.3% year-on-year on stronger fibreisation and indoor building solution projects.
As of the end of April, OCK’s outstanding order book stood at about RM757 million, up 16% from the end of January, while its tender book totalled RM2.1 billion. Nearly half of the tender opportunities were related to telecommunication network services, with the remainder comprising digital and power-related projects.
Although RHB Research lowered its FY26 to FY28 earnings forecasts to reflect weaker digital billings and the deconsolidation of EI Power following its listing, it believes OCK remains attractively valued with earnings growth catalysts including 5G-related works, fibreisation projects, smart city contracts and potential mergers and acquisitions.
The stock price gained 1.32% to RM0.385 as of 10.15 am.
