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Monday, April 04, 2016

OCK: A Regional Telecommunication Play

Background

OCK Group Bhd (OCK) is principally involved in the provision of telecommunications network services and generation & sales of renewable energy. For more on the group's business activities, go here.

Recent Business Development

OCK, together with its Myanmar partner, King Royal Technologies Co Ltd has entered into a master services agreement (MSA) with Telenor Myanmar Ltd to build 920 telecommunications towers for Telenor in Myanmar in a long-term “build and lease” model. OCK will invest US$75 million (RM324.4 million) on this project which will be delivered in 2016.

Historical Financial Performance

OCK's top-line and bottom-line, which have been on a gradual rise, jumped in QE31/12/2015. In that quarter, revenue increased to RM108.4 million from RM83.7 million recorded in QE30/9/2015 mainly due to continual growth in revenue from telecommunication network services in the quarter of under review. This consists of contribution from the fibre works, distribution of telecommunication equipment and completion of more projects in Malaysia. In addition to that, there were higher contribution from its regional business in Indonesia, Cambodia, Myanmar and China. Collectively, these offset the drop in delivery of power solution equipment in the current quarter due to the uncertainty of the currency costs.

As a result of the higher Group revenue, Group PBT rose to RM17.4 from RM8.8 million in the preceding quarter. In addition to that, the Group also recognised an unrealised gain on revaluation of certain of its investment properties amounted to RM4.69 million.


Table: OCK's last 15 quarterly results


Chart 1: OCK's last 15 quarterly results

Financial Position

As at 31/12/2015, ICK's financial position is deemed satisfactory. Current ratio stood at 3.4X while total liabilities to equity stood at 0.6X. Cash & bank balances amounted to RM163 million, thanks to a Rights Issue of 1-for-2 completed in November.

Valuation

OCK (closed at RM0.77 last Friday) is now trading at a PER of 18X (based on last 4 quarters' EPS of 4.24 sen). This is considered fair for a high growth company. Ignoring the fair value adjustment in QE31/12/2015, OCK's EPS CAGR for past 2 years average about 24%. This gives the stock a PEG ratio of 0.75X.

Changes in Shareholdings

Despite attractive valuation, we note that the main shareholder. Sam Ooi sold some shares in OCK in March at RM0.825 (here). He may feel that this is a fair value for the stock for the near term.

Technical Outlook

OCK is in a long-term uptrend line (in blue). This uptrend is capped by an intermediate downtrend line (in red). OCK broke above the intermediate downtrend line 3 weeks ago. The stock is pulling back to the breakout level at RM0.75-0.77. If the share price does not go below this level, it may continue its prior uptrend.


Chart 2: OCK's weekly chart as at Apr 1, 2016 (Source: ShareInvestor.com)

Conclusion

Based on good financial performance, reasonable valuation and bullish t3echncial outlook, OCK is a good stock for a trading BUY or even a long-term investment.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, OCK.

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