OCK's tower leasing to drive earnings in FY19, says RHB

KUALA LUMPUR: OCK Group's tower leasing business will drive long-term recurring earnings for the group, says RHB research.

In a note, the research house said it expects the tower leasing business to remain the group's key growth driver, underpinned by strong orderbook for built-to-suit sites and inorganic expansion in Myanmar and Vietnam, domestic build and lease contract for U-Mobile and rising tower co-locations. 

"We see a recovery in domestic contracting revenues in FY19 after the 15% YoY decline in FY18. 

"We project tower leasing revenue contribution to reach 34% and >40% in FY19 and FY20 (FY18: 28%)," said RHB.

The research house also sees OCK as a key beneficiary of 5G spending on higher demand for sites and network densificaiton by the operations. 

It expects the group to be well placed in securing potential fiberisation jobs falling within the scope of the National Fiberisation and Connectivity Plan given its good deployment track record.

In the meantime, OCK is planning a joint bid for a RM2bil solar farm project under the large-scale solar scheme in mid-August.

"A successful bid would bolster recurring revenues although the solar project contribution is likely to only account for <5% of group revenue," said RHB.

The research house maintained its buy call with a lower target price of 82 sen from 89 sen previously after incorporating the higher cost of debt at its Vietnam operations.

FY19F-20F core earnings were raised by 3-6% to build in higher lease revenue assumptions for Vietnam and Myanmar as well as the recovery in domestic contracting revenue.
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