RHB maintains 'buy' on OCK after adjusting for Myanmar's political risk


KUALA LUMPUR: RHB Research is seeing growth headwinds for OCK Group Bhd as it factors in the political and execution risks following the military coup in Myanmar.

"Network shutdowns and/or delays in site deployments from the emergency order could present some earnings

and execution risks to OCK’s towerco business in Myanmar.

"However, we believe the impact should be manageable as communication services are deemed essential, and mobile operators are bound by long-term master lease agreements (MLA) with committed site rentals," it said.

The research house noted that in the worst-case scenario where a force majeure is invoked, OCK could still look to grant some rebates on site rentals and other flexible payment terms.

OCK’s Myanmar towerco accounted for about 18% and 45% of group revenue and Ebitda in 9MFY20.

A 10% fall in the sum-of-parts valuation for the Myanmar business would impact RHB's target price by 4%, all else being equal.

According to RHB, the group has 1,073 revenue-generating sites in Myanmar.

The completion of its outstanding orderbook of 200 new sites could face some delays due to widespread street protests affecting work projects.

The research house raised the risk premium in its discounted cashflow valuation in light of the development.

However, it maintained that OCK's valuation is undemanding at 6x FY22 EV/Ebitda at -2 standard deviation from the historical EV-Ebitda mean.

RHB maintained "buy" on OCK after lowering its target price to 59 sen from 63 sen previously.

It believes the near-term weakness presents an opportunity to accumulate the stock.
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RHB Research , OCK , telco , towerco , Myanmar , political coup

   

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