HLIB Research said growth prospects for the capital financing remain strong, anchored by Australia and the civil servant segment.
PETALING JAYA: OSK Holdings Bhd
is seeing a strong growth in capital financing, which recorded a pre-tax profit of RM26.1mil in the first quarter of 2024 (1Q24). This is an increase of 13.6% quarter-on-quarter and 41.8% year-on-year, said Hong Leong Investment Bank (HLIB) Research.
Following a recent meeting with OSK’s management, the research firm said growth prospects for the segment remain strong, anchored by Australia and the civil servant segment.
“The group is scaling up its expansion in Australia, with plans to move beyond Victoria to New South Wales and other states in the country. Currently, the group’s loan disbursements in Australia are funded through both bank facilities raised in Malaysia and Australia,” said HLIB Research in a report yesterday.
According to the research firm, OSK is in the midst of seeking new licences in Australia that will allow it to raise third-party capital through the setup of a new fund. Its revenue source from the fund would be from management fees.
“The group plans to set up this fund once its loan portfolio reaches a sizeable amount which will provide it with the economies of scale to do so. This is likely to be achieved by the end of financial year 2025 (FY25),” it said, adding that as of March 2024, OSK’s Australia loan portfolio stood at A$166.9mil (RM514mil).
With the global private credit market growing significantly in recent years, OSK is targeting to expand regionally over the next five years. It plans to set up a regional office in selected countries in South-East Asia and towards this end, has begun studying the viability and dynamics of these markets, said HLIB Research.
Meanwhile, the group’s property segment expects RM1.75bil in launches for FY24, which is a record high in recent years. The higher launches were partly due to several delayed projects from the previous year. The research firm noted that property sales were slower at RM128mil in 1Q24, making up only 12.8% of the full-year target.
As for its cables segment, it is poised for growth in the second half of 2024 due to the anticipated increased demand from data centres and utility companies.
On the loss-making hospitality segment, HLIB Research said the group still plans to exit the space. It has five hotel assets with 1,649 rooms under its management currently.
Post-disposal, it plans to redeploy the sales proceeds to expand its capital financing and property segments. HLIB Research keeps its “buy” call on the stock with a higher target price of RM2.37 from RM2.21.
