OCK enjoys 54% surge in share price in the past year. Can this uptrend continue?

OCK Group Bhd is on an uptrend, rising 6% to close at 62 sen on July 5. The good run may likely continue as an upward shift is anticipated backed by increased trading volume.

Its share price could break out from an existing trading range of between 57.5 sen and 65 sen. The stock is expected to climb and challenge resistance thresholds of 66 sen and 75 sen. These thresholds will mean surpassing its 52-week high of 65 sen seen recently. The counter was trading at a low of 39 sen a year ago but managed to surge some 54% in the past year.

Fundamentally, there are a lot of positives from the provider of telecommunication network solutions. OCK stands to benefit from an anticipated rise in infrastructure spending in the Malaysian telecommunications industry.

After recording net profit of RM36.5 million (up 11% YoY) in FY Dec 2023, the group posted quarterly net earnings of RM10.2 million, rising18% YoY in 1QFY24. Going forward, OCK is projected to turn in stronger net profit of RM53 million for FY Dec 2024 and RM61 million for FY Dec 2025.

More excitingly, OCK should see a record-breaking year this year in terms of earnings, which are supported by its RM220mil order book and positive outlook in tower leasing. The company is also likely to fare better on the back of interest cost savings and robust solar and digital solutions business prospects.

OCK is poised to benefit from higher tenancy ratios in Malaysia, projected to rise from 1.5 times to 1.6 times, alongside the deployment of new sites under the dual 5G network initiative. The recent allocation of new 5G spectrum in Vietnam to Viettel and VNPT is expected to further bolster tenancy ratios to 1.6x (up from 1.4x).

OCK has entered into a 3-year contract with DigitalEdge to maintain 3,000 towers, expanding its total number of managed towers under portfolio to 63,000. The company’s regional tower expansion plan is driven by the ongoing rollout of 5G both domestically and internationally.

Recently, OCK secured a contract for 100 new sites in Laos from Best Telecom, with 60 of these sites slated for completion by 2025. OCK’s next major re-rating catalysts include securing contracts in data centre (DC), solar, and its burgeoning digital solutions business.

The group is actively pursuing DC projects valued at RM50mil (or 7% of 2023 revenue), with a historical success rate exceeding 50%. This is expected to further bolster its DC orderbook of RM20 million. OCK has recently secured a 2.5 megawatt (MW) Net Energy Metering (NEM) solar project, which is expected to start contributing in 2025. The prospects for its digital solutions business look bullish, with ongoing bids amounting to RM400 milionl.

It cautioned that key downside risks include unforeseen delays in project deployment and execution and weaker-than-expected results and margins. Nevertheless, investors should take this opportunity to position themselves in this growing space via OCK.