RHB Research foresees the group benefitting from new 5G site deployments and co-locations with a second 5G network set to be deployed in 2024.
PETALING JAYA: The government’s pivot towards a dual 5G network model could be positive for OCK Group Bhd
, according to RHB Research.
The research firm said it sees the group benefitting from new 5G site deployments and co-locations with a second 5G network set to be deployed in 2024.
“The strengthening narrative on in-building coverage should also contribute positively with OCK having undertaken in-building sub-contract work for Digital Nasional Bhd and mall operators,” said RHB Research in a report yesterday.
It noted that OCK had an outstanding order book of over RM300mil.
This comprised largely of Jendela-related projects, representing 1.1 times the revenue of its telco network services segment in the financial year 2022 (FY22).
Meanwhile, the group is also looking at refinancing its US dollar debt which portends significant interest cost savings from FY24 onwards.
“The group is looking to refinance its US dollar debt with a sukuk facility which should lower financing cost going forward and mitigate foreign exchange-related risks.
“Of the RM574mil debt sitting in its books as at first quarter 2023 (1Q23), around 51% is US-dollar denominated,” said RHB Research.
It estimates interest savings of around RM14mil-RM15mil per year based on the current cost of US dollar debt of over 8%.
This is significant relative to the group’s financing cost of over RM30mil per year.
The new debt facility also offers headroom for solar-type ventures, which OCK has embarked on and to meet working capital needs, added the research firm.
RHB Research said although the solar segment makes up less than 5% of group revenue, it offers recurring revenue with earnings before interest and tax, depreciation and amortisation margin in excess of 80%.
It noted that OCK had submitted a bid for a 30 megawatt solar farm under the Corporate Green Power Programme (CGPP) with a virtual power purchase agreement deal struck with a customer or off-taker.
“If successful, this would add to the existing solar farms ventures, which are premised on the feed-in-tariff and net metering schemes.
“We see the CGPP as an attractive avenue for corporates to procure renewable energy credits to offset their carbon footprint,” said RHB Research.
As for its venture in Laos, RHB Research said that discussions were on-going with a local telco for the deployment of 5G sites in Vientiane.
Recall that OCK was the first foreign company to be awarded an independent towerco licence by the Laos government.
This came with the inking of a joint-venture agreement with the Finance Ministry in October 2022.
“It would adopt a similar model as with the Myanmar towerco with upfront capital expenditure and the sites eventually leased to telcos via long-term lease agreements,” added RHB Research.
