Ock Group Berhad

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2025 Market Strategy

Positive on MY equity market outlook. However, potential risks from additional US tariffs and stronger US$ could slow foreign fund inflows into EMs, which has historically been a determinant on KLCI return

US-China trade tensions and tariffs will be a key theme to watch for next year, likely leading to some market volatility. However, we view this as opportunity to accumulate on winners, especially if market overreacts to perceived negative effects

Stocks benefiting from the trade conflict, with strong earnings visibility, are particularly attractive. Small/mid caps which are still recovering from the sharp sell-off in Aug look appealing at current level. With a more risk-on sentiment expected, coupled with strong domestic liquidity, clear thematic drivers, and supportive govt policies, we expect SC to outperform in 2025

⭐️ 2025 FOCUS THEMES
✨ Sustained FDI growth
✨ Acceleration of infra spending
✨ Rapid AI adoption
✨ Rising focus on local green energy
✨ Expanding DCs infra
✨ Tariff-driven glove sector recovery

🌟 2025 CONVICTION BUYS 🌟
SMALL MID CAPS
🛫 AGX (TP: RM0.84)
🛢️ Armada (TP: RM0.93)
🏗️ Binastra (TP: RM2.30)
♻️ BM Green (TP: RM2.65)
⚙️ Critical (TP: RM1.65)
🛢️ Dayang (TP: RM4.50)
⚡️ HEGroup (TP: RM0.84)
☀️ Pekat (TP: RM1.15)
⚡️ MN (TP: RM1.45)
📲 OCK (TP: RM0.85)

LARGE CAPS
🏦 CIMB (TP: RM9.30)
💻 Frontken (TP: RM6.00)
🏗️ Gamuda (TP: RM5.55)
🧤 Hartalega (TP: RM4.55)
🤖 NatGate (TP: RM3.00)

🇲🇾 2025 Macro Forecast
🎯 KLCI target: 1,750
💲 US$/RM: RM4.30
🏦 GDP: 5.1%
🏦 OPR: 3%
🛢️ Brent: US$80

We're Overweight on 12 sectors that align with our thematic ideas, supported by strong conviction BUYs. Feel free to reach out and have a chat on our market outlook/ideas

$FRONTKN / 0128 (FRONTKEN CORPORATION BERHAD)
$PEKAT / 0233 (PEKAT GROUP BERHAD)
$OCK / 0172 (OCK GROUP BERHAD)

$OCK / 0172 (OCK GROUP BERHAD)
Research by RHB

$OCK / 0172 (OCK GROUP BERHAD)
Research by KENANGA

$OCK / 0172 (OCK GROUP BERHAD)
Research Report by RHB

$OCK / 0172 (OCK GROUP BERHAD)
Research Report by KENANGA

$OCK / 0172 (OCK GROUP BERHAD) -2Q24

Impairment Loss in Myanmar:

OCK faced a one-off RM7.6m impairment loss in 2QFY24 due to service level agreement (SLA) issues in Myanmar. Curfews and military checkpoints hindered access to tower sites, impacting revenues. Despite this, OCK's Myanmar operations remain stable with strong cash flows from lease payments.
RHB echoes this, noting the impairment resulted from diesel supply issues, though Myanmar remains a significant contributor to site leasing revenue (41%).

Focus on 5G Rollout and JENDELA:

OCK is completing its existing 5G rollout contracts in Malaysia, awaiting further opportunities from Malaysia’s second 5G network. JENDELA Phase 2 tenders are also anticipated after delays in Phase 1.
RHB highlights that 5G policy uncertainty will clear up by 4Q24, potentially boosting network spending in the second half of 2024. Digital contracts and data center (DC) projects are also set to drive future earnings.

Order Book and Future Contracts:

OCK's current order book stands at RM440m, with RM920m in tenders focused on digital solutions, particularly DC connectivity and backup power.
RHB reports a similar tender book value, with expectations for digital project momentum to pick up in FY25.

$OCK / 0172 (OCK GROUP BERHAD)
Research by Kenanga
MARKET PERFORM – TP RM0.60

" Eyeing Next Phase of 5G & JENDELA ”

OCK's 2QFY24 impairment loss on trade receivables were explained as once-off and related to certain contracts in Myanmar. Meanwhile, the group is focused on completing outstanding 5G rollout and JENDELA Phase 1 contracts. This is while awaiting the second phase of these projects to take-off. We maintain our forecasts, TP of RM0.60 and MARKET PERFORM call.

Analyst:
Kylie Chan Sze Zan
kyliechan@kenanga.com.my

$OCK / 0172 (OCK GROUP BERHAD)
Research by RHB
Buy - TP RM0.82

"A Light Quarter; Keep BUY"

KeepBUYandSOP-basedTPofMYR0.82,44%upsidewithc.2%FY24Fyield. OCK Group’s results were light against our/consensus estimates as its site contracting jobs are at the tail-end. We see revenue momentum picking up in 2H, supported by an outstanding orderbook of over MYR270m which includes recent wins in the data centre (DC) space. Investors should accumulate on price weakness.

Analyst:
Jeffrey Tan
jeffrey.tan@rhbgroup.com

$OCK / 0172 (OCK GROUP BERHAD)
Research by Kenanga
Market Perform - TP RM0.60

"Lower Revenue Visibility"

OCK’s 1HFY24 results disappointed, mainly due to weaker revenue at the telco network services (TNS) segment. We believe this was likely caused by the slower network rollout of 5G in Malaysia. We cut our FY24F/FY25F earnings by 32%/28%, lowered our TP by 30% to RM0.60 (from RM0.86), and downgrade our recommendation to MARKET PERFORM from OUTPERFORM. A re-rating catalyst could be the award and accelerated rollout of contracts for the second 5G network and JENDELA Phase 2.

Analyst:
Kylie Chan Sze Zan
kyliechan@kenanga.com.my

Growing Demand for Electricity in Data Centers: What’s Next?

While data center stocks may not be as hot as they once were, the construction of data centers continues unabated. Recently, $OCK / 0172 (OCK GROUP BERHAD) secured contracts for data center projects, and it's anticipated that more companies will soon follow suit, winning similar contracts in the near future.

In June 2024, CGS conducted a study on the data center capacity in Malaysia, referencing data from DC Bytes. A recent RHB report, also citing DC Bytes, indicates that the electricity demand for data centers is expected to rise significantly in the coming years.

According to the CGS report and DC Bytes data, by 2028, the electricity required for data centers in Malaysia is projected to reach 3,221 MW. Delving deeper into DC Bytes' data, we find that 280 MW are already operational, 159 MW are under construction, 766 MW are committed, and 2,016 MW are still in the early stages, where their future is uncertain.

The latest RHB report, also based on DC Bytes data, shows an increase in these figures: 344.4 MW are currently operational, 240.7 MW are under construction, 766.9 MW are committed, and 2,828.6 MW are in the early stages. The total electricity required had increase to 4,180.6 MW! This indicates a rising demand for electricity within just a month. Additionally, Johor has emerged as the prime location for data centers, with electricity requirements surpassing those of Kuala Lumpur.

$OCK / 0172 (OCK GROUP BERHAD) Group
Research by Kenanga
OUTPERFORM – TP RM0.86

" Snags More Data Center Power Jobs”

OCK has secured three new data centre (DC) backup power solutions (BPS) contracts valued at RM32.5m. While these new jobs are within our expectations, we remain positive on OCK’s continued success in securing DC-related contracts. We estimate that these contracts will contribute 3% to FY24F-25F earnings. BPS jobs currently account for 5% of FY24F-25F topline. We maintain our forecasts, TP of RM0.86 and OUTPERFORM call.

Analyst:
Kylie Chan Sze Zan
kyliechan@kenanga.com.my

$OCK / 0172 (OCK GROUP BERHAD) Group
Research by RHB
BUY– TP RM0.82

" Powering Data Centres; Keep BUY”

We remain upbeat on OCK Group’s earnings prospects. The latest contracts in the data centre (DC) space underscore its ability to drive strategic revenues on the back of its end-to-end infrastructure and connectivity offerings. We see latent value for its recurring towerco business with a potential carveout/spin-off in the longer term. The stock trades at undemanding FY25F EV/EBITDA of <5x, supported by a 3-year core earnings CAGR of 19%. Our TP includes a 2% ESG premium.

Analyst:
Jeffrey Tan
jeffrey.tan@rhbgroup.com

$KEYFIELD / 5321 (KEYFIELD INTERNATIONAL BERHAD)
$JCY / 5161 (JCY INTERNATIONAL BERHAD)
$OCK / 0172 (OCK GROUP BERHAD)
$KOBAY / 6971 (KOBAY TECHNOLOGY BERHAD)
$FPI / 9172 (FORMOSA PROSONIC INDUSTRIES BERHAD)

Anyone still keeping a close eye on $OCK / 0172 (OCK GROUP BERHAD)?

This 5G guy is making some strong moves, following some rate cuts prospects as well as AI hype, the upside looks huge from a technical POV

$OCK / 0172 (OCK GROUP BERHAD)
Research by RHB
Buy – TP RM0.82

“Doubling Down On Digital; Stay BUY"

Keep BUY, with new SOP-based MYR0.82 TP from MYR0.76, 33% upside and c.2% yield. We are upbeat on OCK Group’s digital venture with the new revenue stream expected to drive a new earnings leg-up. This comes on top of the recurring site leasing business which is benefitting from 5G deployments and its leadership in managed network services across Malaysia and Indonesia. We believe there is latent value for its towerco business with a potential monetisation/IPO in the longer term. OCK is trading at inexpensive 4.6x FY25F EV/EBITDA, with a 19% 3-year core earnings CAGR.

Analyst:
Jeffrey Tan
jeffrey.tan@rhbgroup.com

PETALING JAYA: OCK Group Bhd earnings are poised for a record year in 2024, supported by its RM220mil order book and positive outlook for tower leasing.

$OCK / 0172 (OCK GROUP BERHAD)
Research by Kenanga
Outperform - TP RM0.86

"Riding on Digital Wave"

The key competitive advantage of OCK’s new digital business lies in its capacity to offer end-to-end services, including connectivity solutions. This is possible by leveraging on the group’s existing resources, such as engineering manpower. Currently, it is mainly tendering for smart city solutions from state governments. We maintain our forecasts, TP of RM0.86 and OUTPERFORM call.

Analyst:
Kylie Chan Sze Zan
kyliechan@kenanga.com.my

Additional Listing Announcement /Subdivision of Shares

OCK Group Bhd’s earnings are poised for a record-breaking year, supported by its RM220mil order book, positive outlook in telecommunications tower leasing, interest-cost savings and robust solar and digital solutions business prospects.

Additional Listing Announcement /Subdivision of Shares

Additional Listing Announcement /Subdivision of Shares

Notice of Person Ceasing (Section 139 of CA 2016) - LEMBAGA TABUNG ANGKATAN TENTERA

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - LEMBAGA TABUNG ANGKATAN TENTERA

$OCK / 0172 (OCK GROUP BERHAD)

TELECOMMUNICATIONS
$AXIATA / 6888 (AXIATA GROUP BERHAD) $OCK / 0172 (OCK GROUP BERHAD)
Research by RHB
Neutral

“Eyes On 5G Situation”

Malaysian telcos had a typical seasonal start to the year, with continued weight on ARPUs from inflationary pressures and the tight competition. Upselling of mobile fibre bundles remains a key focus, with Telekom Malaysia (TM) unveiling its latest converged proposition, UniVerse. We continue to favour the fixed/integrated plays, on structural catalysts and the stronger earnings outlook. Maintain NEUTRAL on sector. Competition, earnings misses and regulatory setbacks are key risks.

Analyst(s):
Jeffrey Tan
jeffrey.tan@rhbgroup.com

KUALA LUMPUR: OCK Group Bhd is well-positioned to benefit strongly from 5G deployment in Malaysia, thanks to its solid execution track record in rolling out 3G/4G sites under projects initiated by the Malaysian Communications and Multimedia Commission (MCMC) and Jendela. 

&copy; New Straits Times Press (M) Bhd

Change in Boardroom - MR CHANG TAN CHIN

Change in Boardroom - ENCIK ABDUL HALIM BIN ABDUL HAMID

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - LEMBAGA TABUNG ANGKATAN TENTERA

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - LEMBAGA TABUNG ANGKATAN TENTERA