PETALING JAYA: OCK Group Bhd is eyeing the fibre-to-the-home or FTTH project being tendered by the Malaysian Communications and Multimedia Commission.
The project, worth RM3.9bil, involves the laying and commissioning of new fibre optic cables across six regions to support 0.4 million premises.
It is an extension to the high-speed broadband phase one and two projects that were awarded exclusively to Telekom Malaysia Bhd in the past, RHB Research said in its latest report.
But now it comes on top of the current fibre rollout under the Jalinan Digital Negara (Jendela) initiative.
The research house said OCK is also well-positioned to benefit from a rebound in site contracting revenues, from 4G site expansion and 5G rollout regardless of the government’s 5G policy outcome.
It also expects a strong recovery in the domestic contracting revenue parked under the telco network services (TNS) segment in financial year 2022, given the outstanding order book of over RM280mil, which is a new high (58% of FY21 revenue).
This consisted of universal service provision claw back projects, and the satellite broadband wireless access contract (RM115.2mil) under the Jendela programme.
It said domestic TNS revenue grew 9% in FY21 after declining for three consecutive years, while contracting revenue stabilised in the fourth quarter of 2021.
OCK is also in discussions with Digital Nasional (DNB) for additional co-locations and new 5G sites, having inked co-locations on 32 sites so far.
To meet its 5G population coverage target, DNB is targeting to roll out 7,500 new sites by end-2024 from 4,000 by end-2022
As for its site-leasing business, it continues to offer high recurring earnings.
Total sites under ownership (across Malaysia, Myanmar and Vietnam) stood at about 4,800.
It is targeting to acquire 800 sites in Vietnam in FY22 (FY21: 506), with outstanding orders for 153 built-to-suit sites in Myanmar for Mytel.
The research house said the group’s strong recurring revenue and earnings before interest tax depreciation and amortisation of about 60% and 70% would provide a good earnings downside buffer.
RHB adjusted its FY22 to FY23 core earnings forecast from minus 7.3% to 5.1%, mainly factoring in weaker contributions from its regional towerco.
The impact is partially offset by tax incentives and a rebound in domestic contracting revenues, it said.
It maintained its “buy’’ call with a target price of 56 sen per share.
RHB also cited key downside risks for its call on delays in the site rollouts, execution and weaker-than-expected earnings.