OCK Group Bhd has been awarded a BUY rating on account of the group's proposal to invest in a large scale solar (LSS) power plant in Kedah for an enterprise value of RM350 million, along with a long-term power purchase agreement (PPA) that generates recurring revenues in the long run.

According to a research noted prepared by RHB Investment Bank Bhd Small Cap ASEAN Research (RHB Research), OCK has entered into a conditional investment agreement with Spanish firm Zelestra Corporacion and its subsidiary Solarpack Asia Sdn Bhd, where OCK would subscribe to 1,000 redeemable preference shares (RPS) in Solarpack Asia for an enterprise value of RM350 million, which may be redeemed for shares. The transaction is subject to closing adjustments and the settlement of a loan consideration.

RHB Research has awarded a target price of RM0.70 which offers a premium of 21.5 sen, or 44.3%, over market valuation.

As at 2:20pm, the stock price of OCK stood at RM0.485. (Stock updates from Bursa Malaysia)

Analysts view the proposal positively as the investment into LSS plant could further drive the group's recurring revenues in the longer-term and to diversify from the mainstream telco engineering and network services segment, which has been a core segment for OCK since the group's inception.

OCK stands to benefit from long-term cashflows from the PPA-backed solar asset, not surprising given the group's recurring revenues from site leasing (towerco business), site maintenance, and renewable energy (RE) services which have contributed over two-thirds of the group's revenue.