OCK Group Berhad (OCK) is leveraging its existing resources to offer end-to-end services in its new digital business, targeting smart city solutions from state governments. Kenanga Investment Bank (Kenanga) in their report today (July 5, Friday) noted that OCK's digital unit has a tender book valued between RM300 million and RM400 million, with a focus on smart city solutions, managed services, connectivity, and cloud services.
Kenanga maintains its OUTPERFORM recommendation on OCK with a target price of RM0.86, based on the company's robust market position and growth prospects in the digital and telecommunications sectors.
OCK aims to capitalise on digital trends like generative AI, 5G, and AI cloud services to diversify its revenue and expand its service offerings. The group's integrated digital solution capability allows it to manage the entire infrastructure lifecycle, from planning and design to implementation, maintenance, and optimisation, with earnings contributions expected by CY25.
OCK's digital unit has a significant share of its tenders (90%) targeting government contracts, including state and federal governments and various ministries, while the remaining 10% is aimed at enterprises, retail, and education sectors. The group is also pursuing AI cloud contracts and aims to receive recurring fees from services such as cloud AI, connectivity solutions, managed services, and cybersecurity.
Kenanga maintained its forecasts and target price of RM0.86, based on a 7x FY25F EV/EBITDA, reflecting OCK's smaller size compared to larger peers like Edotco. OCK's share price performance has shown a 37.9% increase year-to-date, with a market cap of RM640.2 million.
OCK is well-positioned to benefit from the JENDELA Phase 2 and 5G roll-out projects in ASEAN, with strong earnings visibility as 57% of its revenue comes from recurring income, primarily from telco tower leasing and network management contracts. The company's earnings may also receive a boost from new power management contracts for data centres.
Investors should consider OCK's strategic initiatives in the digital business sector and its competitive positioning within the telecommunications infrastructure industry. OCK's ability to leverage its existing resources and expand its service offerings indicates potential for future growth and profitability.
Investors are encouraged to evaluate OCK's performance and market conditions before making investment decisions.