OCK: Sequential Earnings Soar on Cost Efficiencies, Robust Order Book Fuels Optimistic Outlook
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.72 (+94.6%) |
| Last Traded | RM0.37 |
| Recommendation |
An investment bank analysis highlights that despite first-half earnings being light against full-year forecasts, the company posted a significant sequential surge in its second-quarter profit, driven primarily by lower depreciation expenses and robust EBITDA growth. The firm maintains a “BUY” rating on the stock, citing a strong future outlook bolstered by a record order book and potential for value-unlocking initiatives.
Performance Review
For the first half of the financial year 2026 (1HFY26), profit after tax and minority interests (PATAMI) reached MYR10.1 million, marking a substantial 66% quarter-on-quarter increase and a 25% year-on-year growth. This surge was attributed to reduced depreciation expenses, resulting from an extension in the useful lives of its tower assets, coupled with a 5% quarter-on-quarter increase in EBITDA. While the 1HFY26 PATAMI represented approximately 39% of the full-year forecast, analysts anticipate a strong catch-up in earnings during the second half of FY26, propelled by upcoming project deliveries and billing milestones.
Despite the positive sequential performance, tower leasing revenues experienced a quarter-on-quarter decline, largely impacted by the strengthening Malaysian Ringgit against regional currencies. However, overall telco network services revenue showed strength, supported by active cost management.
Future Outlook and Growth Drivers
The outlook for the company remains optimistic, with earnings expected to accelerate in the coming quarters as several key projects move through various stages of implementation and delivery. Anticipation is high for the award of JENDELA Phase 2 (JP2) projects, an area where the group has a proven track record from previous JP1 implementations and is expected to be a key beneficiary.
The outstanding order book, which stood at a post-pandemic high of MYR652 million at end-January 2026, provides strong revenue visibility. Telecommunications Network Services (TNS) projects constitute 53% (MYR347 million) of this order book. The company has also made strategic pivots into the government sector, successfully implementing various infrastructure projects including Wi-Fi connectivity for public universities and military camps, and fibre projects for schools.
Analysts also highlight significant latent value in the company’s strategic portfolio of regional towerco assets across Indo-China. Potential value-unlocking could come from a spin-off, divestment, or IPO of these assets in the medium to long term. Furthermore, the impending listing of its power solutions arm, El Power Technology (EIP), is expected to unlock substantial value for the group, with a 37% effective stake in EIP potentially contributing 9-12 sen per share, based on a target PER of 15-20x on FY27 earnings.
