OCK: Value Unlocking and Strategic Growth Propel Telecom Infrastructure Outlook

TA Securities has reiterated its “BUY” recommendation for the telecom infrastructure company, raising its target price to RM0.72 from RM0.60, signaling a robust upside of approximately 63.6% from its last traded price of RM0.44. The positive outlook is largely attributed to the impending value unlocking of its key assets and strong growth drivers within its core businesses.

Performance Review and Growth Drivers

The firm’s power solutions subsidiary, El Power Technologies (EIPT), has demonstrated significant growth, with revenue and profit after tax (PAT) expanding at a compounded annual growth rate (CAGR) of 13% and 76% respectively between FY22-24. Gross profit margins for EIPT surged to 30% in FY24 from 16% in FY22. Furthermore, the company’s data centre (DC) revenue recorded a remarkable 77% sequential increase in 2Q25, contributing approximately 14% of the group’s total revenue. The group also reported a substantial 168% quarter-on-quarter and 103% year-on-year jump in contracting revenue, which includes fiberisation and in-building site projects, in 6QFY25.

Strategic Asset Unlocking and Future Initiatives

A key catalyst for the revised valuation is the planned initial public offering (IPO) of EIPT, slated for early 2026. This move is expected to unlock significant value and enhance visibility for the group’s emerging data centre business. EIPT, a leading provider of power back-up solutions for hyperscale and co-location data centres, boasts a strong outstanding order book of MYR70m and a tender book of MYR100m as of end-August. Analysts estimate EIPT’s equity value could range between MYR250-334m post-IPO, with proceeds earmarked for new headquarters and business expansion.

The report also highlights the substantial but currently undervalued towerco business, OCKT, which possesses over 5,500 sites across Malaysia and Indochina. OCKT is a significant generator of recurring revenue and EBITDA, contributing 74% to the group’s EBITDA, yet its value is not fully reflected in the current market capitalization. Analysts suggest OCKT could be worth MYR760-905m, or MYR0.70-0.85 per OCK share. Management is actively considering additional mergers and acquisitions (M&A) and value illumination exercises for OCKT in the medium to longer term.

Market Dynamics and Outlook

Despite some near-term sluggishness in contracting revenue due to restrained capital expenditure from Mobile Network Operators (MNOs) and Digital Nasional Berhad (DNB), an acceleration in capex intensity is anticipated in 2H25. This will be driven by the JENDELA Phase II initiative and ongoing 5G network expansion projects. The company is actively in discussions with Huawei for the deployment of U Mobile’s 5G sites, a potential contract valued at approximately MYR500m, which could significantly boost contracting revenues in FY26. Additionally, a recent contract from U Mobile for indoor building sites is expected to generate MYR8-9m in recurring annual revenues. The firm expects double-digit earnings growth for FY27-28, supported by robust DC power solution sales and a stronger recovery in telecommunications network services (TNS) revenue.

Risks and Forecast Revisions

Minor revisions to FY26F-27F core earnings forecasts were made to account for the slower-than-expected recovery in contracting revenue, though this was partly offset by stronger power solution sales. Key risks include weaker-than-expected margins or earnings, potential project execution delays, and lower-than-anticipated orderbook replenishment. However, the investment bank believes current valuations have already factored in these downside risks, with near-term sentiment bolstered by the ongoing asset value illumination.