Wednesday, 10 May 2017
OCK- How Much Does The Warrant Worth?
Co- Written: By Alvin L & Humblepie (BBO Value Investing)
After another record year in 2016, what’s next? OCK had successfully venture into Vietnam market, by acquiring Southeast Asia Telecommunication Holding Pte Ltd (SEATH), the largest independent base transceivers station (BTS) owner in Vietnam. SEATH holds 100 per cent of three BTS owners in Vietnam: the VNC-55 Infrastructure JSC, the Mobile Information Service JSC, and the Global Infrastructure Investment JSC. They own and lease 1,938 BTS and over 150 in-building systems (IBS) for mobile network operators in Vietnam. SEATH average net-profit from 2013-2015 is RM7.4 mil, 2017 will be the first full year profit from SEATH.
Another successful strategy that OCK did was entering to Myanmar market, a population of 54mil and an average GDP growth rate of 7%. OCK having a Master Service Agreement with Telenor Myanmar for the construction and lease 920 telecommunication towers. It is believe that OCK will finish all the towers and pass to Telenor Myanmar this year. The deal is in a long-term "build and lease" business model that will deliver OCK rental income for 12 years, according to the agreement. Partnership with Telenor Myanmar is an advantage as the company currently operated the largest 3G network in Myanmar, and serves more than 12 million customers, and covers with its network over 60% of the population. For your information, Myanmar awarded its fourth - and final - telecoms license to Myanmar National Tele& Communication (MNTC). It could increase the tenancy ratio of OCK to build and lease telecommunication towers to the company, as OCK had already established her name in Mynamar.
Telecommunication services still remains as the largest contributions for OCK, so venturing into emerging markets provides tons of opportunities for OCK. In Cambodia, the group’s project involving dredging and laying works for 800km of fiber for Telecom Cambodia, is at the tail end. So we won’t see much contribution for the group in 2017. On the other hand, Instead of owning its own telecoms towers and competing head-on with the giant tower companies in Indonesia, OCK will participate in the local market by providing the telcos there tower-management services, although the market was attractive. Today, OCK are the largest telecoms-managed services company in Indonesia, commanding 23% of the market by number of towers.
Key Question: Mother Price selling at 0.895 , how much does the warrants worth?
With the Implied Volatality of 29.52%, the Fair Value for OCK-Wa should be at 0.33 which is exactly the current closing price of OC-Wa. The market has priced in the the FV with no arbitrage opportunity. Talk about Efficient Market Hypothesis!
Lately, RHB Research came out with the Target Price of OCK @ RM1.05. So, the golden question would be:
What is the FV for the warrants if OCK is trading at RM1.05?
The OCK- Wa will be worth RM0.46 which is is potential 40% upside from 0.33
Mother price will be gaining 16.6% with the same TP of RM1.05.
P/S: One of the reason on top of the leveraging concept for warrants trading, I am choosing the OCK Wa instead of the mother is because the low/negligible dividend payout. If you know what i means =)
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