OPCOM (0035) - OPCOM - Cable of Cash
OPCOM OPCOM控股 0035 OPCOM HOLDINGS BHD
15 September 2014
OPCOM Holdings Berhad (OPCOM 0035) had recently underwent an EGM to approve the followingi) The acquisition of 40% equity interest in Unigel (UK) Limited by Opcom Niaga Sdn Bhd.
ii) Bonus issue of 32,250,000 new ordinary shares of RM 0.20 on the basis of 1 bonus share for every 4 existing Opcom shares held.
Opcom had been a pioneer player in the cabling industry since 1994. Till date, Opcom had covered more than 1.6million kilometer of fiber optic throughout Malaysia, spanning from West Malaysia to East Malaysia.
Malaysia is still a country with ample of opportunity in the multimedia and communication sector. With more cheaper and affordable hardware that is high in data consumption, the demand for data had continued to surge exponentially, clogging up the already clogged up data cables.
With this bright prospectus in line, as well as the Prime Minister Datuk Seri Najib Tun Razak reiterating the government's commitment to increase HSBB (High Speed BroadBand) internet coverage to the masses, the HSBB Phase 2 which feature a better and wider internet coverage as well as increasing speeds in major town and cities as well as rural areas is definitely something that will benefit OPCOM well in the coming days.
Let's have a quick outlook in OPCOM shares as of lately.
OPCOM had been seeing some interest in the end of July after seeing more than 1.5millions of share exchange hand. While the share consolidate in the range of RM 0.80, OPCOM had underwent an EGM and approved the 40% equity acquisition from Unigel (UK) Ltd and a bonus issue. Unigel (UK) Ltd is a company that specialized in manufacturing a core component of the fiber optics cable's filling compound - Thixotropic Gel.
OPCOM had been flattish for FYE 2013. However, OPCOM had been seeing a positive growth in the 1Q FYE 2014 which a supply contract secured with TM that is worth RM 20.3 million. While this is just the start, OPCOM will definitely benefit more from the launch of the HSBB Phase 2 later in the 2H of 2014.
OPCOM is a debt free company, and currently sitting in a cash pile of RM 44million, translating to RM 0.3475 cash worth per share (Based on 129 million outstanding shares). Under their belt is a RM 20m worth of office building/warehouse/manufacturing block situated at Shah Alam.
Upcoming Catalyst
According to Malaysian Communication and Multimedia Commission (MCMC), the 1st quarter 2014 broadband penetration rate was 67.3%, which is still below the 75% target set by the MCMC to be attained by year 2015. As such, Budget 2014 allocates an investment of some RM 1.8 billion to expand the HSBB coverage in major towns and another RM 1.6 billion is to be invested to expand suburban area. To further add on, there will be more than 1000 telecommunications towers that is to be built over the next 3 years and RM 850million to be allocated for underwater cabling project to increase the coverage of Sabah and Sarawak.
All these expansion in coverage will be looking no lesser than another 10000 kilometer of Fiber Optics to be manufactured and installed into the ground or going underwater. At the current market ongoing rate for supply and installation of 1 meter of of fiber optics, it will be putting up to a cost at around RM 120 to RM 150. A very skeptical calculation of 10000 kilometer at RM 120,000 per km will be putting up a project value worth RM 1.2 billion.
While the project is a big chunk of pie, Opcom will be facing competitor from Leader Optic Fibre Cable Sdn Bhd, Fujikura Federal Cables Sdn Bhd, Gunung Fiber Optik Sdn Bhd, Photon Technologies (M) Sdn Bhd and Optical Communication Engineering Sdn Bhd. However, Opcom will still be in the advantage position due to their past record and also strong political ties.
I believe Opcom will be a great and interesting company to be invested into based on
- Strong financial background with no debt
- Good cash position amounting to RM 0.3475 cash worth per share
- Good record in the past for delivering projects
- Huge beneficiary from the HSBB Phase 2 worth more than RM 3.4 billion
- Strong and favorable political ties
- Strong business relationship with TM Berhad
- Good dividend paying company
- Bonus issue of 1 bonus share for every 4 shares held
OPCOM will be looking to trend higher in the coming days. A quick outlook will see Opcom putting up a quick challenge towards RM 0.90, while a longer term outlook will see Opcom trading above RM 1.00.
Bone's short term TP: RM 0.90
Cheers and have a nice day.
Regards,
Bone
http://bonescythe.blogspot.com
