Wednesday, August 14, 2013

Instacom: A possible Main Market transfer candidate

Instacom: A possible Main Market transfer candidate
admin Aug 13th, 2013

Instacom Group Berhad, a company which is principally providing support services to the telco industry and recently made its debut on the Ace Market of Bursa Malaysia (via the RTO of I-Power Berhad) in October 2012 may well be on its way to a possible Main Market transfer.

Already with its current Ace Market Listing, Instacom has already garnered a fair bit of followings from the retail investors, coupled with its possible Main Market transfer, according to some local fund managers it may well be a darling stock with some of the local as well as foreign fund managers once the transfer to Main Market is done with (most fund managers currently don’t have the mandate to invest in Ace Market stocks).

Instacom provides a slew of services to the telcos, such as network planning, design and optimisation, network deployment, network operations and infrastructure management and maintenance.

In other words, the company acts as a contractor to install equipment for network equipment providers for the telcos. In addition to the aforesaid bread and butter business, it differentiates its business model with the other tier one boys mainly via its build and lease tower segment. In the longer run, upon having sufficient number of towers with recurrent income, the group may consider putting this segment of assets into a REIT – again a very common feature in overseas markets.

Furthermore, the implementation of the LTE network means more towers will be built, especially for the new players which were recently awarded the spectrum. This only means there are more jobs in the pipeline for players like Instacom, which will enhance its future earnings.

On 20 May 2013, Instacom announces that the company had received and accepted a Letter of Award for the supply, installation, testing and commissioning of telecommunication network and infrastructure and engineering works in Sarawak. The value of this project to Instacom is RM205 million, which is expected to contribute strongly to the company’s earnings and net assets for financial years ending 2013 to 2015.

This development follows on the heels of the company’s sterling Q1 results announced on 14 May 2013 when it posted revenue of RM30.210 million and profit before tax of RM6.828 million, marking significant respective increases of RM29.350 million and RM9.895 million against the previous corresponding period.

“Such positive developments bode well for Instacom’s transfer to the Main Board of Bursa Malaysia which will most certainly lend credence to our already strong profile,” its CEO Anne Kung was reported saying in a statement. “We believe Instacom has met with all the criteria for an upgrade to the Main Board of Bursa Malaysia from the ACE market, and we are proud of the achievement,” she adds, explaining that institutional funds have expressed interest in acquiring substantial equity stakes in the company.

In the longer run, assuming that Instacom is able to sustain its FYE 2013 results going forward and is able to fully repay its borrowings, (which translates an interest savings of RM8 mn per year) its annual PAT could easily increase to approximately RM25 – 28 mn. Applying the similar PE’s the share price should hoover around the RM0.62 – RM0.70 band.

With the current order book of Instacom together with the expected lucrative spending of the telco companies, which will only translate to further revenues and profits to Instacom, the share price of this darling stock can only move further north.

Publish date: 13/08/13

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