I am sure everyone had heard about "The National Fiberisation and Connectivity Plan (NFCP) ", which involved RM21.6 billion capital expenditure to substantially upgrade Malaysia telecommunication connectivity in prepare of digital economy as well as 5G technology.
With the NFCP,we can expect great investment opportunities ahead without any doubt.
But unfortunately,i also found many investors do not really understand how NFCP or even telecommunication industry is working,even famous bloggers make horrible mistake,so i think it is necessary to write this article and share my knowledge here.
1.)what is NFCP?
NFCP is a major plan to revolutionize Malaysia telecommunication industry,with target of building solid foundation for economy to adapt digital industrialisation,like industry 4.0 and Internet of Things(IOT),altimately make malaysia an even competitive economy globally.
The total investment under NFCP was estimated at RM21.6 billion.Among which,50-60% of the total investment will funded by universal services provision(USP) fund managed by MCMC,the remaining will be funded by private sector,namely TM,MAXIS,DIGI,CELCOM,etc.
Investment made by USP fund will be focus on infrastructure in rural area,mainly building new towers,upgrading exsisting towers as well as regular maintainance.
On the other side,investment made by private sector will mainly focus on urban area,included but not limited to building new towers,upgrade current facilities and network,as well as 5G investment.
2.)What is USP fund?
USP fund was set up by MCMC and contributed by telecommunication company every year.
The rationale behind is simple:Due to commercial consideration,telco wont set up their towers in most of the rural area.So,to make sure people in rural area can enjoy telco services too,MCMC request all telco to contribute certain percentage of their profit into USP fund every year,and then use the fund to build towers in rural area.
The towers build by USP fund will altimately connected to telco's network,thus allow all telco to provide services for rural residents.
3.)Which company will be benefited from NFCP?
This is certainly the most important part of this article.
When talk about NFCP,investors are focusing on 6 company,which include REDTONE,OPCOM,OCK,ROHAS,CMSB and BINACOM.Also,an IT related company name NETX also strongly promoted by a blogger.
But is it true that all these company will be benefited from NFCP?
Let's have a closer look together now.
I have wrote few article about how Redtone could benefited from NFCP since august last year,so the answer is YES,Redtone is difinitely one of the major winner.
As i mention before,Redtone had consistantly appointed as USP contractor by MCMC for the last 7 year,so far they already help MCMC to install and maintain hundreds tower in rural area,and already became one of the largest MTNS player in the market.So,NFCP is not something new to Redtone,they have necessary experience,expertise,capital,and track record.
To be even clear,Redtone is the only services provider in Bursa that own excellent record on large scale USP project.
We can expect Redtone to win more towers as soon as next week,as final winners of NFCP 1 that involve 153 towers would be announce anytime from now,following by NFCP 2 that involve 500 new towers.
No matter how,MCMC will spend big on rural towers expansion in years to come.i am pretty sure Redtone can win more towers from MCMC,just the matter of when,as they had clear advantage in USP projects.
Opcom is famous among investors not simply because of business itself,but also the controlling shareholder--Tan Sri Mokhzani Mahathir,the eldest son of Tun Dr. Mahathir Mohamad.
As the core business of Opcom involved Fibre Optics manufacturing,people started to think Opcom might be the biggest NFCP beneficiary,as the demand for Fibre Optics cable will surge significantly under NFCP.
But,will Opcom benefited for sure?
My answer remain YES.
That is because Opcom is one of the leading fibre optic cable manufacturer and supplier in malaysia.So,even Opcom does not benefited directly from NFCP,as they wont awarded any contract by government or MCMC,but when company like TM invest more money to widen fibre optic network,opcom might play a important role in material supply.
However,Opcom is currently making losses,they shall benefited in future but the degree is not predictable.As an result,the share price may go up or down sharply in the future,depending on news flow.
Thats simply means,you might win big or loss big by invest into Opcom,make sure you can adopt to the risk and reward profile before make any investment decision.
Ock is the famous with their towers business--the build the towers by using own money then rent it to telco for fees.Other than that,they also involved in telecommunication network services(similiar to Redtone but mainly focus on servicing private telcos instead of MCMC) .
So YES,OCK will also be one of the benificaries under NFCP.
Other than having more opportunity to expand towers portfolio,Ock might also benefited from huge CAPEX spend by major telco,as all big telco is expected to ramp up activites toward their own towers to improve services quality and capabilities,Ock is well positioned to capture the potential as they have been working with telcos for many years.
However,even the business is generating stable profit and future is bright,Ock might face some difficulty in financing mega investment because of their high gearing profile and high CAPEX business profile,so very limited capacity left for NFCP opportunities,management have to solve the debt issue as soon as possible,before they can grap more opportunities from NFCP.
Rohas is mainly in power transmission business,they fabricate towers and provide construction services for power transmission grid.Beside fabricate towers for power transmission use,Rohas also fabricate towers for telecommunication use but revenue contribution is not that significant.
So,is Rohas one of the NFCP benificiaries?
The answer is MAYBE.
Since Rohas are capable to supply towers for telecommunication use,they might benefited under NFCP as tower demand is expected to rise,but i dont think this factor alone sufficient for Rohas to make big money in the future.
Thats simply because,power business contribute more than 90% to Rohas revenue,so,if anybody interested to invest in Rohas,they should actually put more attention on the prospect of power transmission business instead of telecommunication business,that make NFCP merely a bonus to Rohas,at best.
CMSB is one of the most well known listed conglomerate in sarawak,involved in cement,construction,trading,property and others.CMSB also owned a 50% associate namely Sacofa,the monopoly towers owner in major city of sarawak.
However,i dont think CMSB going to benefit much from NFCP.The answer is NO.
We have to understand that,Sacofa is towers owner(not contractor or service provider),so they wont get any USP contract from MCMC.what sacofa do is,they build and operate towers by using own money,then rent it to telco for profit.(similiar with Axiata's edotco or OCK)
So,Sacofa wont simply build more towers just because of NFCP,any new tower must be cormercially viable and supported by certain level of population,thats why must be somewhere in the city or close to city.
As for rural area,towers will still be build by MCMC via USP fund as mention above,the towers will be managed by USP contractor which appointed by MCMC,there is nothin much for sacofa to get involve.
lastly,Sacofa is merely a small part of CMSB,even Sacofa double their profit,the quantum of increase should be less than 10% in CMSB level,not as significant as many had expected.
Binacom is involved in various types of supporting network engineering services,included satelite,mobile,and fibre optic,they help telco and equipment supplier to install and maintain network facilities.
Their business is similiar to redtone's MTNS segment,but Binacom is focus on servicing private sector,while Redtone focus on MCMC project.
So the answer is YES.
even Binacom is specilize in satelite technology,but they also good in mobile and fibre optic installation and maintainance,they had been serving Maxis for more than 12 year,and provide supporting services to Huawei for more than 6 year.
the mobile and fibre optic business contribute around 50% of Binacom's revenue,so the impact to group financial will be significant if mobile and fibre optic division doing well in the future.
As mention earlier,private sector will contribute nearly half of the RM21.6 billion NFCP investment,and other than TM,Maxis will be one of the major contributor,that should benefited Binacom as they had excellence record with Maxis.
Other than that,Binacom have good chance to benefited from 5G as they are one of Huawei's trusted sub-contractor.
Netx is involved in e-payment services and network and IT related services.Thats means,if your company needed to setup e-payment terminal or IT system,Netx can be your supplier to supply IT expertise,infrastructure and equipment,just like many other ACE market IT company would do.
So,it is clear that when come to NFCP,sorry to say that,Netx would not benefited much as they are not participating,and do not even have necessary expertise in telecommunication network and infrastructure related project.
it is almost impossible for Netx to win any contract from big telcos or MCMC under NFCP.(Sorry for any offence,i am merely speaking the truth.)
i wont comment much on Netx here,but i'll advice everyone to do your own research,or seek advise from stock expert before invest,not only on Netx but other companies as well.If you dont,well,then do not blame other people(even the one who ask you to buy) when you lose money,you can only blame to yourself.