- We maintain our BUY call on Sarawak Cable (S Cable) with a SOP-derived fair value of RM2.50/share.
- S Cable yesterday announced that its wholly-owned subsidiary, Trenergy Infrastructure, has received a letter of acceptance from Sarawak Energy Bhd (SEB) for the Tudan-Miri airport 132kV transmission line project worth RM32.9mil.
- The project will commence on 17 June, 2013 and will be completed within 15 months, or Sept 16, 2014.
- This is the first transmission job S Cable has clinched since the conclusion of the 13th general election. We expect more jobs to flow through by year-end, including the Tanjung Manis-Bintulu and Mambong-Kalimantan lines worth ~RM350mil.
- More notably, we believe that S Cable will most likely secure the 500kV backbone transmission line (transmission package worth ~RM1b), which is expected to be awarded by year-end. There is urgency for the 500kV line to be awarded soon due to the needs of power intensive industries in SCORE.
- Apart from that, S Cable is expected to benefit from the acceleration of state government’s rural electrical scheme (RES) to meet state’s original target of 95% by year-end (currently ~60%). As the dominant supplier of fabricated poles and cables in Sarawak, we expect S Cable to secure 80% of the total RM400m worth of jobs to be tendered out this year.
- As at end-May, S Cable has an order book of RM687m, with an outstanding amount of RM202m. We have a conservative order book assumption of RM1b for FY13F (including the 500kV line) to be progressively-recognised in FY13F-FY15F.
- As the only integrated power cable and transmission line player in the state (and region), SCable is still trading at alluring forward core FD PEs of 7x-11x on FY14F-FY15F EPS against solid financials (FY13F net gearing: 7.8%) and ROEs of 18%-24%. Maintain BUY.
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