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Sarawak Cable Bhd (SCABLE) was thrown some kind of lifeline in the form of UK-based investor Serendib Capital Ltd which will help in reviving the fortunes of the loss-making manufacturer. The investor is said to be bringing in RM250 million to resuscitate SCABLE.

Serendib has over 20 years of expertise in advising and restructuring financial assets across South Asia, Of course many are excited with the prospects of a foreign investor pumping in the sum of money. This excitement was reflected in SCABLE’s share price.

SCABLE was one the list of actively traded stock on Bursa Malaysia after the Practice Note 17 company announced on Dec 12, that it had found a white knight to revive its business. The next trading day, the stock went up as much as six sen, or 28.57%, to a one-year high of 27 sen. The good run continued on Dec 13 with SCABLE appreciating 14.3% to close at 24 sen.

On Dec 12, the power cable manufacturer said Serendib Capital had prepared RM250 million to help pare down its debts, and to recapitalise SCABLE to cater to growing demand for infrastructure grid development and high-voltage cables. It was not stated if Serendib will come in as a substantial shareholder or just giving a loan to SCABLE. The money to be brought is many times bigger than the company’s market cap of around RM96 million.

As at Aug 31, SCABLE’s current liabilities amounted to RM388.75 million, of which 84% were secured loans, while long-term debts stood at RM11.67 million. The company’s cash balance, excluding the overdraft and deposits pledged, was at RM19.42 million.

In addition, SCABLE was sitting on accumulated losses of RM296.42 million as at end-August, resulting in a negative shareholder equity of RM76.6 million. With Serendib’s funds, SCABLE can focus on aggressively delivering on its RM900 million order book.

SCABLE’s external auditor Baker Tilly Monteiro PLT issued a disclaimer opinion in May, pointing out that its financial position for the financial year ended May 31, 2023 and its PN17 status indicate material uncertainties that may cast significant doubt on its ability to continue as a going concern.

According to SCABLE, Serendib Capital is “an experienced UK-based investor, holding over 20 years of expertise in advising and restructuring financial assets across South Asia”. Its achievements included the successful restructuring of LankaBangla Finance, yielding investors over 50 times the invested capital. Serendib adviser and director Takeo Hirata said it wants clean up whichever lingering issues and build this business into regional powerhouse.

However, after such a large jump in price, SCABLE’s price-to-sales (P/S) ratio of 0.2x might still make it look like a buy right now compared to the electrical industry in Malaysia. Having RM250 million may be more than sufficient to ‘clean up’ its issues but the quantum of its accumulated losses may render the RM250 million not attractive enough to bring tourists into the cinema.

Here are some of the info we can study based on SCABLE hourly chart:

1. Pullback to 20MA

2. No weakness at the resistance level