- The OR for Sarawak Cable Bhd’s rights issue started trading from today.

- Investors looking for arbitrage opportunities could look at the OR, which is currently trading at 54 sen, compared to the mother share price of RM1.58. At the same time, current shareholders who may not want to participate in the rights exercise may sell their OR on the open market.

- Note that the rights have an issue price of RM1.00 each. The trading would cease next Friday (July 12).

- To recap, S Cable is raising RM77.63mil from a proposed 1-for-2 rights issue. About RM66.6mil of the proceeds will be used for working capital and capex, while RM10mil will be used to pare down borrowings.

- The rights issue is expected to be completed at the end of this month followed by a 1-for-5 bonus issue of 46.6mil new shares a month later.

- We maintain our BUY call on S Cable with an SOP-derived fair value of RM2.50/share.

- We opined that the 500kV backbone line would be awarded soon in order to meet the needs of power-intensive industries in SCORE. The recent power outage in Sarawak underscores the need to expedite its implementation.

- S Cable is a laggard among Sarawak-based stock with an attractive forward core FD PEs (ex-all) of 4x-7x on FY14F-FY15F EPS with ROEs of 18%-24%. Maintain BUY.

Source: AmeSecurities