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Sarawak Cable - Rights issue oversubscribed by 9.7% BUY

kiasutrader
Publish date: Mon, 29 Jul 2013, 10:21 AM

- Sarawak Cable Bhd (S Cable) announced on Bursa Malaysia yesterday that its rights issue was oversubscribed by 9.7%.

- The rights issue received 77.3mil valid acceptances, or 99.6% of total rights offered, and another 7.8mil in valid excess applications.

- A total of 77.6mil rights shares would be listed on July 31.

- The rights issue, which raised RM77.6mil, would be followed by a 1-for-5 bonus issue of 46.6mil shares that is expected to be completed next month.

- Our channel checks suggest that a state meeting would be held next week to discuss the award of the 500kV backbone line (transmission package worth ~RM1bil).

- As such, we opine that Sarawak Energy Bhd might announce the award of the 500kV line as early as next month, after the bonus issue is completed.

- Being the only integrated power cable and transmission player in the state (and region), we believe SCable is the frontrunner for the job.

- The 500kV needs to be implemented soon in order to support the intensive power needs of investors in SCORE. The recent state-wide power outage in Sarawak further underscores the need to expedite this.

- Note that SEB has committed the entire firm output of Bakun (1,777MW) and Murum (635MW) to SCORE.

- With the RM3.5bil Murum dam to commence operations soon, The Star recently reported that another two new dams might be in the pipeline:- (i) 1,200MW Baram Dam, and (ii) 1,300MW Balleh dam. S Cable might benefit from new transmission jobs arising from these.

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

Source: AmeSecurities

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