- We expect the decision on the award of the 500kV transmission line job (transmission package worth ~RM1bil) to be announced soon following the completion of Sarawak Cable’s (S Cable) rights and bonus issue.

- S Cable has completed a 1-for-2 rights issue last month which was oversubscribed by 9.8%. The rights shares were listed on July 31.

- The exercise raised RM77.6mil with 86% of total proceeds earmarked for working capital and capex.

- The company is now in the midst of completing a 1-for-5 bonus issue of 46.6mil shares. We expect the company to announce the ex-date for the bonus issue soon with the listing to be completed by end of this month.

- We opine that the 500kV job would be announced after the bonus issue is completed. S Cable is the frontrunner to clinch this job as it the only integrated power cable and transmission player in the state (and region).

- We think the 500kv award is timely in order to support the intensive power needs of investors in SCORE. Note that SEB has committed the entire output from Bakun (1,777MW) and Murum (635MW) to SCORE. The recent power outage in Sarawak further underscores the need to expedite the implementation of the 500kV line.

- In June, S Cable won a RM32.9mil job to build the 132kV line between Tudan and Miri airport. Other potential jobs include the Tanjung Manis-Bintulu and MambongKalimantan lines worth RM350mil. S Cable may also benefit from the state’s Rural Electrification Scheme (RES).

- As at end-May, S Cable has an order book of RM687mil, with an outstanding amount of RM202mil. We have a conservative order book assumption of RM1bil for FY13F (including the 500kV line to be progressively-recognised in FY13F-15F.

- It was recently reported that the RM3.5bil Murum dam would soon commence operations and two new dams – 1,200MW Baram dam and 1,300MW Balleh dam – are being considered to be built in the state. If these come through, we expect S Cable to secure more transmission jobs.

- We maintain BUY on S Cable with an SOP-derived fair value of RM2.50/share (ex-bonus). S Cable is currently trading at alluring forward core PEs of 6x-10x for FY14FFY15F EPS with ROEs of 18%-24%. Maintain BUY.

Source: AmeSecurities