- Business Times today reported that Sarawak Energy Bhd (SEB) has evaluated the tenders for the RM1billion 500kV backbone line and is expected to announce the award as early as next month.

- The daily quoted SEB corporate communications manager Haniza Hamid as saying that a final “clarification” meeting with the bidders would be held next month, after which the tender award announcement would be made.

- It noted that SEB is in the process of finalising internal arrangements before inviting the preferred tenderers to attend the meeting.

- The news reaffirms our view that the 500kV job would be awarded soon. We see Sarawak Cable (S Cable) as the frontrunner as it is the only integrated power cable and transmission player in the state and region.

- We expect the award to be announced following S Cable’s completion of its one-for-five bonus issue of 46.6 million shares. The ex-date is expected to be announced soon.

- According to Business Times, the 500kV backbone line comprises three packages: 196km Similajau-Mapai line, 174km Mapai-Lachau line, and 141km Lachau-Tondong line.

- 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.

- Note that S Cable had completed a one-for-two rights issue last month that was oversubscribed by 9.8%. The exercise raised RM77.6mil in fresh funds.

- 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-11x for FY14F-FY15F EPS with ROEs of 18%-24%. Maintain BUY.

Source: AmeSecurities