- We downgrade our call on Sarawak Cable Bhd from BUY to HOLD with a lower fair value of RM1.70/share (from RM2.33/share previously).

- We have cut our FY13F earnings as we expect further amortisation of intangible assets in 4QFY13.

- Recall that RM2.4mil was recognised in the preceding two quarters for these. We understand that the amortisation relates to projects with contract revenue following its acquisition of Trenergy last year.

- We also tweaked our forecasts for FY14F-FY15F to reflect lower margins, increased competition and a slowdown in near-term job prospects for the group. We also take this opportunity to introduce our FY16F numbers with a forecasted net profit of RM46.6mil or 9.1sen/share.

- While the FY13F numbers are expected to be weak, we expect earnings to improve in the coming years due to progressive recognition of the 500kV backbone line packages (worth RM620mil) it secured last November.

- We understand that the group would only begin recognising contributions from the 500kV line package from FY14F onwards.

- We have trimmed our new order book assumption for FY14F-FY15F to RM350mil-RM400mil per annum as we foresee a slowdown in new contracts being awarded in the near term.

- While it was recently reported that the Sarawak government will go ahead with building the proposed Baram (1,200MW) and Baleh (1,295MW) dams, we expect both projects to be rolled out only within the next two years. As such, the transmission package could only be dished out earliest in 2016.

- Besides that, we understand that there are plans for a 2^nd phase of the 500kV line and another two 275kV lines to link the various growth nodes within SCORE. Nevertheless, Sarawak Cable will be kept busy with the roll-out of the 500kV job.

- Until then, some of the prospective near-term jobs include the Tanjong Manis-Bintulu line.

- Based on the current price, Sarawak Cable is trading at 9x PE of FY15F earnings. Note that the 4Q results are expected to be released tonight.

Source: AmeSecurities