- Sarawak Cable Bhd (SCable) has clinched a RM493mil job to supply local content for the 2x300 MW Balingian coal-fired plant.

- The group announced yesterday that it had received the letter of award from Shanghai Electric Group Co Ltd, the main contractor for the plant’s power island engineering, procurement & construction works.

- Nevertheless, the contract sum is provisional and subject to final scope of work and bill of quantities for the required local content.

- The project will commence on 28 Nov, and will take 40 months (until 27 March 2018) to complete.

- We are positive on the award as it will contribute positively to the group’s earnings over FY15F-18F.

- We understand from management that the scope of works include the supply of cables and steel products required for the construction of the coal-fired plant as well as civil works.

- Assuming an EBITDA margin of 8%, we see earnings accretion of 7%-8% over FY15F-FY16F. Nevertheless, we maintain our numbers for now pending a meeting with management later today.

-Meanwhile, SCable has until next Monday to sign the agreement for the acquisition of 100% stakes in Universal Cable (M) Bhd and Leader Cable Industry Bhd for RM210mil from HNG Capital Sdn Bhd. The acquisitions would fortify SCable as the leading integrated power cable supplier in Malaysia.

- While we understand that discussions are still ongoing, it was reported that SCable may issue up to 10% of new shares to fund the acquisitions. It may also borrow RM110mil with the remaining RM60mil to be offset by debts owed to HNG to the companies.

- Recall that the HNG Capital will guarantee a total PBT of RM21mil for the two companies for FYE14F. While margins for the two cable companies are said to be lower than SCable’s current business, there are plans to improve it post-acquisitions.

- We maintain HOLD and our numbers for now pending a meeting with management later today.

Source: AmeSecurities