- It was reported over the weekend that the Sarawak state government will proceed with the construction of the RM4bil Baram dam.

- The Star reported Chief Minister Tan Sri Adenan Saptem as saying that he had secured the support of majority of the community leaders in Baram to proceed with the project. Construction of the dam is expected to commence as soon as possible.

- When completed, the Baram dam will generate 1,000MW of electricity. The dam is located ~200km inland from Miri.

- The news comes hot on the heels of the state’s approval for the construction of the 1,285MW Baleh dam. Recall that last month, the Baleh dam received the approval for the dam’s social and environmental impact assessment (SEIA) from the authorities. The construction is slated to begin next year with completion expected by 2024.

- The approvals for the two dams are positive for Sarawak Cable (SCable), as it ensures continued job flow for the long-run. Recall that Sarawak Energy Bhd (SEB) plans to construct a 500kV/275kV substation in Kanowit and a 500kV double-circuit line to connect Baleh dam to the state’s power grid.

- Given SCable’s fortified position as the leading integrated transmission line player in the state, we believe SCable stands a good chance to secure jobs from the planting-up of the two dams. The two dams are part of the state’s plan to ramp up generating capacity to 7,000MW (vs. 2,000MW currently) by 2025.

- While cable supply tenders for the two dams will come later, some near-term prospects for SCable include:- (i) TNB’s tenders for cable supply for distribution lines amounting to ~RM1.2bil; (ii) underground cables for 132kV lines in Petra Jaya; and (iii) TNB’s 500kV overhead transmission lines.

- SCable’s 1QFY15 results are scheduled for release on 26 May. We expect a stronger quarter sequentially, although there could be some impact from forex losses (as raw materials are denominated in USD).

- Nevertheless, SCable should see peak earnings contribution this year from its strong outstanding order book of ~RM2bil with a tender book of ~RM1bil. Maintain BUY.

Source: AmeSecurities Research - 19 May 2015