BUY  Fair Value: RM1.70

- StarBiz reported yesterday that three out of the eight major work packages for the RM9bil 1,285MW Baleh dam have been tendered out.

- The report quoted Sarawak Energy Bhd group CEO Datuk Torstein Dale Sjotveit as saying that the tender for the explosion magazine and diversion tunnels packages had closed. The bidders are currently being evaluated.

- The third package – operator’s village – is expected to close this month. 

- Another five packages are expected to be tendered at a later stage. These are: (i) jetty; (ii) bridges and roads; (iii) main civil works; (iv) main electrical mechanical works; and (v) transmission lines and substations. 

- Torstein said only Sarawak companies may be allowed to bid for five packages – jetty, bridges and roads, explosive magazine, operator’s village, and transmission lines and substation.

- Emphasis will also be given to local companies for participation in the international contracts – main civil works, main electrical mechanical works, and diversion tunnels.

- We see Sarawak Cable (SCable) as a potential beneficiary of these contracts; notably, it should be in the lead to secure the transmission lines and substation package given its position as the leading integrated transmission line player in the state.

- If works for the Baleh dam commences by year-end, we expect the award of the transmission lines to only come in 2017 with a possible length of ~200km. Nevertheless, we do not rule out SCable’s participation in the other packages as well.

- In the near and mid term, SCable’s prospective jobs include:- (i) 132kV and 275kV underground cable packages in Pengerang; (ii) 132kv underground cables in Petra Jaya, Kuching; (iii) packages for Tenaga Nasional Bhd’s 500kV lines; and (iv) TNB’s tender for supply of cables for distribution lines. 

- A strong outstanding order book of RM1.8bil (as at end-April) will continue to support earnings while tender book amounts to ~RM1bil. Maintain BUY.