- Sarawak Cable Bhd yesterday announced that it has secured a 275kV transmission job at Samalaju worth RM19.1mil.

- The letter of acceptance was awarded to its wholly-owned subsidiary, Sarwaja Timur Sdn Bhd by Sarawak Energy Bhd.

- The job entails the design, supply, delivery, erection and commissioning of Samalaju 1-Samalaju 2 275kV overhead transmission line project. The contract duration is 18 months and will contribute positively to the group’s FY15F-17F earnings.

- With the award, we estimate that its outstanding order book is currently at ~RM1.3bil (end-June: RM1.5bil).

- YTD, it has secured RM46mil worth of new jobs. This is within our new order book assumption of RM260mil for the year (FY14: RM765mil).

- Its tender book remains healthy at ~RM1.4bil. Prospective jobs include:- (i) packages for TNB’s 500kV lines in Peninsular Malaysia; (ii) underground cables for 132kV in Petra Jaya, Kuching; (iii) supply of underground cables at Pengerang; and (iv) TNB’s tenders for cable supply for distribution lines.

- Notably, management’s strategy is to focus on tendering for jobs that yield better margins – particularly for the supply of its new underground 257kV cables. It is the sole manufacturer of such cables in Malaysia.

- Currents jobs at hand – e.g. 500kV backbone line (RM620mil), Balingian (RM493mil), and Pengerang (RM257mil) – will continue to sustain earnings. Notably, contribution from the completion of its 500kV job should flow through stronger in the 2H.

- Valuations are undemanding at 7x PE currently. Maintain BUY and our fair value of RM1.70/share – pegged to 10x FY15F PE.

Source: AmeSecurities Research - 3 Sep 2015