Listed in Oct 2020 and is slated to migrate to the Main Market on Monday, Southern Cable Group Berhad (SCGBHD) is principally a manufacturer of cables and wires that are being used in many sectors such as power distribution and transmission, communications as well as control and instrumentation applications. Over the past 27 years, SCGBHD has established a solid track record in supplying cables and wires to giant companies like Tenaga, Sabah Electricity SB, TM, and Petronas. The company also supplies cables and wires to significant projects such as the MRT and RAPID projects in Pengerang. Recently, the group is targeting the construction and infrastructure sectors with its newly-developed aluminium-based cable as copper cable substitute, to mitigate rising copper prices in the past year.

As economic reopening gains traction, we expect the demand for cables and wires to increase in line with the accelerated economic activities. Power sector, which contributed 85% of its FY19 cables and wire revenue is deemed to be a major growth driver. As electricity demand in Peninsular Malaysia is expected to grow at a CAGR of 1.8% from 2020-2030, it will serve as baseline growth for SCGB HD power cables and wires sales. Besides, with JENDELA aiming to expand the 4G mobile broadband coverage from 91.8% to 96.9% by 2022 through building new towers and upgrading existing towers as well as the 5G rollout, SCGBHD’s prospects remain positive.

Leveraging into the group capabilities in manufacturing variety of cables and wire, SCGBHD had ventured into solar PV cables in FY20 that was used for solar PV system (certified by TÜV SÜD Product Service GmbH). We view this development positively as Malaysia is set to achieve 31% RE capacity mix by 2025, with solar PV as the key growth segment.

After correcting 20% from 52-week high of RM0.60 to RM0.48 yesterday, SCGBHD is poised for a downtrend reversal breakout in anticipation of a U-shaped rebound. A successful breakout above its neckline (RM0.50) will spur the prices toward RM0.53- 0.55-0.57 territory. Cut lost at RM0.445.

Source: Hong Leong Investment Bank Research - 1 Oct 2021