Sarawak Cable Bhd
(Sept 3, RM1.32)
Maintain buy: Sarawak Cable Bhd announced that it has secured a 275-kilovolt (kV) transmission job at Samalaju worth RM19.1 million. 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 financial year 2015 to 2017 forecast (FY15F to FY17F) earnings. 

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

Year to date, it has secured RM46 million worth of new jobs. This is within our new order book assumption of RM260 million for the year (FY14: RM765 million). Its tender book remains healthy at  RM1.4 billion. 

Prospective jobs include: (i) packages for Tenaga Nasional Bhd’s (TNB) 500kV lines in Peninsular Malaysia; (ii) underground cables for 132kV in Petra Jaya, Kuching; (iii) supply of underground cables in 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. 

Current jobs at hand — 500kV backbone line (RM620 million), Balingian (RM493 million), and Pengerang (RM257 million) — will continue to sustain earnings. Notably, contribution from the completion of its 500kV job should flow through stronger in the second half. 

Valuations are undemanding at 7 times price-earnings ratio (PER) currently. Maintain “buy” and our fair value of RM1.70 per share is pegged to 10 times FY15F PER. — AmResearch, Sept 3

This article first appeared in digitaledge Daily, on September 4, 2015.