Sarawak Cable wins RM493m Balingian job

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Sarawak Cable Bhd
(Oct 10, RM1.40)
Maintain hold with a target price of 1.60:
Sarawak Cable has clinched a RM493 million job to supply local content for the 2x300mw Balingian coal-fired plant. The group announced on Oct 9 that it had received the letter of award from Shanghai Electric Group Co Ltd, the main contractor for the plant’s power island engineering, procurement and construction works.

Nevertheless, the contract sum is provisional and subject to the final scope of work and bill of quantities for the required local content. The project will commence on Nov 28, and will take 40 months (until March 27, 2018) to complete.

We are positive about the award as it will contribute positively to the group’s earnings over forecast financial year 2015 (FY15F) to FY18F. We understand from management that the scope of works include the supply of cables and steel products required for the construction of the coal-fired plant as well as civil works.

Assuming an earnings before interest taxes depreciation and amortisation (Ebitda) margin of 8%, we see earnings accretion of 7% to 8% over FY15F/FY16F.

Meanwhile, Sarawak Cable has until Oct 13 to sign the agreement for the acquisition of 100% stakes in Universal Cable (M) Bhd and Leader Cable Industry Bhd for RM210 million from HNG Capital Sdn Bhd.

The acquisitions will fortify Sarawak Cable as the leading integrated power cable supplier in Malaysia.  — AmResearch, Oct 10



This article first appeared in The Edge Financial Daily, on October 13, 2014.