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Strong contract flow in the pipeline for Sarawak Cable

Posted on June 14, 2013, Friday

KUCHING: Sarawak Cable Bhd’s (Sarawak Cable) has a bright future outlook as it stands to potentially win contracts for activities in the Sarawak Corridor of Renewable Energy (SCORE) as well as the state’s Rural Electrification Scheme (RES) moving forward.

Its wholly-owned subsidiary, Trenergy Infrastructure, has received a letter of acceptance from Sarawak Energy Bhd (SEB) for the Tudan-Miri airport 132 kilovolt (kV) transmission line project worth RM32.9 million.

The project, to commence on June 17, 2013 and be complete within 15 months (September 16, 2014), is the first transmission job the company has clinched since the conclusion of the 13th General Election.

“We expect more jobs to flow through by year-end, including the Tanjung Manis-Bintulu and Mambong-Kalimantan lines worth about RM350 million,” said AmResearch Sdn Bhd (AmResearch) in a stock update note yesterday.

“More notably, we believe that Sarawak Cable will most likely secure the 500kV backbone transmission line (transmission package worth about RM1 billion), which is expected to be awarded by year-end.

“There is urgency for the 500kV line to be awarded soon due to the needs of power intensive industries in SCORE,” it said.

It added that the company, with a market capitalisation of some RM300 million, is expected to benefit from the acceleration of state government’s RES to meet state’s original target of 95 per cent by year-end (currently at about 60 per cent).

AmResearch expects the company to secure 80 per cent of the total RM400 million worth of jobs to be tendered out this year as it is the dominant supplier of fabricated poles and cables in Sarawak.

It pointed out that as at end-May, Sarawak Cable had an order book of RM687 million with an outstanding amount of RM202 million.

The research house revealed a ‘conservative’ order book assumption of RM1 billion for financial year 2013 (FY13) – including the 500kV line – to be progressively recognised in FY13 to FY15.

As the only integrated power cable and transmission line player in the state (and region), Sarawak Cable is still trading at alluring forward core fully diluted price earnings of seven to 11 times on FY14 and FY15 earnings per share.

This was also against solid financial fundamentals (with FY13 net gearing of 7.8 per cent) and a return on equity of 18 to 24 per cent, it said as it revealed fair value of RM2.50 per share for the stock, based on a sum of parts derivation.

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