Sarawak Cable eyes more jobs in Peninsular Malaysia

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KUCHING: Sarawak Cable Bhd (Sarawak Cable) is eyeing more contracts in Peninsular Malaysia that provides better profit margins post-acquisition of Universal Cable (M) Bhd (Universal Cable) and Leader Cable Industry Bhd (Leader Cable).

Following a company visit, AmResearch Sdn Bhd (AmResearch) said the company expects the acquisition of Universal Cable and Leader Cable to be earnings accretive.

The research firm observed that Sarawak Cable’s acquisition of both firms came with a profit before tax (PBT) guarantee of RM21 million for financial year 2014 (FY14) and the acquisition is expected to be completed in December.

AmResearch added Sarawak Cable plans to improve the margins of the two cable manufacturers after the acquisition by leveraging on economies of scale and improving efficiencies.

Additionally, the research firm said the power cable manufacturer will streamline the businesses of the two firms by focusing on producing medium voltage and high voltage cables, which provides higher profit margins.

As a move to capture more sales and manage its cost, AmResearch said Sarawak Cable intends to move the capacity of the two firms which is located at the Nilai plant in Negeri Sembilan to Sabah to capture the demand there.

It noted that at present, all cable manufactured by the two firms are transported to Sabah from West Malaysia.

Meanwhile, AmResearch observed Sarawak Cable’s move to consolidate the operations in Peninsular Malaysia with a combined market share of about 50 per cent will also enable the company to be in a better position to secure more power transmission jobs there.

Furthermore, the research firm noted national power utility services provider Tenaga Nasional Bhd (TNB) has announced last week that it will spend RM23.3 billion over the next three years (2014 to 2017) or more than RM7 billion per year to improve the national power transmission lines.

Hence, AmResearch expects the enlarged Sarawak Cable group to secure a significant portion of the jobs to be awarded by TNB in the future given its size and capacity.

Apart from that, the research firm believed Sarawak Cable is also in contention for other prospective jobs which include transmission lines at the Refinery and Petrochemical Integrated Development (RAPID) project in Pengerang, Johor and the cable tunneling system for the RM9 billion Light Rapid Transit 3 (LRT 3) project.

Furthermore, AmResearch projected new orderbook expectation of RM200 million for Sarawak Cable for FY15 and FY16.

In the meantime, while the research firm forecasts a steady financial performance for Sarawak Cable in FY14, it expects the power cables manufacturer’s earnings to improve significantly in FY15 and FY16 supported by contribution from the 500 kilovolt (kV) jobs and the local portion of the 2×300 megawatt (MW) Balingian coal-fired power plant contract worth RM493 million.

Therefore, AmResearch is upbeat on the company’s prospects and believed that Sarawak Cable’s future earnings will improve supported by jobs in hand and efforts the enhance its orderbook with more contracts.