KUCHING: Sarawak Cable Bhd (Sarawak Cable) announced that it has been awarded a 500kV and 275kV double circuit transmission line contract from the boarders of Pahang to Selangor and analysts see little risks from these jobs as they are within SCable’s normal business scope.
The research arm of Hong Leong Investment Bank Bhd (HLIB Research) did not see any unique risks with this job as transmission line contracts are within Sarawak Cable’s normal business scope.
To note, this contract is Sarawak Cable’s first job win announcement for the year. The research team estimated that Sarawak Cable’s construction orderbook now stands at RM681 million, down from RM929 million at the beginning of the year.
“This implies a thinning cover ratio of 1.2-folds on the financial year 2015 (FY15) construction revenue.
“The declining orderbook balance was due to high burn rate on its Balingan coal fired plant job coupled with lower than expected job wins,” it commented.
Meanwhile, the research team noted Sarawak Cable could benefit from the revival of the Baleh Dam project.
It pointed out that last month, Sarawak Energy Bhd (SEB) had received the approval from the State Government to proceed with the construction of the Baleh Dam (1,285MW).
“With this job kicking off, Sarawak Cable could be a potential beneficiary via the transmission line contracts.
“To recap, Sarawak Cable previously undertook the 500kV transmission line job from Mapai-Lachau-Todong in Sarawak. SEB is the second largest shareholder in SCable with a 16.5 per cent stake,” it added.
Overall, HLIB Research maintained a ‘hold’ call on the stock.
“While it is a beneficiary of Sarawak’s massive power generation expansion plan, we remain cautious over its short term outlook due to its high net gearing and strong US dollar (which is the flow through effect via copper
cost).”
It also retained its earnings estimate as the company’s year to date job wins is still within its FY16 orderbook replenishment assumption of RM250 million.