AmResearch maintains Buy call on Sarawak Cable

The Star Online – Wednesday, 1 July 2015

KUALA LUMPUR: AmResearch has maintained its Buy call on Sarawak Cable Bhd (SCable) with an unchanged fair value of RM1.70 a share – pegged to nine times FY15F PE.

Moving forward, management’s strategy is to focus on securing jobs with better margins, instead of order book growth, AmResearch said in a note on Wednesday. With a tender book of RM1bil currently, the group is targeting to secure RM300mil worth of jobs this year.

While this is lower than new order wins for the previous years (FY13: RM652mil, FY14: RM765mil), it intends to bid aggressively for those with better margins in order to improve profitability. To this end, SCable will leverage on its expanded capacity and product mix following the acquisitions of Leader Cable and Universal Cable last year.

“We understand that there may be some requirements for these cable at Pengerang,” it said.

The group is also aiming to increase cable exports to 30%-40% of total production this year (from 20% currently) in order to capitalise on the stronger USD. SCable is also banking on its bumi status to bid for TNB jobs.

“We understand tenders for the cable supply to distribution lines had been delayed from 1QFY15 to 3QFY15,” it noted.

“Outstanding order book was at RM1.8bil as at end-April. We maintain our numbers as we have factored in improved margins in our model with an order book assumption of RM260mil for FY15F.

“Further upside stems from better-than-expected margin improvement.  Risks include further delay in earnings recognition and less-than-expected margin delivery,” it said.

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