Sarawak Cable

Sarawak Cable

Postby winston » Thu Oct 23, 2014 12:39 pm

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AmResearch upgrades Sarawak Cable to Buy

KUALA LUMPUR: AmResearch has upgraded Sarawak Cable Bhd (SCable) to Buy from Hold with a higher SOP-based fair value of RM1.70/share, which implies a PE of nine times FY15F EPS.

In a note on Thursday, the research house said it has computed SCable’s proposed acquisitions of 100% stakes in Universal Cable (M) Bhd (UCMB) and Leader Cable Industry Bhd (LCIB), as well as contributions from the Balingian job into its model.

"These resulted in earnings accretion of 51% each for FY15F and FY16F," it said.

It added that SCable announced that it had entered into an SPA for the acquisitions of the two companies from HNG Capital Sdn Bhd for RM210mil.
It will be satisfied via cash of RM110.3mil (including RM2.1mil in deposit paid earlier), assumption of liabilities amounting to RM49.6mil, as well as issuance of 37.6mil new shares worth RM50.1mil (at RM1.33/share).

"We view the acquisitions positively as it will fortify the group as a leading integrated power cable supplier in Malaysia with an estimated 50% market share.

"Recall that HNG Capital will guarantee a total PBT of RM21mil at the companies for FY14F ending Dec. As such, we deem the acquisitions to be fair at 13x PE (assuming a tax rate of 25%).

Also, SCable is acquiring the two companies at a 33.5% discount to the aggregated net assets of RM316mil as at end-Dec 2013," it said.

While the companies’ PBT margins are low at 0.5%-2%, management plans to improve it via cost improvement strategies.

"We also understand that the two companies have an outstanding order book of RM698mil (with RM200mil for the existing LRT job) that would last two years," it said.

Looking ahead, Scable is in good position to secure more jobs due to TNB’s cable replacement plans, as well as the cable supply for the upcoming RM9bil Bandar Utama-Klang LRT 3 project and Rapid.

Notably, UCMB is the sole manufacturer of 275kV cables in Malaysia, which will cater to growing domestic demand.

Source: the Star
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Re: Sarawak Cable

Postby winston » Tue Nov 04, 2014 7:40 pm

AmResearch maintains Buy on Sarawak Cable

KUALA LUMPUR: AmResearch has maintained its Buy call on Sarawak Cable with an unchanged fair value of RM1.70 a share, pegged on a price per earnings of nine times FY15F EPS.

"We hosted a company visit with clients and came away upbeat on the group’s prospects.

Management affirmed our view that the proposed acquisitions of 100% stakes in Universal Cable (M) Bhd (UCMB) and Leader Cable Industry Bhd (LCIB) are earnings-accretive.

Our stance is premised on management’s plans to improve margins of the two cable manufacturers post-acquisition by leveraging on economies of scale and improving efficiencies," AmResearch said on Tuesday.

The research house said the group intends to move its capacity at the Nilai plant to Sabah in order to capture the demand there.

Currently, all cables are transported to Sabah from West Malaysia. The consolidation of operations in Peninsular Malaysia (with a combined ~50% market share) will also put the group in a better footing to secure more transmission jobs.

Last week, Tenaga Nasional Bhd announced that it will spend RM23.3bil (or RM6bil p.a.) over 2014-2017 to improve the national grid.

"We expect the enlarged SCable group to secure a significant portion of the jobs given its capacity. Other prospective jobs include transmission lines in RAPID, Pengerang as well as the cable tunneling system for the RM9bil LRT 3 project.

"While management has put in place a strategy to improve margins, we have conservatively imputed a blended PBT margin of 3% for the cable division. We have also conservatively imputed a new order book replenishment of RM200mil for FY15F-16F," it said.

Further upside stems from better-than-expected margin improvement and higher job wins. While earnings growth is expected to be muted this year, it expects contributions from the 500kV job as well as the RM943mil Balingian job to come in strongly in FY15F-FY16F.

Source: The Star
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