Sarawak Cable
Posted: Thu Oct 23, 2014 12:39 pm
not vested
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
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