S’wak Cable to see high profits with SCORE projects

Posted on August 19, 2011, Friday

KUCHING: Sarawak Cable Bhd’s (Sarawak Cable) plans to forge strategic tie-ups with leading international power specialists will boost its chances of securing more transmission line projects under Sarawak Corridor of Renewable Energy (SCORE).
The group had recently announced on Bursa Malaysia that it had inked a memorandum of understanding (MoU) with Sinohydro Corp (M) Sdn Bhd (Sinohydro) and KEC International (KEC) to jointly prepare proposals for power transmission projects in Malaysia.
“With all this happening, we believe Sarawak Cable’s smart partnership with its strategic foreign partners would solidify its rapid progression as an integrated power solutions provider ahead of Sarawak Energy Bhd’s (SEB) aggressive power footprint,” said AmResearch Sdn Bhd (AmResearch) analyst Mak Hoy Ken in a research note yesterday.
Furthermore, the research firm pointed out that Sarawak Cable was also keen to tap into SEB’s booming power export potential within the neighbouring Asean block including Indonesia, Brunei and Sabah.
Part of Indian conglomerate’s RPG Group, KEC is one of the largest integrated power transmission EPC outfits in the world, having successfully executed transmission-related projects in over 40 countries. The group has a market capitalisation of US$386 million (approximately RM1.2 million).
More than just an EPC specialist, KEC is also the second largest-maker of transmission towers in the world, with capacity of 310,000 tonnes. Under its expansion programme, KEC acquired SAE Towers in September 2010 with an annual capacity of approximately 100,000 tonnes.
As testament to its proven capabilities, the group had the experience of designing multi circuit, river crossing towers weighing more than 250 metric tonnes with the height of more than 150 metres per tower.
“Rounding up its impressive resume is KEC’s status as among the top three power cables manufacturer in India, following a merger with RPG Cables back in March 2010,” Mak pointed out.
Sinohydro, on the other hand, is an engineering behemoth group that possesses a wide range of expertise, including for the power sector. It is ranked number six in China in terms of turnover, with total sales of over US$14 billion in 2010.
In 2010, overseas projects accounted for 27 per cent or approximately US$4 billion of group revenue. Out of this, energy and water-related sectors made up 43 per cent.
On another note, Sinohydro had been increasing its focus on exploring more energy-related projects. To date, the group had successfully installed 20,000 megawatts (MW) of power plants, including the Yangtze Three Gorges, Jingping Hydropower station, Sudan Merowe Hydropower project and Malaysia’s own 2,400MW Bakun Hydroelectric dam project in Sarawak.
In the areas of transmission lines, Sinohydro was awarded the 275kv double circuits and four bundle conductor overhead transmission line project (Package A and B) by SEB. Package B was through a joint venture with Naim Holdings Bhd.
“Interestingly, Trenergy Infrastructure – in which Sarawak Cable had proposed to acquire a 65 per cent stake – is the main sub-contractor for Sinohydro for both packages. On the flip side, Sarawak Cable, through wholly-owned unit Universal Cable Sarawak, won the contract to supply power cables for this project,” said Mak.
“Leveraging on its partners’ international pedigree and track records, such a move would also help minimise execution risk for Sarawak Cable, particularly for larger scale transmission projects of up to 500kV,” the analyst added.
AmResearch pegged Sarawak Cable’s fair value at RM2.86 per share based on the sum-of-parts method by implying a target price earnings of 9.6 times on financial year 2012 forecast earnings per share.