Sunday, August 28, 2011

Proxy companies likely to profit from SCORE development

Posted on August 17, 2011, Wednesday
DEVELOPMENT DRIVERS: A key unifying theme projected by the four participating companies is that Sarawak is at the nascent stages of an infrastructure boom.
KUCHING: Four Sarawak based companies have been listed by a research house as ‘excellent proxies’ to the deep development potential of the Sarwak Corridor of Renewable Energy (SCORE).
AmResearch Sdn Bhd (AmResearch) named Sarawak Cable Bhd (SCB), Hock Seng Lee Bhd (HSL), Naim Holdings Bhd (Naim) and Press Metal Bhd (Press Metal) as the four major players after an advisory conference.
AmResearch stated, “We came away from the conference feeling even more convinced about SCORE’s raw appeal as a future hub for renewable energy.
“This is largely underpinned by RM26 billion worth of largely private initiated investments to-date (SCORE was launched in 2008), the bulk of which comes from energy-intensive industries.”
A key unifying theme projected by the four participating companies was that Sarawak is at the nascent stages of an infrastructure boom.  As such, the research house highlighted several key power-related projects that could gain prominence in the months to come.
After Bakun and Murum, Sarawak Energy Bhd (SEB) was lining up at least five more hydro dams (including Baram and Baleh) and two coal-fired plants to meet its targeted 7,000 megawatt (MW) generation capacity by 2020.
The proposed 600MW coal-fired plant in Balingan worth US$600 million (RM1.8 billion) was in the advanced stages of implementation.
It was reported that SCB was part of a consortium that had been pre-qualified for the proposed 500KV ‘backbone’ line linking Bunut to Kuching.
The project, worth about RM2.5 billion, involved transmission works and sub-stations and could be dished out by year-end, ahead of its targeted completion by end-2014. Phase 1 was due to be completed by March 2014.
There could be more transmission opportunities through the export of Sarawak’s power resources under the Asean inter-transmission master plan.
AmResearch gathered that there could be over 100 new sub-stations that were to be developed to cater to Sarawak’s increasing power loads, where the larger ones could cost up to RM300 million each.
It was also reported that just last month, SCB had teamed up with energy solutions provider ABB Group Bhd to bid for the Samajaya sub-station.
With regards to the Rural Electrification Scheme (RES), Sarawak endeavoured to achieve its targeted 95 per cent electricity coverage by end-2012 and this might trigger more demand for SCB unit Sarwaja Timur Bhd’s steel poles.
Also, there was a growing probability that the proposed Samalaju port (worth about RM1.2 billion) would take off by year-end, whereby Bintulu Port Holdings could have a role, with several contractors including HSL also eyeing construction opportunities from it.
Along with over RM2 billion worth of mostly access roads to the SCORE energy sites, the development of more energy-intensive industrial zones (especially at Samalaju) should also prod fresh demand for fabrication/building contracts.

AmResearch believed SCB’s deepening progression as an integrated transmission line specialist puts the group in a favourable position to tap into SEB’s accelerating capex cycle.
AmResearch highlighted, “SCB is evidently bullish about its future job prospects emanating within SCORE – riding on SEB’s expanding power footprint.
“The group believes that its bargaining leverage would be enhanced by last week’s proposed buying up of Sarwaja Timur and the acquisition of a 65 per cent stake in Trenergy Infrastructure Sdn Bhd.”
SCB was reported to be pursuing over RM1 billion worth of new jobs against its current orderbook of about RM384 million.
AmResearch also stated that HSL was increasingly bullish about its orderbook prospects in the coming months. The group currently had over RM1.1 billion worth of current work orders that had yet to be billed.
Year-to-date, HSL had secured about RM108mil worth of new contracts. It remained confident of at least matching FY10’s total new contracts of RM532 million, implying the potential crystallisation of another RM400 million worth of new job orders by the end of the year.
It also gathered that HSL was in advanced negotiation stages of several projects and was also angling for the balance of the RM1.7 billion remainder of the Kuching City water management project.
“Having being previously involved in Phase 1 together with Nishimatsu along with ownership of five tunnel boring machines (TBMs) at the project site, we reckon that HSL has a bright chance of securing more works under this project,” it elaborated.
Meanwhile Naim was ‘cautiously optimistic’ of contract flows in Sarawak could pick up soon with the expected roll-out of basic infrastructure projects required to support the first batch of investments in SCORE by the third quarter (3Q) of 2012 onwards.
The research firm commented, “Going forward, Naim is selectively bidding for several new projects worth about RM 1billion. It is also eyeing a role in a RM1 billion Asia Pulp & Paper project in Bintulu – whereby a Chinese party could be appointed as its main contractor. Naim’s orderbook currently stands at RM2.7 billion.
“On the property front, Naim remains upbeat about prospects for Sarawak’s property market – where housing needs should grow in tandem with the rising proliferation of activities within SCORE. It is targeting a market share of up to 30 per cent from the estimated increase of 14,084 new average annual housing units in Sarawak between 2010 and 2015.”
“We understand that Naim’s pre-sales have improved to circa RM100 million for the first six months of 2011 – representing more than 50 per cent of the RM144 million achieved in financial year 2010,” Amresearch added.
Press Metal also benefitted as a prime mover in Sarawak, whereby its proposed Samalaju smelter was poised to triple the group’s aluminium capacity to 360,000 tonnes on the back of locked-in supply of long-term energy needs at attractive rates from SEB.
The group’s proposed Phase 2 plant was well in progress. Phase 2A was on track to be delivered by 3Q 2012, and Phase 2B by 2Q 2013.
Under Phase 2, the plant’s equipment and design was from China’s Chalco. It was designed to be more technologically superior and more efficient – thus allowing the group to enjoy more economies of scale compared with its existing operations under Phase 1 in Mukah.

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