Southern Cable: Powering Growth with New Contract Wins

Southern Cable Group Berhad continues to strengthen its market position with a new RM172.6m long-term contract from East Malaysia, raising its total orders to RM871.8m. The company’s strategic diversification, robust order replenishment, and expansion into high-voltage (HV) markets position it as a key player in Malaysia’s growing power demand. This analysis delves into SCG’s recent achievements, financial outlook, and valuation, underscoring its growth potential despite industry challenges.

Southern Cable: Summary of Segments

New Long-Term Contract

• Secured a RM172.6m contract from East Malaysia to supply cables and conductors until December 2026.

• Boosted total orders in hand to RM871.8m, equivalent to 0.8x FY23 revenue.

Apex Research on the group

• Estimated annual gross profit (GP) of ~RM8m from the contract, contributing 5% of the Group’s forecasted GP.

• East Malaysia now contributes ~10% of revenue, diversifying SCG’s risk from TNB’s 80% share in West Malaysia.

Outlook

East Malaysia’s contribution is expected to grow due to SCG’s strong market position and increasing infrastructure demands.

Anticipated boost from TNB contract renewals and expanding opportunities in the HV cables market, with an addressable market of RM80bn.

Expected approvals for SCG’s 1,600sqm HV Milliken cable by 3QCY25, enhancing margins via a better product mix and increased US exports.

Earnings Revision

FY25F/FY26F earnings projections raised by 7.3%/6.2%, reflecting stronger replenishment orders of ~RM1.5bn from FY25 onwards.

Valuation & Recommendation

Target price revised to RM1.63 (from RM1.27) with an 18.0x P/E ratio pegged to FY26F EPS of 9.1 sen.

BUY recommendation maintained, supported by SCG’s position in Malaysia’s power demand growth, HV market expansion, and US export supply.

Risks

• Heavy reliance on the power industry.

• Potential escalation in plastic resin prices.

• Intense market competition.

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