Southern Cable likely frontrunner for next wave of data centre cable jobs
KUALA LUMPUR: Southern Cable Group Bhd is poised to clinch a major share of the next wave of power cable contracts linked to at least 10 electricity supply agreements (ESAs) for data centre projects, said an analyst.
This follows Tenaga Nasional Bhd's (TNB) recent announcement of five signed ESAs for data centres totalling 666 megawatts (MW) in the first quarter of this year, with another 10 contracts expected to be signed by year-end.
Apex Securities analyst Tan Sue Wen said the surge in demand for medium- and high-voltage (MV and HV) power cables is expected to benefit Southern Cable, which operates in a segment with limited competition.
"With its entrenched position in the MV and HV cable segments, and limited competition in this space, Southern Cable is well-positioned to capture a large portion of these upcoming infrastructure opportunities," she said in a note.
Besides its role in domestic infrastructure, Tan said Southern Cable is also seen as a beneficiary of United States-bound exports, being one of the few local cable suppliers with distribution access to the American market.
Apex Securities has raised its earnings forecast for Southern Cable by 21 per cent across financial years 2025 to 2027, citing robust margin expansion and resilient demand for power cables.
The group's power segment, which accounts for the bulk of its revenue, saw gross profit more than double year-on-year in the first quarter ended March 31, 2025, as demand for MV and HV cables surged.
These products made up over 30 per cent of the segment's revenue during the quarter, according to the research firm.
Excluding a one-off forex loss, core net profit rose 113.7 per cent to RM29.1 million in the quarter, accounting for 28 per cent of the full-year forecast, a performance it described as exceeding expectations.
"We expect stronger performance in the remaining quarters of the financial year. The outperformance was largely due to stronger-than-anticipated margins of power cables and wires in the power segment," it said.
Southern Cable has RM1.3 billion worth of orders in hand, about 90 per cent of which are for power cables, which Apex Securities believes provides solid earnings visibility for the rest of the year.
In line with the revised earnings outlook, the firm raised its target price for the group to RM1.72 from RM1.42 and reiterated a 'Buy' call, noting the stock's undemanding valuation at 12 times 2025 forecast earnings.
"Risks to the outlook include a spike in raw material prices such as copper and steel, and the potential failure to secure new contracts," it added.
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