Southern Cable in line to win MRT3 deals: Apex Securities
In a recent report, Apex Securities Bhd estimated that, assuming a cable supply package valued at RM600 million, with 60% market share and a blended gross profit margin of 15%, Southern Cable could generate RM54 million in gross profit from MRT3—equivalent to 25% of the research firm's FY25 forecast.
'This would provide a meaningful uplift to earnings visibility over the medium term,' Apex said.
The MRT3 project has received final approval from the Transport Ministry, enabling the land acquisition process to begin. The project is targeted for completion by end-2026.
The MRT3 Circle Line will span 51km, comprising 31 stations. Construction is scheduled to begin in 2027, with full operations expected by 2032.
In rail infrastructure projects, cable supply contracts are usually split across several key work packages including power supply systems, signalling and control systems, track works, and station components.
As a reference point, MRT2, which spans 52.2km with 36 stations, has a total project cost of RM56.9 billion. Cable supply contracts for MRT2 were estimated at around RM550 million, according to market sources.
'Given the comparable scale of MRT3, we estimate the cable supply package to be valued at RM600 million,' Apex added.
In light of MRT3 and other infrastructure rollouts such as the Penang LRT, Apex Securities has revised its earnings forecasts upward by 9.5% for FY26 and 18.5% for FY27.
The research firm noted that cable orders for large infrastructure projects are typically distributed across multiple packages and subcontractors.
This results in staggered purchase orders, rather than a single lump-sum entry in Southern Cable's order book.
'We raise our price-earnings (PE) multiple from 15x to 17x to reflect Southern Cable's improving earnings visibility and robust growth outlook.
'Valuation remains attractive, with a price/earnings-to-growth (PEG) ratio of 0.4x, based on our projected EPS compound annual growth rate (CAGR) of 33.9% for FY24–27.
'Our revised target price of RM2.14, up from RM1.72, is based on a 17x FY26 EPS of 12.6 sen, and supported by a three-star ESG rating.
'We maintain a 'Buy' call on Southern Cable. We remain positive on the company, given its position as a proxy for Malaysia's rising power demand, growing need for high-voltage power cables, and export exposure to the US market,' Apex Securities concluded.
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