Southern Cable Group Berhad - MRT3 Sparking the Next Growth Phase
Mon, 21-Jul-2025 07:50 am
by Tan Sue Wen • Apex Research

Counter

SCGBHD (0225)

Target Price (RM)

2.14

Recommendation

Buy

Final approval secured. MRT3 has received final approval from the transport ministry, allowing the land acquisition process to commence, which is targeted for completion by end-2026. The MRT3 Circle Line will cover a 51km rail alignment with a total of 31 stations. Construction is expected to begin in 2027, with the entire line anticipated to be fully operational by 2032.

 

Estimated RM600m of cable required. For rail infrastructure projects, cable supply contracts are typically spread across several main work packages, including Power Supply System, Signalling & Control Systems, Track-Related Work, and Station-Related Work. As a reference, MRT2 spanned 52.2km and included 36 stations, with a total project cost of RM56.9bn and cable supply contracts estimated at c.RM550m based on channel checks. Given that MRT3 is comparable in length to MRT2, we estimate its cable supply package to be valued at c.RM600m.

 

Our View. SCGBHD is well-positioned to capture a significant portion of the MRT3 cable supply package, leveraging its strong MRT2 track record, comprehensive product offerings, and market leadership. Assuming cable supply package value of RM600m, a 60% market share, and a blended GP margin of 15%, MRT3 could contribute RM54m in gross profit, or 25% of our FY25F forecast. This would provide a meaningful uplift to earnings visibility over the medium term.

 

More critically, we highlight that growth is now constrained by capacity, not demand. With surging demand driven by national infrastructure projects, data centre investments, and energy transition initiatives, capacity expansion is emerging as the key bottleneck. We believe there may be further upside to SCGBHD’s current capacity expansion plan, which targets production capacity growth of 20% to c.60,000 km/year within next two years. A more aggressive capex rollout could position the Group to capture even larger volumes, implying further upside to our earnings forecasts.

 

Earnings forecasts. Given the expected rollout of MRT3 and other mega infrastructure projects such as Penang LRT, we have revised our earnings forecasts upward by 9.5% and 18.5% for FY26F and FY27F respectively. Note that cable orders for large infrastructure projects involve multiple packages distributed through several layers of subcontractors, resulting in a staggered purchase orders rather than a lump sum in SCGBHD’s order book. 

 

Valuation & Recommendation. We raise our PE multiple from 15x to 17x to reflect SCGBHD’s improving earnings visibility and robust growth outlook. Valuation remains undemanding, with a PEG ratio of 0.4x, based on our projected EPS CAGR of 33.9% for FY24-FY27F. Our new TP of RM2.14 (from RM1.72) is based on 17x FY26F EPS of 12.6 sen and a three-star ESG rating. Maintain BUY. We are positive on SCGBHD, supported by (i) its role as a proxy for Malaysia’s growing power demand,(ii) increasing demand for HV power cables, and (iii) export exposure to the US market.

 

Risks. Dependency on government initiatives. Inability to secure new contracts. Spike in raw material costs such as copper and steel.

Read more details in:

Disclaimer

The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior written consent of Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report.

Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.

Apex Securities Berhad does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against Apex Securities Berhad. Apex Securities Berhad may from time to time have an interest in the company mentioned by this report. This report may not be reproduced, copied or circulated without the prior written approval of Apex Securities Berhad.

Market Mover
Settlement Rates
Currency Buy Rates (RM) Sell Rates (RM)
USD 4.218775 4.252219
EUR 4.939520 4.944581
CNY 0.589464 0.590042
HKD 0.537504 0.541263
SGD 3.286293 3.309519