SCGBHD has proposed a private placement of up to 120.0m new shares, representing approximately 10% of its enlarged share capital under the full placement scenario. Based on an indicative issue price of RM2.16/share, the exercise is expected to raise gross proceeds of up to RM259.2m.
The proceeds will be utilised mainly for capacity expansion (50%), while the balance will go towards working capital to support higher raw material requirements (41%), repayment of borrowings (6%), land lease settlement (2%), and placement-related expenses (1%).
We are positive on the development, as the placement will further strengthen SCGBHD’s balance sheet and fund its multi-year capacity expansion programme aimed at raising cable and wire output by c.25% to 65,000 km/year and tripling aluminium rod production to 60,000 tonnes/year. Nevertheless, the enlarged share base will lead to an estimated 9.1% dilution to our FY26F EPS, translating to a fully diluted fair value of RM2.28/share.
Maintain BUY with an unchanged TP of RM2.50, based on 18x FY26F EPS of 13.9 sen and a three-star ESG rating.
Proposed Placement. SCGBHD has proposed a private placement of up to 120.0m new shares, representing 10% of its enlarged share capital under the maximum scenario, assuming full exercise of outstanding warrants. Under the minimum scenario, where none of the outstanding warrants are exercised, the placement would involve up to 101.0m new shares. The issue price will be determined later, at a discount of no more than 10% to the 5-day VWAP prior to price fixing. The placement is targeted to be completed by 2QCY26.
Based on an indicative issue price of RM2.16/share, the proposed placement is expected to raise up to RM259.2m under the maximum scenario. About 50% (RM129.0m) of the proceeds are earmarked for capital expenditure, mainly for the purchase of new machinery and equipment (RM83.0m), followed by the construction and renovation of factories and warehouses in Kuala Ketil (RM34.0m), and the acquisition and setup of a new warehouse (RM12.0m). Meanwhile, RM105.5m (41%) will be allocated to working capital, primarily for the procurement of raw materials such as copper, aluminium, and plastic compounds to support the Group’s capacity expansion. The remaining funds will be utilised for the repayment of bank borrowings (RM16.6m, 6%), the settlement of the balance land lease payment (RM5.1m, 2%) and estimated expenses in relation to the placement (RM3.0m, 1%)
Our Take. We are positive on the proposed private placement. While the exercise will strengthen SCGBHD’s balance sheet and enhance funding flexibility for upcoming expansion, it will also result in an estimated 9.1% dilution to our FY26F EPS under a fully diluted scenario, where the share base expands but incremental earnings from lower finance costs, interest income, and future capacity growth have yet to be reflected. Based on this maximally diluted EPS scenario, our fair value stands at RM2.28/share.
Placement Paves Way for Capacity-Led Growth. The placement underscores management’s confidence in SCGBHD’s long-term growth trajectory and commitment to scale production capacity by c.25% to 65,000 km per year, triple aluminium rod output to 60,000 tonnes per year, and capture rising demand from the power infrastructure, renewable energy, and data-centre sectors. We continue to reiterate that demand is no longer a limiting factor for the Group. Growth is now primarily constrained by production capacity. Against this backdrop, the current expansion via private placement is both strategically timely and largely anticipated.
Earnings revision. Maintained pending the determination of issue price and the completion of the exercise.
Valuation & Recommendation. We maintain our BUY rating with an unchanged TP of RM2.50, based on 18x FY26F EPS of 13.9 sen and a three-star ESG rating. We remain positive on SCGBHD for its (i) role as a proxy for Malaysia’s growing power demand,(ii) increasing demand for HV power cables, and (iii) position as one of the few vendors supplying US distributors.
Risks. (i) Change in government policies, (ii) inability to secure new contracts, (iii) spike in raw material costs such as copper and steel, (iv) delay in capacity expansions.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.212894 | 4.246402 |
| EUR | 4.925348 | 4.934954 |
| CNY | 0.592662 | 0.593823 |
| HKD | 0.542079 | 0.546393 |
| SGD | 3.250847 | 3.276896 |