Southern Cable Group Berhad - TNB’1+1 contract renewal boost
Fri, 03-Jul-2026 07:47 am
by Research Team • Apex Research

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SCGBHD (0225)

Target Price (RM)

2.97

Recommendation

Buy

  • SCGBHD secured a supplementary RM403.6m contract from TNB on 2 July 2026, representing TNB’s exercise of the one-year extension option under the original February 2025 contract for the supply of underground power cables and conductors to TNB’s distribution network division from August 2026 to August 2027. 

  • Including the latest award, the Group’s total orders in hand have expanded to over RM1.0bn, providing earnings visibility through FY27. Total contracts secured from TNB now exceed RM900m since 2025.

  • Maintain BUY recommendation with TP of RM2.97, based on an unchanged 20x P/E applied to our FY27F EPS of 14.9sen.

 

Secures a RM403.6m supplementary supply contract from TNB. The contract was awarded to its wholly-owned Southern Cable Sdn Bhd. It covers underground power cables and conductors for TNB's Distribution Network Division, and reflects TNB exercising an add-on option under the original February 2025 contract, running an additional one-year term from August 2026 to August 2027. With this award, group orders in hand exceed RM1.0bn, and cumulative contracts from TNB total more than RM900m since 2025. 

 

Our View. We view this contract award positively, as it introduces an additional revenue stream over the next year while strengthening the Group’s order book. The award follows the RM121.1m variation order secured in February 2026, being the 30% add-on option under the same contract, bringing the cumulative value of the framework to c.RM928m (RM403.6m Original contract + RM121.1m variation + RM403.6m extension) and reaffirming SCGBHD’s standing as a key supplier to TNB’s Distribution Network Division. We view the extension as a continuation of resilient demand under TNB’s RP4 grid expansion and transmission upgrades, particularly for MV cables, alongside the data centre pull under the Green Lane pathway, which fast-tracks grid connections and brings cable procurement earlier in the project execution cycle. With orders in hand now above RM1.0bn, or c.0.53x FY26F revenue, earnings visibility through FY27 is well underpinned.

 

Earnings Revision. We make no changes to our FY26F and FY27F earnings forecast of RM163.1m and RM194.0m respectively. The extension falls within our existing orderbook replenishment assumptions, and given delivery only commences in August 2026, RM991.3m of FY26 orderbook wins will be phased c.6%/53%/41% across FY26F/FY27F/FY28F. This will step up our orderbook forecast materially into FY27F (c.RM947m) and FY28F (c.RM1,048m). The net earnings impact is neutral, with the award serving to de-risk rather than lift our existing forecasts.

 

Valuation & Recommendation. We maintain our BUY recommendation on SCGBHD with an unchanged TP of RM2.97, based on 20x P/E applied to FY27F EPS of 14.9sen, alongside a three-star ESG rating. We continue to like SCGBHD for its (i) strong earnings visibility backed by its more than RM1.0bn orderbook, (ii) direct exposure to Malaysia’s power infrastructure buildout and data centre-driven grid investment under RP4 and the NETR, and (iii) growing export presence, particularly within the US market. Ongoing capacity expansion, to 60,000 km by end-2026 and 65,000 km by end-2027 from 54,980 km currently, together with improving vertical integration, should further support the Group’s long-term growth trajectory and margin sustainability.

 

Risks. Volatile raw material prices (copper and aluminium), slower-than-expected orderbook replenishment, delivery timing subject to TNB’s call-back schedule, and weaker export demand may pose downside risks to earnings.

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