PETALING JAYA: Southern Cable Group Bhd
’s proposed private placement is poised to strengthen its market position as it gears up for a multi-year expansion to capture growing demand from domestic and overseas markets.
The cable and wire manufacturer had announced plans to raise between RM218mil and RM259mil through the placement of up to 10% of its issued shares at an indicative price of RM2.16 per share.
The proceeds will primarily fund capital expenditure (capex) and expansion, including two new production lines for medium to extra high-voltage cables, a high-capacity aluminium furnace, and new facilities in Kuala Ketil, Kedah.
Hong Leong Investment Bank (HLIB) Research noted that Southern Cable had intended to fund the capex internally but opted for equity raising.
“We understand that management had initially planned to fund the capex fully via internal fund.
“However, the group has opted to pursue equity raising following two considerations: higher capex needs arising from a more ambitious expansion plan and strong order flows from Tenaga Nasional Bhd (TNB), which necessitate preserving internal funds for working capital,” the research house said.
HLIB Research pointed out that the capex scope has been expanded to include two continuous catenary vulcanisation (CCV) lines at the new plant, alongside the construction of an additional warehouse.
The increase in CCV lines, it said, is meant to “meet strong demand for high-voltage cables from TNB and data centres, while also supporting the group’s entry into the extra-high voltage segment – a niche currently without a domestic producer.”
The research house also highlighted that the continued strong orders from TNB and the private sector require sizeable working capital for raw material purchases, reinforcing management’s decision to retain internal funds for operations.
HLIB Research maintained its “buy” call on Southern Cable with an unchanged target price of RM2.65, based on 22 times 2026 fully diluted earnings per share.
“We like Southern Cable for its leading position in the power cable business in Malaysia. The growing power demand and the dropout of a major competitor bodes well for the group to capture more market share,” it said.
