Southern Cable targets automotive and elevator industries

by HARIZAH KAMEL / graphic by MZUKRI

SOUTHERN Cable Group Bhd unveiled plans to enter the automotive and elevator segments by the second half of 2021 (2H21), following its debut on Bursa Malaysia Securities Bhd’s ACE Market last Friday.

The group intends to set foot in the two segments through the introduction of new products, including power and control cables, and wires for automotive and elevator applications, which will be developed and commercialised in 2H21.

Its MD Tung Eng Hai said the company foresees increasing demand for automotive and elevator cables in the future.

“As a cables and wires provider with key supporting activities such as furnace and continuous casting, and manufacturing of plastic compounding, we can quickly adapt to market changes and develop new products to extend our reach,” he said in a virtual press conference after the listing ceremony last Friday.

Tung said the company’s new factories will also allow Southern Cables to expand its annual production capacity and effectively increase its market share in the local cables and wires manufacturing segment.

With the new plants (namely Lot 38 and Lot 39), the group expects a total production capacity of 6,350km of cables and wires.

“For Lot 38, we can increase our capacity around 5,000km, and for Lot 39, we can expand our capacity by about 1,350km of cables and wires.

“These initiatives will allow us to address growing market opportunities in Malaysia and countries where we have already made inroads, underpinning our hope to continue our growth story,” he added.

About 76.1% of the company’s revenue for the financial year ended Dec 31, 2019 (FY19), was contributed by the sales of power cables, while revenue from its wires business was 5.4% of the total revenue.

The sale of control and instrumentation cables and wires made up 9.4% of revenue, while the remaining 9.1% was from related products and services.

From FY16 to FY19, the group recorded a three-year revenue compound annual growth rate (CAGR) of 11.7% from RM470.7 million to RM656.7 million.

Its net profit reported a CAGR of 26.4% from RM14.2 million to RM28.5 million in the same period.

Group GM Ooi In Keong said the company did not face any disruption from the government’s restrictions on movement to contain the spread of Covid-19 and is looking forward to enhancing its capabilities to maintain its growth.

“Our factories in Kedah did not face any disruption as we adhered to all the standard operating procedures guided by the Health Ministry. Our factories are in full operation and we are not facing any supply chain issue.

“We are also considering tendering for new contracts to strengthen our orderbooks,” he said.

The company’s orderbook stood at RM405.4 million as at Sept 1, 2020, which included contracts secured from the essential services sector such as Tenaga Nasional Bhd and Telekom Malaysia Bhd, which will help sustain its earnings until FY22.

Southern Cable will adopt a dividend policy to distribute at least 15% of its annual audited net profit as dividends, subject to business performance and recommendation of the board.

The company raised RM71.2 million from its listing. The group allocated RM30 million for capital expenditure and expansion.

Of the amount, RM18.5 million will be used to purchase and upgrade machinery and equipment, RM7.5 million will be used to construct new factories and RM4 million to fund the purchase and installation of enterprise resource planning information technology system.

An additional RM27.5 million will be set aside as working capital and RM9.2 million will be utilised for repayment of bank borrowings.

Southern Cable closed marginally lower at 33 sen from its offer price of 34 sen on its debut last Friday after trading in a range of 33 sen to 38.5 sen in intraday trade.