Southern Cable Group Berhad (SCGBHD): Assessing Value at RM2.04 Amid Market Volatility

Southern Cable Group Berhad (SCGBHD) has emerged as a focal point for investors seeking value in Malaysia’s capital goods sector. As of August 2025, the stock trades at RM2.04, a price point that warrants scrutiny through both fundamental and technical lenses. This analysis evaluates whether SCGBHD’s current valuation, coupled with its market positioning, justifies a long-term investment case amid sector volatility.

Fundamental Analysis: A Discount to Future Earnings

SCGBHD’s trailing price-to-earnings (P/E) ratio of 21.98 [1] appears elevated compared to the telecommunications sector’s average of 20.5 [2]. However, its forward P/E of 19.80 [1] suggests that the market anticipates stronger future earnings, aligning with the company’s 14.78% year-over-year earnings growth [3]. This forward-looking metric positions SCGBHD as a potential undervaluation opportunity, particularly given its 20.4% return on equity (ROE) [1], which far exceeds the sector’s 7.75% [4].

The company’s price-to-book (P/B) ratio of 2.76 [1] also stands out. While higher than the sector’s 1.62 [4], this premium reflects investor confidence in SCGBHD’s intangible assets and growth prospects. Leverage metrics, though less transparent, indicate moderate risk. A debt-to-equity ratio of 0.59 [5] (for a recent period) contrasts with the sector’s 1.27 [2], suggesting SCGBHD’s capital structure is more conservative. Analysts have also highlighted the company’s 7.5% profit margin and 33% Q2 revenue growth [6], reinforcing its financial resilience.

Technical Analysis: A Bullish Confluence of Signals

Technical indicators paint a compelling case for entry. The 14-day RSI of 61.924 [1] resides in the “buy” territory, while the 5-day, 50-day, and 200-day moving averages (2.028, 1.967, and 1.838, respectively) confirm an uptrend [1]. The MACD of 0.01740 [7] further signals short-term momentum outpacing long-term trends.

Support and resistance levels add clarity to entry timing. Immediate support is at RM1.75 [8], with a break below this level signaling a potential correction. Conversely, the stock has already surpassed RM1.85 [8], with RM1.95 and RM2.05 as next hurdles. These levels align with analyst target prices of RM2.14–RM2.17 [6], driven by ECRL and MRT3 project contracts. Bollinger Bands analysis reinforces bullish momentum, with the price trading above the 20-day moving average [9].

Addressing Price Discrepancies: RM2.04 as a Strategic Entry Point

The RM2.04 valuation appears to resolve earlier discrepancies with RM1.24 references, which likely stem from outdated or alternative scenarios. Recent analyst upgrades, including Hong Leong Investment Bank’s RM2.17 target [6], underscore confidence in SCGBHD’s execution of RM600 million in cable supply contracts [10]. This aligns with the company’s Q2 results, which showed robust revenue growth and a 14.78% EPS increase [3].

Investment Thesis: A Value-Driven Case for Long-Term Exposure

SCGBHD’s fundamentals and technicals converge to form a compelling investment narrative. Its ROE of 20.4% [1] and forward P/E of 19.80 [1] suggest undervaluation relative to earnings potential, while its moderate leverage and sector-leading profitability mitigate downside risk. Technically, the stock’s alignment with key resistance levels and analyst targets creates a favorable risk-reward profile.

For long-term investors, the current price of RM2.04 offers a strategic entry point, particularly for those willing to hold through short-term volatility. The company’s involvement in high-margin infrastructure projects (e.g., ECRL, MRT3) provides a durable earnings catalyst, supported by a bullish technical setup.

Conclusion

Southern Cable Group Berhad’s valuation at RM2.04 reflects a balance of strong fundamentals and favorable technical momentum. While market volatility remains a factor, the company’s financial health, sector positioning, and analyst optimism create a robust case for long-term investment. Investors should monitor key resistance levels and earnings reports to time entries, leveraging the stock’s current alignment with both value and momentum strategies.

Source:
[1] Southern Cable Group Berhad Financial Metrics, Q2 2025 [https://finance.yahoo.com/quote/0225.KL/]
[2] Telecommunications Sector Averages, Q2 2025 [https://csimarket.com/Industry/industry_valuation_ttm.php?ind=905]
[3] Southern Cable Group Berhad Earnings Growth [https://www.marketscreener.com/quote/stock/SOUTHERN-CABLE-GROUP-119080220/finances/]
[4] Telecommunications Sector ROE and P/B Ratios [https://csimarket.com/Industry/industry_ManagementEffectiveness.php?ind=905]
[5] Southern Cable Group Berhad Debt-to-Equity Ratio [https://stockanalysis.com/quote/klse/SCGBHD/financials/ratios/]
[6] Analyst Target Price Upgrades for SCGBHD [https://www.klsescreener.com/v2/news/view/1579411/hlib-lifts-southern-cable-target-price-to-rm2-17-on-stronger-outlook]
[7] SCGBHD MACD and Momentum Indicators [https://charts.thestar.com.my/?mode=normal&s=SCGBHD]
[8] SCGBHD Support/Resistance Levels [https://www.tradingview.com/symbols/MYX-SCGBHD/]
[9] Bollinger Bands and Volatility Analysis [https://highstrike.com/bollinger-bands-strategy/]
[10] MRT3 Project Contract Details [https://klse.i3investor.com/web/blog/detail/Chloe_Tai_Blog/2025-08-10-story-h499688632-Southern_Cable_Group_Berhad_SCHBHD_Part_2_MRT3_s_RM600_Million_Cable_Sup]