Southern Cable Group Berhad (SCGBHD): A High-Growth Earnings Story in Malaysia's Telecommunications Sector

In the dynamic landscape of Malaysia's telecommunications sector, Southern Cable Group Berhad (KLSE: SCGBHD) has emerged as a standout performer, blending robust earnings growth with compelling valuation metrics. As the country accelerates its 5G rollout and digital infrastructure expansion, SCGBHD's strategic positioning in the cable and wire manufacturing space has unlocked significant upside potential. This analysis explores why SCGBHD represents an undervalued high-growth opportunity in a recovering market.

A Sector on the Rise: Malaysia's Telecom Transformation

Malaysia's telecom sector is undergoing a renaissance, driven by government-led initiatives such as the National Fiberisation and Connectivity Plan (NFCP) and the MyDIGITAL program. These efforts aim to expand 5G coverage to 80% of urban areas by 2023 and 85% of rural regions by 2024, with 5G adoption expected to rise from 4.2% in 2023 to a projected 15% by 2025, according to a Mordor Intelligence report. That report also forecasts the sector's market size to grow at a compound annual rate of 4.07%, reaching USD 11.54 billion by 2030.

This transformation is not just about connectivity-it's about economic competitiveness. As industries like BFSI, healthcare, and retail digitize, demand for advanced infrastructure, including fiber-optic cables and 5G-enabled solutions, is surging. Telekom Malaysia and CelcomDigi are already investing heavily in 5G labs and digital services, creating a ripple effect for suppliers like SCGBHD, a trend highlighted in the same Mordor Intelligence analysis.

SCGBHD's Earnings Momentum: A Case Study in Execution

Southern Cable Group Berhad has capitalized on this tailwind with remarkable financial performance. In Q2 2025, the company reported a 119.3% year-over-year increase in net profit to RM31.6 million, driven by a 33% surge in group revenue to RM419.3 million, according to a Business Today article. Domestic revenue rose 23.1% to RM372.2 million, fueled by strong demand in power utilities and construction, while overseas revenue exploded by 261.8% to RM47.1 million-largely due to U.S. market expansion-details noted in that article.

For the full year 2024, SCGBHD delivered a 28% revenue increase to RM1.35 billion and a 146% jump in net income to RM72.3 million, according to ValueInvesting's valuation page. Its profit margin improved to 5.4% from 2.8% in FY2023, and earnings per share (EPS) more than doubled to RM0.086, metrics compiled on the same ValueInvesting page. Over the past 12 months, EPS growth has averaged 72% year-on-year, outpacing many peers in the capital goods sector, a trend also noted in industry analysis by Mordor Intelligence.

Valuation Metrics: Undervalued Despite Strong Growth

Despite these stellar results, SCGBHD trades at a discount relative to its peers and industry benchmarks. As of September 2025, the stock has a forward P/E ratio of 23.00 and a trailing P/E of 25.89, significantly lower than the Asian Electrical industry average of 33.9x, according to Simply Wall St's valuation. Analysts argue this reflects undervaluation: SCGBHD's current price of MYR 2.38 is above its estimated fair value of MYR 0.29, but intrinsic value models suggest a fair price of MYR 1.85, implying a potential downside of -22.3% (ValueInvesting's page).

However, this apparent contradiction may stem from differing valuation methodologies. SimplyWallSt's intrinsic value calculator estimates SCGBHD's fair value at MYR 2.49, just 4.70% above the current price, according to SimplyWallSt's tools. Meanwhile, its price-to-book (P/B) ratio of 5.10 is notably higher than the Malaysian telecom sector average of 2.1x, based on the Simply Wall St telecom analysis, suggesting the market values SCGBHD's intangible assets (e.g., brand strength, R&D capabilities) more highly than its peers.

A Compelling Risk-Reward Profile

SCGBHD's financials further bolster its case as a high-conviction investment. The company's return on equity (ROE) of 25.19% and profit margin of 6.72% outperform industry averages, reflecting efficient capital allocation and pricing power, as shown in the Simply Wall St telecom analysis. Analysts project earnings growth of 6.7% annually, aligned with the sector's expansion, per ValueInvesting's projections.

Yet risks persist. Intense competition in the telecom sector and regulatory hurdles could pressure margins. Additionally, SCGBHD's overseas revenue growth-while impressive-relies heavily on the U.S. market, introducing currency and geopolitical risks.

Conclusion: A High-Growth, Undervalued Play

Southern Cable Group Berhad exemplifies the intersection of strong earnings growth and attractive valuation. In a sector poised for 5G-driven expansion, SCGBHD's ability to scale revenue, improve margins, and outperform peers on key metrics makes it a compelling candidate for investors seeking undervalued opportunities. While valuation discrepancies exist, the company's fundamentals and alignment with Malaysia's digital transformation suggest a favorable risk-reward profile.

As the telecom sector continues to recover, SCGBHD's story is one of disciplined execution and strategic foresight-qualities that rarely go out of style.