KUALA LUMPUR: CIMB Equities Research remains positive on Cypark Resources as it expects stronger earnings due to the commissioning of the large scale solar photovoltaic (LSS 2) and waste-to-energy (WTE) plant.
It said on Monday it expects FY19-21F earnings to be stronger due to the commissioning of the LSS 1/WTE plant in FY19F and LSS 2 plant in FY21F.
Other factors are the upcoming LSS 3 tender and initiatives for the renewable energy industry which are positive for renewable power players, especially Cypark Resources. Our sum-of-parts based target price is unchanged at RM1.83.
“Cypark’s 1QFY10/19 core net profit was in line, at 16% of our and Bloomberg consensus full-year forecasts as 1Q is seasonally its weakest quarter,” it said.
Its 1Q19 core net profit increased 6% yoy supported by higher revenue (+5% yoy), particularly from environmental engineering (EE, +4% yoy) division due to new projects secured, as well as landscaping & infrastructure (+28% yoy) division due to increase in work activities for the preliminary works and site preparation works from the new projects secured.
Cypark’s 1Q19 pretax profit improved 9% yoy, largely underpinned by better profitability from EE (+8% yoy), and landscaping & infrastructure (+44% yoy) segments due to increased work activities.
Green tech & renewable energy (RE) division’s PBT was slightly higher by 3% yoy despite flat revenue, due to savings achieved in finance costs. Qoq, revenue was up 11% but PBT declined 28% due to more setup costs incurred for the early implementation stage of the projects.
As of FY18, Cypark’s total renewable energy (RE) capacity stood at c.31MW. Its two new solar plants under the first round large scale solar photovoltaic (LSS 1) with a combined capacity of 11MW (Jelebu 3MW and Ladang Tanah Merah 8MW), have an initial operation date (IOD) of end-Apr 2019.
"We estimate these two plants could contribute an additional RM8m in revenue p.a.," it said.
Cypark’s 20MW WTE plant is 98% completed as of end-Feb 2019. It plans to test run the WTE plant in Apr 2019 and expects the plant to achieve commercial operation date (COD) in June 2019.
“We expect the WTE plant to generate stable revenues of c.RM80m p.a. over its 25-year concession. Completion of the WTE plant will be a key milestone for Cypark as it is the single-largest investment the company has ever undertaken; its completion would likely catalyse the stock,” it said.
Limited time offer:
Just RM5 per month.
