KUALA LUMPUR: PublicInvest Research has lowered its earnings forecast on Cypark Resources Bhd
to account for deferred commercial operation date of its waste-to-energy (WTE) project in Ladang Tanah Merah, Negeri Sembilan.
The research house downgraded its call on the counter to neutral and reduced its target price to RM2.45.
Construction on the WTE project is expected to be completed by end 2018 due to the encountering of rocks during the installation of bunkers by contractros and Tenaga Nasional's new grid connection routing.
"Thus, full commissioning of the WTE is now estimated to be only by April or May 2019 (i.e. 2HFY19), after accounting for 3 to 4 months of cold and warm testing on consistency.
"That said, we understand that the project is still within the contractual completion date with the Government i.e. June 2019," said PublicInvest.
It said Cypark's future growth prospects will be underpinned by earnings growth in its renewable energy segment from the sale of electricity from its new 20MW biomass and 5MW biogas facilities by 2HFY19 onwards.
Cypark has received a few EPCC projects to develop large sale solar plants with commercial operating dates in 2019-2020 such as floating solar at Empangan Terip and Empangan Kelinichi in Negeri Sembilan of 30MW each.
It said it expects further contribution from the sale of electricity to the national grid for the next 21 years upon completion of the floating solar in Empangan Terip.
"We anticipate Cypark to potentially receive up to RM10m from the sale of electricity based on a feed-in-tariff of RM0.46 (for 40%-stake), with a profit margin between 15%-18%. This has yet to be accounted for in our earnings forecast however."