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PublicInvest Research

Author: PublicInvest   |   Latest post: Wed, 23 Sep 2020, 10:17 AM

 

Cypark Resources Berhad - EPCC Continued To Be The Main Driver

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Cypark reported a net profit of RM20m (+4.4% YoY) in 3QFY19. YTD 9MFY19, its net profit jumped 4.4% YoY to RM52.4m, below ours but within consensus expectation at 67% and 72% of net profit estimates respectively. The discrepancy from our forecast was mainly due to the delay in the commissioning of waste-to-energy (WTE) plant in Ladang Tanah Merah, Negeri Sembilan. We understand that the WTE is only expected to be commissioned by 1QCY20, with initial operation date by 4QCY19. We revise downwards our forecast by an average of 15% for FY19-21F, to account for the delay in WTE as well as higher financing cost from the new financing. We maintain our Neutral call on Cypark with a lower SOP-based TP of RM1.48 (previously RM1.60).

  • Environmental Engineering (EE) continued to be the main driver to Group’s earnings. Its revenue jumped 15% YoY to RM67.2m in 3Q19, bringing its YTD 9MFY19 to RM211.2m (+8%). This was mainly owing to progressive completion from the new large scale solar (LSS) projects. To recap, under the second LSS projects (LSS2), Cypark had secured c.90MW of EPCC contracts i.e. 30MW of floating solar in Empangan Kelinchi and Empangan Terip (40%-owned) respectively, as well as 30MW ground solar in Sik, Kedah, with a scheduled commercial operations date of 31 December 2020. Its pre-tax profit however declined by 4.5% YoY to RM17.1m in 3Q19, mainly due to one-off additional fees incurred in obtaining the new financing. YTD 9MFY19 its PBT declined by 4.2% to RM44.8m (vs 9MFY18: RM46.8m). Meanwhile, we understand that Cypark had submitted its bidding to secure EPCC from other project owners under the third LSS projects (LSS3) in August 2019, of which the results of the bidding will be released by the Energy Commission (EC) by December 2019.
  • Green Tech & Renewable Energy (RE)’s sales slightly decreased by 2.2% YoY to RM14.2m in 3Q19, bringing its 9MFY19’s sales marginally declined to RM36m (-0.4%). Its pre-tax profit however increased 4.3% to RM5.9m in 3Q19, due to savings from the finance costs. For 9MFY19, PBT for this segment increased 5.5% to RM11.5m (vs 9MFY18: RM10.9m). To note, the first LSS projects (LSS1) was already commissioned in 4QFY19, i.e. 3MW in Jelebu and 8MW in Ladang Tanah Merah (LTM). Meanwhile, the 20MW waste-to-energy (WTE) project in LTM is only expected to be commissioned by 1QCY20. Upon commissioning of the solar farm under LSS1 as well as the WTE plant, Cypark will increase its RE installed capacity from c.31MW to around 62MW.
  • Other segments. Landscaping & Infrastructure segment reported higher revenue at RM25.3m for 9MFY19 (vs 9MFY18: RM21.4m) due to increase in work activities for the preliminary works and site preparation works from the new projects secured. As a result, its pre-tax profit also jumped 21% to RM8.2m for 9MFY19, compared to RM6.7m in 9MFY18. Meanwhile, pre tax profit for Maintenance segment in 9MFY19 was marginally lower at RM1.4m (vs 9MFY18: RM1.7m).

Source: PublicInvest Research - 1 Oct 2019

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