PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 12 Dec 2019, 9:19 AM



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Cypark announced that it has entered into three Memorandum of Understanding (MoUs) with Menteri Besar Kedah Incorporated (MBI Kedah), NS Corporation (NS Corp) and Petronas Chemicals Group (PCG) to jointly develop 150MW Solar Photovoltaic as well as waste-to-energy (WTE) projects. We are positive on this, as it could provide opportunity for Cypark to expand its orderbook with constructions-related projects under Environmental Engineering as well as renewable energy (RE) segments. We make no changes to our earnings forecast as this is still in the discussion stage. All in, we maintain our Neutral call on Cypark with an unchanged sum-of-part (SOP)-target price of RM1.48.

  • The collaboration. Cypark will jointly collaborate with MBI Kedah and NS Corp to jointly develop solar photovoltaic projects under Net Energy Metering Scheme (NEM) through Supply Agreement Renewable Energy (SARE) in the state of Kedah and Negeri Sembilan with a capacity of 100MW and 50MW respectively. The MOUs will be effective for a period of 12 months and two years under MBI Kedah and NS Corp respectively or may be extended for a further period upon mutual agreement in writing. Separately, Cypark has also entered into MOU with PCG to evaluate and /or potentially collaborate in WTE projects for a period of 5 years.
  • Our view. The MOUs is positive for Cypark as we believe this will present opportunity to improve its future orderbook with construction-related projects as well as to further expand its RE segments. The EPCC contracts for the 150MW solar projects may costs about RM600m, while the cost to develop a WTE will be depending on the capacity of the power plant. To recap, its facility for 20MW of WTE in Ladang Tanah Merah was c.RM500m, being the first WTE in Malaysia and expected to be commission in 1QCY20. We maintain our forecast for now, pending further details from the collaborations.
  • RE outlook. The Minister of Energy, Science Technology, Environment and Climate Change (MESTECC) has implemented clear roadmap to achieve a 20% RE target by 2025, which currently stood at 2%, through NEM, large scale solar (LSS) and other RE e.g. mini- hydro, biogas and biomass. In addition, the Minister of Housing and Local Government (KPKT) also plans to build one WTE plant in every state will also brought in more confidence in the future green technology and RE in Malaysia. To note, Cypark will increase its RE installed capacity from the current 31 MW to around 62 MW, upon commissioning of its WTE plant and solar farms under the LSS1.

Source: PublicInvest Research - 11 Oct 2019

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