Cypark Resources (Cypark) reported a wider core net Loss After Tax and Minority Interest (LATAMI) of RM4.8m in 2QFY24 from a core net LATAMI of RM2.3m in 1QFY24. This is due to higher net losses from its waste-to-energy (WTE) segment arising from a plant outage that required maintenance. Cumulatively, 1HFY24 net LATAMI of RM7.2m is below our and consensus full-year net profit expectation of RM20.3m and RM19.7m respectively. Cypark reiterated completion of the Large Solar Scale 2 (LSS2) Danau Tok Uban (DTU) and LSS3 Merchang plants by December 2023, though it has yet to announce the commercial operation date (COD), however. On these notes, we revise our forecast for FY24F to net LATAMI of RM9.3m to reflect the WTE plant outage and potential delays in the commercialization of the LSS2 and LSS3 plants. We also lower our forecast for FY25F and FY26F by 49% and 24% respectively the account delayed plant optimization. We maintain our Neutral recommendation with lower sum-of-parts (SOP) based TP to RM0.86 (from RM0.90) after reflecting the earnings changes, which also rolling-over our base-year valuations.

• WTE segment recorded wider loss before tax (LBT) of RM9.1m in 2QFY24, as compared to LBT RM6.2m in 1QFY24. This is mainly due to the lower sale of green energy arising from plant outage that required maintenance during the period. Management guided that the plant has resumed normal operation and is expected to reach maximum capacity soon. Nevertheless, we lower our forecast to reflect the gradual optimization of the plant from its current state. On a positive note, discussions on the tipping fee revision has received a favourable response from the authorities, which will improve its margin and cashflows significantly upon approval.

• Potential slight delay of LSS2 and LSS3. Cypark still retains the completion of LSS2 and LSS3 by December 2023. However, it has yet to declare COD as of now. Therefore, we do not discount slight delays in the completion date, although it has resumed active progress on both of the projects after injection in funding from its new major shareholders via a perpetual sukuk.

Source: PublicInvest Research - 2 Jan 2024