• We like Cypark’s leadership position in waste-to-energy (WTE) space with the successful commissioning of Malaysia’s first WTE plant. Although it is still running at a loss, we believe the company has a competitive edge to secure future WTE concessions.

• The company is set to boost its solar asset in operation to 408MW upon completion of LSS2 Danau Tok Uban and LSS3 Merchang projects. However, we are cautiously optimistic that this expansion will strengthen its position with improved cash flow upon commissioning these assets.

• Given the financial backing from Jakel who emerged as the largest shareholder of the company, we observe that concerns about its financial position have been easing. This is evident in the recovery of its share price, which has risen by 127% over the past 12 months.

• We initiate coverage on Cypark with a HOLD recommendation and TP of RM0.89, derived using DCF methodology. This implies a PE of 22x based on FY25F.

Pioneer of Green Energy Services

We admire Cypark for its pioneering role in Malaysia's WTE projects. With the successful completion of Malaysia's inaugural WTE plant in Ladang Tanah Merah, we are optimistic that Cypark is well-positioned to be a leading contender for upcoming WTE projects. This aligns with the government's initiative to establish at least 1 WTE plant in every state. Additionally, the company boasts extensive experience in the development and operation of solar assets, currently managing a total capacity of 109MW. Looking ahead, Cypark aims to achieve a remarkable 800MW capacity by 2027 in its medium-term goals.

Overcoming Liquidity Constraint to Complete On-going Projects

The company had previously encountered liquidity challenges in completing its remaining 270MWp solar projects in Kelantan (LSS2) and Terengganu (LSS3). However, it has successfully secured financial support from Jakel to complete these projects. With these initiatives nearing commissioning, we are cautiously optimistic about the company's imminent turnaround. The completion of these projects is poised to generate recurring income over the next 21 years, placing the company in a stronger position to secure additional projects in the future.

Earnings Forecast

We expect the company to remain in the red in FY24 with LATAMI of RM24mn mainly dragged by losses at the WTE plant. Subsequently, we project a return to profitability, expecting a PATAMI of RM25mn in FY25F and RM35mn in FY26F supported by (i) new revenue streams from the operation of 270MWp solar assets and (ii) improvements in the WTE plant operation.

Source: BIMB Securities Research - 15 Jan 2024