• Maintain HOLD (TP: RM0.89). Cypark 9MFY24 net loss of RM26.0mn was deemed above our prediction at 109%. In 3QFY24, the topline declined 35.1% QoQ to RM35.9mn (from RM55.3mn in 2QFY24), primarily due to lower work progress on the construction project and nearing completion of the LSS project (DTU Kelantan). Consequently, the bottom line turned red during the quarter, resulting in a net loss of RM27.5mn, driven by adjustments made on amortisation on trade receivables for waste management and WTE segment. The amortisation was readjusted to a concession term basis consistent with the prior year, amounting to RM21mn. There were no earnings revisions. Overall, we foresee Cypark's earnings turning positive only in FY25F, propelled by stable WTE plant operation and the COD of both LSS projects. Reiterate a HOLD call on Cypark with DCF-derived TP of RM0.89.

• Key highlights. Cypark's revenue escalated by 9.1% YoY, driven by recurring turnover from its renewable energy and waste management & WTE division. Note that the group is transitioning from the construction phase (for some LSS only) to the Operation and Maintenance (O&M) phase, which will provide steady interest revenue streams for 21 years. Notwithstanding, earnings remained dragged down by losses from waste management & WTE division.

• Earnings Revision. No revision to our earnings forecast as we view the amortisation adjustment to be as a non-recurring expense in upcoming quarters.

• Outlook. To date, management has yet to announce the COD for its LSS2 (Danau Tok Uban) and LSS3 (Merchang) projects due to some technical issue raised on the said site (i.e. TNB interconnection facility and others). Overall, we foresee Cypark’s earnings to return to profitability only in FY25F premised on stable WTE plant operation and COD of both LSS project.

Source: BIMB Securities Research - 1 Apr 2024