• Upgrade to BUY (TP: RM0.96). Cypark 12MFY24 core net loss of RM40mn (excluding derecognition of deferred tax asset) was below our prediction. No earnings revisions made. Overall, we foresee Cypark's earnings to turnaround in FY25F, propelled by (i) turnaround in WTE segment and (ii) new income generation from solar asset. Following correction in the stock price, we upgrade our call on Cypark to a BUY with unchanged DCF-derived TP of RM0.96.

• Key highlights. In 4QFY24, the topline improved 57% QoQ to RM56mn thanks to construction progress of Selgate’s hospital project in Rawang. Nevertheless, the bottom line remained in the red with a net loss of RM58mn, driven by RM46mn derecognition of the deferred tax assets in certain entities following the MFRS112 Income Tax requirements, higher one-off professional fees (in RE segment), and losses from unscheduled WTE plant outage. Notably, the PBT narrowed to RM17.6mn (3Q24: RM33.2mn) underpinned by lower losses at the waste management and WTE division with LBT of RM13mn (3Q24 LBT: RM33mn), thanks to absence of amortisation expenses adjustment. To recap, the segment posted a RM21mn amortisation expenses adjustment in previous quarter.

• Earnings Revision. No revision to our earnings forecast.

• Outlook. Overall, we foresee Cypark’s earnings to return to profitability in FY25F premised on i) turnaround in WTE segment and ii) new recurring income generation from solar projects. Of note, Cypark’s 100MW LSS3 hybrid solar in Merchang has achieved its commercial operation date (COD) in June 2024 while LSS2 Kelantan project is targeted to achieve COD in 3QCY24. Key re-rating catalysts to the stock price include: (i) new win in WTE concession asset, and (ii) further expansion in ownership of solar assets.

Source: BIMB Securities Research - 1 Jul 2024