Based on Cypark’s solid R&D capability and track record, we expect it to benefit from the new government promises to increase renewable energy (RE) from 2% to 20% by 2025. We are positive on Cypark given its steady 10% FY19-21 EPS CAGR following the commissioning of the 20MW waste-to-energy (WTE) and large-scale solar one & two (LSS1&2) plants. Cypark plans to bid for a capacity of 100MW (expect to generate RM50-60m revenue pa) in the LSS3 scheme and it is well positioned to score the job, in view of its cost leadership in RE and high success rate in the past two LSS schemes. We like Cypark for: (i) cheap valuation at 9.1x FY20E P/E (12.8% and 30.5% below its 3Y mean and peers), (ii) improving net margins; (iii) healthy earnings visibility with the inclusion of the two RE projects in the pipeline; (iv) well positioned for LSS3 scheme and (v) defensive play amid external headwinds as >90% of its projects are based in Malaysia (it has ~RM600m order book and RM1bn tender book).

Pending a positive triangle breakout. Cypark is on the verge of a downtrend resistance breakout as indicators are on the mend. A decisive breakout above downtrend line near RM1.74 will likely to lift share prices higher towards RM1.82 (9 Jan 2018) before testing our LT objective at RM1.92 (12 May 2017). On the flip side, supports are situated at RM1.67 and RM1.64 (200D SMA). Cut loss at RM1.62.

Source: Hong Leong Investment Bank Research - 12 Apr 2019