Cypark‟s full-year 2013 net profit RM34.3m came in a little short, making up only 90% of our of our estimates, with healthier renewable energy income insufficient to take up the slack in lower landscaping and infrastructure profits, as well as higher-thananticipated interest costs. Nevertheless, we continue to like the value proposition Cypark promises, with on-going growth in its renewable energy (RE) business providing the thrust. Our Outperform call is reaffirmed, with a revised target price of RM3.20 (RM2.70 previously) as we ascribe a higher PE of 12x to FY14 EPS of 27.1sen, the higher multiple justifiable on account of its earnings growth prospects which still deems the stock relatively inexpensive. Our earnings estimates are unchanged. We continue to see this valuation as conservative, as the discounted cash flow value of its renewable energy business alone is already RM2.33, deeming all other profit-generating businesses “almost free” at current price levels.

Revenue (+10.9% YoY): Revenue from its renewable energy business increased four-fold to RM21.2m, but insufficient however to counter lower contributions from its landscaping and infrastructure business and tepid growth from its environmental engineering projects. We anticipate stronger revenue growth going forward, driven by the plant-up of more RE capacity and construction works on its biomass-related project.

Net profit (+34.0% YoY ) growth was more robust as the Group‟s export capacity of green electricity increased further from 19MW to 22.3MW currently (FY12: 8MW), in addition to a lower effective tax rate from incentives granted to its RE projects despite higher interest costs. We see similarly healthy growth in the coming financial year, also driven by the commissioning of more RE capacity.

Recent developments: The Government‟s move to increase the surcharge on electricity bills for the RE Fund from 1% to 1.6% solidifies the healthy and growing prospects of the industry and by extension, Cypark, as it remains intent on reducing reliance on other power-generating fuels. It aims to substantially increase the amount of electricity generated from RE sources to 2,080 MW by 2020 (about 121MW currently, 1% of total generation).

Source: PublicInvest Research - 2 Jan 2014