Cypark Resources (Cypark) reported another quarterly core net Loss After Tax and Minority Interest (LATAMI) of RM26.8m in 1QFY25, narrowing from a core net LATAMI of RM68.4m in 4QFY24. This was mainly due to the absence of derecognition of RM46m deferred tax assets in 4QFY24, following the over provision during the kitchen sinking exercise in FY23. On YoY basis, Cypark reported higher core net LATAMI from RM2.3m reported in 1QFY24 as its waste- to-energy (WTE) segment dragged the performance due to prolonged unscheduled shutdown. Overall, 1QFY25 performance was lagging ours and consensus full-year net PATAMI estimates of RM9.7m and RM25.2m respectively, with the variance largely due to rectification works of its WTE plant. We cut our estimate to net LATAMI of RM16m for FY25 and reduced net PATAMI by 53% and 25% for FY26 and FY27 respectively due to prolonged rectification works on WTE, rescheduled of commercial operation date (COD) of Large Solar Scale 2 (LSS2) Danau Tok Uban to 4QCY24 and higher financing cost after LSS3 COD. All in, we maintain our Neutral call and further reduced our sum-of-parts (SOP) TP to RM0.70 (from RM0.80).

• Renewable Energy (RE) segment contributed higher revenue, rising 33.9% on QoQ basis after Cypark achieved COD for its 100MW LSS3 Merchang on 9th June 2024. It is estimated that about RM7.8m of revenue from LSS3 Merchang was recognised in 1QFY25. However, the commencement of LSS3 has increased its financing cost by 65.8% as Cypark started to book in expenses instead of capitalising the project’s financing cost.
   
• On the flipped side, revenue from other segments dropped on QoQ basis with Construction and Engineering segment recorded lower revenue by 45.8% as the construction of private hospital in Rawang reaching completion by September 2024. Meanwhile, WTE segment dragged the performance with lower revenue (down 4.1%), widening the net loss before tax for the segment to RM15.2m from 13.0m in 4QFY24.
   
• WTE rectification and upgrading works is estimated to be completed by October 2024. However, we expect the resumption of its operation will be on staggered basis. Cypark has incurred about RM7m capex for the rectification works, which fully claimable under the insurance and RM2m for upgrading works. Cypark also believe it is entitled for insurance claim loss of income on its revenue worth RM14m due to the unscheduled downtime.

Source: PublicInvest Research - 1 Oct 2024