Excluding a one-off RM30.1m reversal of impairment, Cypark Resources (Cypark) recorded core net Loss After Tax and Minority Interest (LATAMI) of RM36.4m in 2QFY25, widening from a core net LATAMI of RM26.8m in previous quarter and RM4.8m in 2QFY24. This was mainly due to the higher financing cost, deferred tax charged and prolonged unscheduled shutdown of its waste-to-energy (WTE) plant. Overall, 1HFY25 core net loss amounted to RM63.2m, exceeded our and consensus full-year loss estimates of RM16m and RM31.7m respectively. We cut earnings estimates by 179% for FY25F after increasing the financing and tax expenses. However, we raise our FY26F and FY27F estimates by 34% and 12% respectively as we assume higher orderbook replenishment mainly from the 500MW hybrid hydro floating solar (HHFS) plant in Kenyir. After rolling-over our valuation we maintain our Neutral call with higher our sum-of-parts (SOP) TP to RM0.80 (from RM0.70).

• LSS3 Merchang lifed Renewable Energy (RE) segment. On QoQ basis, Cypark achieved 20.7% increase in RE revenue to RM27.8m as it recognised full quarter revenue from its 100MW LSS3 Merchang. However, the commencement of LSS3 has led to higher financing cost as Cypark has started recognising it as expenses instead of capitalising the cost.
• WTE losses narrowed by 45% as it recognised provision for the anticipated compensation from insurance coverage. On this note, Management guided that the plant has been operational since October 2024 without major hiccup so far. We expect WTE segment will improve significantly as it should be posting full quarter recovery.
• Expecting improvement in 2H25. Apart from improvement in the WTE segment, we expect the LSS2 Danau Tok Uban (DTU) to achieve commercial operation date (COD) in 2HFY25. LSS2 DTU had its first energy dispatch to the grid on 16 November and is still undergoing testing, which is expected to be finalised soon. We also believe Cypark's JV participation in the development of 500MW HHFS in Kenyir will strengthen its position to secure EPCC works. This is also supported by the successful commercialiation of 100MW LSS3.

Source: PublicInvest Research - 2 Jan 2025