Cypark Resources Bhd
(Jan 2, RM2.08)
Maintain add with unchanged target price of RM3.09: Cypark’s fourth quarter 2014 (4Q14) revenue declined 11.8% year-on-year (y-o-y) as its environmental engineering division’s revenue fell 51% y-o-y. The decline in revenue was mainly due to the wrapping up of Phase 1 of one of its projects while Phase 2 will only commence in financial year 2015 (FY15). Its other divisions continued to show improvement, particularly its renewable energy (RE) division, where revenues surged 41% y-o-y to RM8.2 million in 4Q14 as Cypark continued to expand its capacity. For the full year, Cypark’s revenue increased by 7.4% y-o-y to RM237 million while core net profit grew by 11.2% to RM39.9 million, driven by tax savings from RE-related tax incentives. No dividends were declared which is unsurprising as Cypark declares dividends post annual general meetings.
We expect more RE projects to be secured by Cypark in 2015 as the government aims to increase contribution from RE sources to 10% of total generation capacity by 2020. This implies that there will be more projects beyond the feed-in-tariff (FiT), which will give opportunities for Cypark to expand its RE capacity further. We expect its main focus to be on solar projects although we do not discount the possibility of other types of RE, such as biomass or biogas, which it is currently executing at Ladang Tanah Merah (LTM).
Cypark’s LTM project will add more RE capacity as it will produce electricity using biogas and biomass generated from the waste that it collects. — CIMB Research, Jan 2
This article first appeared in The Edge Financial Daily, on January 5, 2015.