Maybank Investment Bank (Maybank IB) expects Cypark Resources Bhd (Cypark) to be loss-making in the fiscal year of 2024 (FY24E).
Consequently, it downgraded its call for Cypark to HOLD and cut its earnings forecasts for the fiscal year of 2025 (FY25E) and 2026 (FY26E) by 73% and 76% respectively.
The research house also lower its sum of parts (SOP)-target price (TP) to RM0.86 for the integrate renewable energy provider.
Maybank IB said among the key takeaways from a recent update from the group is that Cypark also expects the waste-to-energy (WTE) to only breakeven in FY25, a revival year for the WTE segment.
“The waste and WTE segment posted RM19.5 million revenue and RM15.3 million pre-tax loss in 1HFY24 due to higher plant outage.
“Management guided a capital expenditure (capex) of RM20 million in FY25E to ensure plant optimization. We understand this will be funded by the perpetual sukuk subscribed by Jakel Capital (not listed).
“We expect WTE to only breakeven in FY25 on higher operational cost, at least until 1HCY25,” it said in its note last Friday (Feb 16).
Meanwhile, the research house said the group is also anticipating a potential revision to the tipping fees to operate and maintain the sanitary landfill is still pending authorities’ approval.
The current tipping fee is RM33 per metric ton (MT) of municipal solid waste.
Additionally, it said that there was three on-going large scale solar (LSS) construction in Terengganu and Kelantan are targeted to complete by 1QCY24.
“Due to floods in Kelantan and Terengganu, Cypark’s LSS2 and LSS3 projects are only expected to complete construction by 1QCY24 instead of December 2023.
“We understand that potential liquidated ascertained damages (LAD) can only be ascertained upon completion of the projects. To recap, management has made LAD provision of RM90 million for the LSS3 project in its 6QFP23, from February to April 2023.”
Lastly, Maybank IB said the group also still awaiting for potential new engineering, procurement, construction and commissioning companies (EPCC) job in FY25.
“As Cypark focuses on completing its LSS projects, they are also exploring new renewable energy (RE) related opportunities such as solar and WTE.
In December 2023, Cypark has entered into a memorandum of understanding (MoU) with Abu Dhabi Future Energy Company PJSC (Masdar)
to collaborate on RE projects in Malaysia.
The partnership will explore various initiatives, including the development of battery energy storage systems (BESS), with the goal of
establishing a 1GW project in Malaysia.
“Cypark is also looking at Sarawak to expand its RE operations. We currently assume RM150 million of EPCC orderbook replenishment in FY25 and FY26E respectively,” the research house added.
