KUALA LUMPUR: CIMB Equities Research believes Cypark Resources’s earnings should continue to improve in FY18-19F as Phase 1 of its waste-to-energy (WTE) project should start operations by end-CY18.“We expect the WTE plant to generate stable revenues of c.RM80mil per annum over the 25-year concession. The completion of the WTE plant will be a key milestone for the company as the plant is the single-largest investment it has ever undertaken,” said the research house on Monday.CIMB Research believes Cypark is poised to benefit from a favourable industry outlook as the government aims to raise renewable energy capacity from 2% to 20% by 2025.Based on the projects on hand, Cypark expects its total renewable energy (RE) capacity to jump four-fold to more than 120 MW by 2020.Cypark’s recent win in large-scale solar (LSS) projects is also likely to enhance its credibility and strengthen its position in the industry, which should help it win future bids.CIMB Research said Cypark’s 9MFY10/18 core net profit came in within its estimates at 79% of its full-year forecast but slightly below Bloomberg consensus at 70%.The 9M18 core net profit increased 30% on-year, supported by stronger revenue (+9% on-year), better gross margin (+1.5% pts on-year), and absence of ESOS accounting expenses (RM5.2mil cost in 2QFY17).The 9M18 profit before tax (PBT) rose 29% on-year, mainly driven by strong PBT growth in the environmental engineering (EE, +37% on-year) and maintenance (+90% on-year) divisions.Cypark’s 9M18 revenue rose 9% on-year, supported by: (i) 10% on-year revenue growth in the EE segment due to continuous work progress on the new large-scale solar (LSS) projects, and (ii) maintenance division (+100% on-year) due to specialist maintenance works on leachate treatment plants secured since 3Q17.Sales for the green tech & renewable division were up marginally by 0.3% on-year while revenue for its landscaping & infrastructure division was flat on-year.“We leave our estimates unchanged as results were within expectations. Maintain Add with a sum-of-parts ased target price of RM2.72. The stock is also a good proxy for investors seeking exposure to the Malaysian renewable energy sector, in our view.“The commissioning of the WTE plant by CY18 is the key potential re-rating catalyst. Key downside risks to our Add call include weaker-than-expected earnings from its EE division and WTE plant,” said CIMB Research.

Source: thestar October 01, 2018 00:57 UTC