CYPARK RATING LOWERED TO ‘HOLD’

Company likely to return to profitability in financial year 2025, says Maybank IB

MAYBANK Investment Bank Bhd (Maybank IB) has indicated that Cypark Resources Bhd would turn a loss in fiscal year 2024.

Due to flooding in Kelantan and Terengganu, the development of the large solar scale (LSS) 2 and LSS3 projects by the renewable energy (RE) firm may be completed only in the first quarter of this year (from the original scheduled completion date of December last year).

“We understand that potential liquidated and ascertained damages can be determined only upon completion of the projects.

“We expect Cypark to report a net loss of RM24 million (from RM19 million net profit) in its financial year 2024 and return to profitability in financial years 2025 and 2025 with lower RM11.3 million and RM12.7 million net profit, respectively,” said Maybank IB.

Cypark’s waste-to-energy (WTE) segment recorded a revenue of RM19.5 million and RM15.3 million in pre-tax loss in the first half of its financial year 2024 year due to higher plant outages.

The management has guided for a capital expenditure of RM20 million in its financial year 2025 to ensure plant optimisation.

“We understand this will be funded by the perpetual sukuk subscribed to by Jakel Capital. We expect the WTE segment to break even only in financial year 2025.

“Meanwhile, the higher tipping fees (to operate and maintain the sanitary landfill) are pending the authorities’ approval.

“The current tipping fee is about RM33 per tonne of municipal solid waste.”

As Cypark focuses on completing its LSS projects, it is also exploring new RE-related opportunities, such as in solar and WTE.

In December last year, Cypark signed a memorandum of understanding with Abu Dhabi Future Energy Company PJSC to collaborate on RE projects in Malaysia.

“We assume RM150 million of EPCC (engineering, procurement, construction and commissioning) order book replenishment in financial years 2025 and 2025 estimates.”

Maybank IB has downgraded its rating on Cypark to “hold” and lowered the target price to 86 sen from RM1.05 previously.