PublicInvest reaffirms Cypark 'outperform' call
KUALA LUMPUR: PublicInvest Research likes the value proposition that Cypark Resources Bhd promises, and reaffirm its 'outperform' call with an unchanged target price of RM3.20.
"Cypark's first quarter financial year (FY) 2014 results missed expectations, with revenue of RM51.5 million and net profit of RM7.7 million only making up
20 per cent and 16 per cent of our full-year estimates respectively.
"Despite this, we remain unfazed and see healthier renewable energy contributions throughout the year driving income growth and narrowing the difference. We
are lowering our estimates for FY2014 and FY2015 by about 25 per cent. However, we are adjusting for timing differences in the export of green electricity,
but in no part due to delays by the group," said Cypark in its research note.
PublicInvest noted that though renewable energy and landscaping contributions were healthy, a 3.6 per cent reduction in its environmental engineering revenue
resulted in the tepid overall growth.
"Future revenue growth will be driven by the plant-up of more renewable energy capacity and construction works on its biomass-related project.
"Growth was more robust as the group's export capacity of green electricity increased further from 19.0MW to 27.3MW currently, in addition to a lower
effective tax rate from incentives granted to its renewable energy projects despite higher interest costs."
The research house sees similarly healthy growth in the coming financial year, driven by the commissioning of more renewable energy capacity.
"With 29.3 megawatt (MW) of capacity planted up and only 27.3MW of solar power exported as at first quarter 2014, forward earnings will see an uptick,
augmented further by more capacity plant-ups this year and next as it achieves its collective 40MW quota.
"1Malaysia Development Berhad's recent foray into the solar-generation space via the 50MW solar farm in Kedah, considering its vast other power-related asset
holdings, amplifies the case and attractiveness of the renewable energy space, in particular solar. While Cypark has reportedly been approached to partner it
in this project given its know-how, we see the group already thriving on its own regardless.
PublicInvest sees the government's recent move to hike the surcharge on electricity bills from 1 per cent to 1.6 per cent effective Jan 1 augurs well, and
also highlights its commitment to the industry's growth.
20 per cent and 16 per cent of our full-year estimates respectively.
"Despite this, we remain unfazed and see healthier renewable energy contributions throughout the year driving income growth and narrowing the difference. We
are lowering our estimates for FY2014 and FY2015 by about 25 per cent. However, we are adjusting for timing differences in the export of green electricity,
but in no part due to delays by the group," said Cypark in its research note.
PublicInvest noted that though renewable energy and landscaping contributions were healthy, a 3.6 per cent reduction in its environmental engineering revenue
resulted in the tepid overall growth.
"Future revenue growth will be driven by the plant-up of more renewable energy capacity and construction works on its biomass-related project.
"Growth was more robust as the group's export capacity of green electricity increased further from 19.0MW to 27.3MW currently, in addition to a lower
effective tax rate from incentives granted to its renewable energy projects despite higher interest costs."
The research house sees similarly healthy growth in the coming financial year, driven by the commissioning of more renewable energy capacity.
"With 29.3 megawatt (MW) of capacity planted up and only 27.3MW of solar power exported as at first quarter 2014, forward earnings will see an uptick,
augmented further by more capacity plant-ups this year and next as it achieves its collective 40MW quota.
"1Malaysia Development Berhad's recent foray into the solar-generation space via the 50MW solar farm in Kedah, considering its vast other power-related asset
holdings, amplifies the case and attractiveness of the renewable energy space, in particular solar. While Cypark has reportedly been approached to partner it
in this project given its know-how, we see the group already thriving on its own regardless.
PublicInvest sees the government's recent move to hike the surcharge on electricity bills from 1 per cent to 1.6 per cent effective Jan 1 augurs well, and
also highlights its commitment to the industry's growth.
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