Enviromental engineering the main driver for Cypark�s earnings

Published on 02 Oct 2019. | Source: theedgemarkets.com

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Cypark Resources Bhd
(Oct 1, RM1.39)
Maintain neutral with a lower target price (TP) of RM1.48: Cypark Resources Bhd reported a net profit of RM20 million (+4.4% year-on-year [y-o-y]) in the third quarter of financial year 2019 (3QFY19). Year-to-date (YTD) or the first nine months (9M) of FY19, its net profit jumped 4.4% y-o-y to RM52.4 million, below our but within consensus’ expectation at 67% and 72% of net profit estimates respectively. The discrepancy from our forecast was mainly due to the delay in the commissioning of waste-to-energy (WTE) plant in Ladang Tanah Merah, Negeri Sembilan. We understand that the WTE is only expected to be commissioned by 1Q of calendar year 2020 (1QCY20), with its initial operation date by 4QCY19. We revise downwards our forecast by an average of 15% for FY19 to FY21F (forecast), to account for the delay in WTE as well as higher financing cost from the new financing. We maintain our “neutral” call on Cypark with a lower sum-of-parts-based TP of RM1.48 (previously RM1.60).

Environmental engineering (EE) continued to be the main driver of the group’s earnings. Its revenue jumped 15% y-o-y to RM67.2 million in 3Q19, bringing its YTD 9MFY19 to RM211.2 million (+8%). This was mainly owing to progressive completion from the new large-scale solar (LSS) projects. We understand that Cypark had submitted its bidding to secure engineering, procurement, construction and commissioning rom other project owners under the third LSS projects in August 2019, of which the results of the bidding will be released by the Energy Commission by December. Green technology and renewable energy’s sales slightly decreased by 2.2% y-o-y to RM14.2 million in the 3Q19, bringing its 9MFY19’s sales marginally down to RM36 million.The landscaping and infrastructure segment reported higher revenue at RM25.3 million for 9MFY19 (versus 9MFY18: RM21.4 million) due to the increase in work activities for the preliminary works and site preparation works from the new projects secured. The pre-tax profit for the maintenance segment in 9MFY19 was marginally lower at RM1.4 million (versus 9MFY18: RM1.7 million). — PublicInvest Research, Oct 1





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