Cypark Resources Bhd
(Jan 2, RM1.62)
Neutral with a target price (TP) of RM1.60: Cypark Resources Bhd reported higher fourth quarter of financial year 2018 (FY18) net profit to RM20.2 million (+11% year-on-year [y-o-y]), bringing its full-year FY18 net profit up 22% y-o-y to RM70.4 million. The better performance was due to absence of employee share option scheme expenses of RM5.2 million recognised in the last financial year.

 
Earnings were slightly above ours and consensus expectations, accounting for 109% and 106% of net profit estimates respectively. It is higher than our forecast due to higher-than-expected cost of sales. We keep our forecast unchanged for now. Our sum-of-parts TP is adjusted to RM1.60, ex-bonus issue.

FY18 revenue increased by 12% y-o-y mainly driven by higher contribution from its environmental engineering (EE) segment (+10% y-o-y) to RM245 million due to the continuous progress of works for the new large-scale solar projects secured. The landscaping and infrastructure as well as maintenance segments also improved significantly by 42% and 57% y-o-y respectively.

This is due to new projects secured and higher specialist maintenance works performed on leachate treatment plants.

Meanwhile, the green tech and renewable energy (RE) segment reported flattish y-o-y growth.

FY18 net profit jump by 22% y-o-y mainly due to higher contribution from the EE-related and landscaping and infrastructure segments as segmental pre-tax margin increased to 23% and 30% respectively, compared with 22% and 18% respectively in FY17.

Cypark’s earnings growth will be underpinned by its RE segment from waste-to-energy facilities in Ladang Tanah Merah to be commissioned from the second half of FY19. We also expect further contributions in RE once it completes the 30MWac of floating solar in Empangan Terip, Negeri Sembilan. — PublicInvest Research, Jan 2