CYPARK (5184) S

Update: 17/Nov/2020

1) Intro

Malaysia Gov has shown unwavering commitment in meeting 20% of RE by 2025, that would be 6,000 MW in total. The Gov has awarded more than 2,000 MW of RE, where 1,634 MW (82%) is from solar energy (LSS Fast Track, LSS1, LSS2 & LSS3). Out of the 2,000 MW of RE, Cypark has already secured about 200 MW (10%) and targets to secure 1,000 MW of RE by 2025.

According to TNB AR 2019, Gas & Coal will continue to be the main source of power generation in the medium term, but there will be an increased uptake of renewable energy (RE) generation, especially solar.
- Coal (53.9%)
- Gas (42.30%)
- Hydro (3.1%)
- Solar (0.6%)
- Others (0.1%)
Cost of generating RE is getting cheaper as technology improves. The cost of generating Gas is at RM0.2322 /kWh while the cost of generating Solar is as low as RM0.1399 /kWh - LSS4. The industry foresees the future LSS projects will have bigger capacities of more than 1000 MW to meet 20% of RE and Malaysia Gov also targeting 6 x WTE Plants soon.

Malaysia needs US$8 billion investment to achieve 20% renewable energy target by 2025.



2) On-Going Projects

LSS1 - 15 MWac
- targeted Commercial Operation Date: 31 Dec 2020
- Daud (CEO) estimated RM10 million annually
- This will contribute to FYE 2021

LSS2 - 3 x 30 MWac = 90 MWac
- targeted Commercial Operation Date: 31 Dec 2020
- Daud (CEO) estimated RM25 million annually
- This will contribute to FYE 2021

WTE - 20 to 25 MWac
- Due to MCO, Cypark has yet to announce the completion date
- Daud (CEO) estimated RM80 million annually
- This will contribute to FYE 2021

LSS3 - 100 MWac
- TNB has inked three LSS3 Power Purchase Agreements.
- Daud (CEO) estimated RM50-60 million annually
- This will contribute to FYE 2022

Net Energy Metering (NEM) ProjectS
- Unknown MWac

Once the above projects are completed, it will be owned, operate & managed by Cypark



3) Future Projects secured (announced )

- MOU w/ Negeri Sembilan Corp - 50MW Solar Project (NEM)
- MOU w/ Kedah Gov - 100MW Solar Project (NEM)
- MOU w/ Petronas Chemicals - WTE Plant Project
- To add 5MWac to 10MWac of biomass/gas per year
- To supply RE directly to end client ( testing phase)



4) Forecast Revenue

Cypark targets to achieve 500 MWdc by FY2022. According to Daud (CEO), Cypark is targeting a stable recurring revenue to be generated from the sales of energy (Green Tech and RE), which will make up 50% of the group’s total revenue by 2022 from the current 16%.

Cypark's revenue comes from four segments as follow:
* Data from Cypark AR2019 *
- RM262 | 73% - Environmental engineering
- RM34 | 9.4% - Landscaping and infrastructure
- RM5 | 1.3% - Maintenance works
- RM59 | 16.3% - Green Tech and RE

Cypark "Green tech and RE" revenue (MYR)
- FY2014 - 34,954,629
- FY2015 - 39,665,233
- FY2016 - 46,544,314
- FY2017 - 48,713,260
- FY2018 - 48,784,125
- FY2019 - 59,020,364
- FY2020 - 65,856,536

Cypark future recurring revenue (Estimation), factoring in their On-Going Projects once completed (Revenue in MYR)
- FY2021 - 161 millions +
59+(10/12*8)+(75/12*8)+(80/12*8) + NEM
- FY2022 - 265 millions +
59+10+75+80+(50/12*10) + NEM

Cypark expects to complete all three projects (LSS 1 & 2 and WTE) by the targeted COD 31 December 2020. For FYE2021, i have multiply by 8 months instead of 10 months (Financial ends at Oct) to have a more conservative forecast.

From their latest QR, Cypark owns approximately 47 MWdc of solar plants In 2020. This capacity is expected to increase to approximately 200 MWdc by early 2021. With only 47 MWdc, the sales of energy already contributing about 65 millions revenue annually. 200 MWdc definitely will contribute positively to Cypark revenue.



5) Dividend

Cypark dividend policy is to distribute not less than 25% of its net profit to the shareholders, provided that such payout would not be detrimental to the operating cash flow as well as business development plans.



6) Cash Flow

According to AR2019, the remaining maturities of the borrowings are as follows:
- 184.8 million - On demand or within 1 year
- 53.2 million - More than 1 year and less than 2 years
- 220.2 million - More than 2 years and less than 5 years
- 715 million - 5 years or more
The reason of huge borrowing is due to building new power plants where large upfront capital investment are required.

Cypark has issued RM550 million Sukuk in FY2019. The RM550 million Sukuk is backed by the projects’ anticipated long-term recurring income from selling energy to TNB for the next 21 years. During 4th Sept 2020, Cypark has issued New RM97.25 million Sukuk ( upto RM500 million )

Generally, Sukuk has a tenure of up to 22 years commencing from the date of the first issuance. On top of that, Sukuk has a fixed profit payments which allows Cypark to determine it at a lower profit rate and enjoy the profit payment savings in the event of an increase in profit rate in the future. As long as Cypark is able to secure more projects in the coming future, logically the recurring income from selling energy to TNB for the next 21 years will also increase.

In the current scenario, it is expected to have more cash outflow than cash inflow due to the Company’s capital investment in the projects and the cash inflow can only be noticed clearly upon the commencement of the commercial operation date (“COD”) of the projects. The Company is expecting a significant amount of revenue and cash inflow to be generated in FY2021 from the completion of LSS 1 & 2 and WTE Plant.

However, Cypark is also expecting a significant cash outflow in year 2021 and 2022 due to capital investment of LSS 4 project and LSS 5 project.



7) Debt Collection (trade receivables)

Cypark has significant amount of trade receivables that is past due for more than 90 days. In AGM2020, Cypark mentioned the outstanding amount is mainly due by Gov agencies. The changes of Gov had impacted longer time in the processing of Cypark’s outstanding trade receivables and this is common whenever changes of administration happen.



DISCLAIMER:
All the information mentioned herein is solely for the purpose of education and references only.

REFERENCE:
- Cypark Annual Report 2019 , 2018, 2017
- Cypark latest Quarterly Report
- Cypark AGM 2020
- TNB Annual Report 2019
- http://ir.chartnexus.com/cypark/docs/agms/Summary%20of%20Key%20Matters%20Discussed%20at%20the%20Postponed%2015th%20AGM%20held%20on%2018%20June%202020.pdf
- https://www.nst.com.my/news/nation/2019/09/518408/malaysia-needs-rm33bil-investment-hit-renewable-energy-target
- https://www.st.gov.my/contents/2020/Copy%20of%20LSS%20Progress%20By%20Region%20(Q1).pdf
- https://www.power-technology.com/comment/malaysia-needs-us8-billion-investment-to-achieve-20-renewable-energy-target-by-2025/
- https://www.theedgemarkets.com/article/govt-targets-six-wastetoenergy-plants-2021
- https://www.theedgemarkets.com/article/better-earnings-visibility-prospects-cypark
- https://www.theedgemarkets.com/article/cypark-sees-doubledigit-revenue-growth
- https://www.theedgemarkets.com/article/tnb-awards-three-lss3-projects-total-capacity-29088-mwac
- https://www.theedgemarkets.com/article/cypark-reorganises-loans-address-debtcash-flow-mismatch