CYPARK (5184) S

Update: 11/March/2021

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: This year
- Daud (CEO) estimated RM10 million annually
- This will contribute to FYE 2021

LSS2 - 3 x 50 MWac = 150 MWac
- Targeted Commercial Operation Date: This year
- Daud (CEO) estimated RM25 million annually
- To contribute revenue in FYE 2021

WTE - 20 to 25 MWac
- Targeted Commercial Operation Date: Mid 2021
- Daud (CEO) estimated RM80 million annually
- To contribute revenue in FYE 2021

LSS3 - 100 MWac
- Targeted Commercial Operation Date: 2022
- Daud (CEO) estimated RM50-60 million annually
- To contribute revenue in 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)



4a) Prospects on Green Tech and RE

According to AR2020, Cypark targets to achieve beyond 500 MWdc by FYE2022. 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 21.7%.

Cypark's revenue comes from four segments as follow:
* Data from Cypark AR2020 *
- RM214 | 79% - Environmental engineering
- RM20 | 6.5% - Landscaping and infrastructure
- RM4 | 1.3% - Maintenance works
- RM66 | 21.7% - Green Tech and RE

Cypark "Green tech and RE" revenue (MYR)
- FYE2014 - 34,954,629
- FYE2015 - 39,665,233
- FYE2016 - 46,544,314
- FYE2017 - 48,713,260
- FYE2018 - 48,784,125
- FYE2019 - 59,020,364
- FYE2020 - 65,856,536

According to the AR2020, by FYE2022, Cypark will increase its ownership of RE asset capacity to 245MWp from its current operating capacity of 47 MWdc.

In addition to its own assets, Cypark will operate a total of 150MWp solar assets under its EPCC + Operation and Maintenance (O&M) long term contract. In total, the number of secured capacity of solar assets built, owned and/or operated by Cypark will reach over 395 MWdc.

With only 47 MWdc, the sales of energy already contributing about 65 millions revenue annually. 395 MWdc definitely will contribute positively to Cypark revenue.



4b) Prospects on LSS 5, 6 & WTE

Cypark believe there will be further extension to the LSS programme possibly LSS5 and LSS6 as this will further enhance Malaysia’s green and renewable energy aspiration in achieving a total of 20% renewable energy mix by 2025.

Cypark's On Waste-to-Energy (WTE), is the first of its kind in Malaysia, is expected to be in commission by the mid of 2021. There will be another five WTE tenders that will be announced in the near future, targeted to be developed in Melaka, Johor, Pahang, and Kedah



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 2020, 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