Cypark Resources Bhd
(April 8, RM2.86)
Maintain outperform with target price of RM3.20: Having secured a construction-related job just about a month ago, Cypark has announced its successful tender for the proposed upgrading of the Kajang Silk Highway from the Uniten Interchange to the UPM Interchange.

The earlier contract involved a one-year RM17.8 million job to construct Phase 1 and 2 of the Fairview International School in Nusajaya, Johor. The latest is an 18-month RM34.5 million contract which is expected to be completed by October 2015. Again, this is a welcome development as it replenishes its order book for its non-renewable energy segment.

We make no adjustments to our earnings estimates however as this also forms part of our replenishment assumption of about RM100 million per annum for the coming years. We continue to like the value proposition Cypark promises, with ongoing growth in its renewable energy business providing the thrust going forward.

With 29.3mw of capacity planted up and only 27.3mw of solar power exported as at the first quarter ended Jan 31 of financial year 2014 (1QFY14), 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 Bhd’s (1MDB) recent foray into the solar-generation space (50mw solar farm in Kedah), considering its other vast 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 1MDB in the Kedah solar farm project given its know-how, we see the group already thriving on its own regardless. The government’s recent move to hike the surcharge on electricity bills for the renewable energy fund from 1.0% to 1.6% effective Jan 1, 2014 augurs well, and also highlights its commitment to the industry’s growth.

Separately, the company has also commenced works in Ladang Tanah Merah, Negeri Sembilan, in preparation for the construction of a leachate area, sanitary landfill and weighbridge station. Expected to cost some RM300 million, the entire project will also comprise a biogas and biomass plant, with works only starting upon the signing of concession agreements with the federal government. — PublicInvest Research, April 8

This article first appeared in The Edge Financial Daily, on April 9, 2014.