This article first appeared in The Edge Financial Daily, on April 4, 2016.

Cypark Resources Bhd
(April 1, RM1.92)
Maintain ourperform and revise up target price to RM2.56 from RM2.25: Cypark Resources Bhd reported a strong first quarter of financial year 2016 (1QFY16) ended Jan 31, 2016 revenue of RM68.8 million.

All segments, except for the landscaping and infrastructure segment, recorded impressive year-on-year (y-o-y) growths.

Its environmental engineering segment registered a 29.4% growth in revenue due to more work activities in Phase 2 of the Ladang Tanah Merah (LTM) project upon Cypark’s formalisation of appointment as engineering, procurement, construction and commissioning contractor in 4QFY15.

While contributions from the maintenance and renewable energy (RE) segments were relatively small at 16.6% of total revenue, the segments registered healthy 47.1% and 7.7% y-o-y growth respectively.

Revenue from the landscaping and infrastructure segment was relatively flat at -4.6% y-o-y.

Higher revenue recognition and savings in finance costs lifted 1QFY16 net profit to RM10.2 million from RM8.5 million in 1QFY15.

Its net profit margin improved slightly to 14.8% versus 14.2% in the previous corresponding year.

We see robust growth in FY18, driven by the commissioning of its 20mw biomass and 5MW biogas plants.

Commercial operations of both plants are expected by end-calendar year 2017 and the company expects to receive full scope of renewable energy revenue by then, which will be reflected in FY18.

We have made some changes to our assumptions including higher contributions from the non-RE segment, while excluding contributions from the unutilised solar quota. We have also included earnings contributions from LTM for its biomass and biogas plants to commence by 2018.

In addition, we ascribe a lower price-earnings multiple to the non-RE segment (from eight times previously to six times) to account for earnings volatility in the construction, landscaping and maintenance business segments. — Public Investment Bank, April 1