Maybank Investment Bank (Maybank) reported today (July 2) that Cypark Resources (CYP MK) faced significant challenges in its latest financial quarter, culminating in a headline net loss of MYR66 million for 4QFY24, leading to a full-year FY24 net loss of MYR110 million. Adjusted for one-off items, the core losses were MYR22 million for the quarter and MYR44 million for the year, exceeding both Maybank's and consensus forecasts. This underperformance was primarily attributed to higher costs incurred in its Renewable Energy (RE) and Waste-to-Energy (WTE) segments.

Maybank has adjusted its core net profit forecasts for FY25 and FY26 by -65% and +59% respectively, while introducing FY27 estimates. Despite these challenges, Maybank maintains a HOLD rating on Cypark Resources with a revised sum-of-parts (SOP) target price of MYR0.83, down from MYR0.86 previously.

In FY24, Cypark's revenue aligned closely with Maybank's expectations, with a notable increase in construction revenue during 4Q driven by a hospital project. However, the RE and WTE segments saw declines in revenue (-4% and -5% respectively), primarily due to reduced contributions from LSS construction and lower green energy sales caused by a fire incident. Both segments reported pre-tax losses for 4Q due to escalated administration and maintenance costs.

Looking ahead to FY25, Cypark anticipates positive contributions from the completed LSS3 project in Terengganu and the ongoing construction of a private hospital, which still holds MYR62 million worth of remaining contracts to be completed during the year. However, Maybank has revised down its forecast for new job wins in FY25 to MYR100 million (from MYR150 million), reflecting current market conditions.

In waste management and WTE operations, Cypark is expecting the first revision of tipping fees by 3QCY24. A hypothetical MYR1 per metric ton per day increase could potentially add MYR300,000 in additional annual revenue for this segment.

Currently, Cypark manages approximately 261MWp of RE assets and aims to expand this to about 358.9MWp by the end of 2024, with ambitions to reach 800MWp by 2027. The completion of the LSS3 project marks a significant milestone, contributing positively to its RE operations for the next two decades.

Despite the recent setbacks, Cypark remains a pivotal player in renewable energy, green tech, and waste management sectors in Malaysia. Maybank's HOLD recommendation underscores caution amidst current market conditions, with a focus on Cypark's strategic initiatives and operational efficiencies to navigate future challenges and capitalize on growth opportunities in the evolving environmental services landscape.