Cypark‟s 1HFY13 net profit RM17.1mn came in broadly within expectations, making up 45% of our recently revised full-year estimates, which we expect to be met upon further recognition of earnings from landfill remediation works and constructionrelated activities. Profit contributions continue to be derived from its environmental engineering (EE) business, as well as landscaping and infrastructure (LI) at this point. Contributions from its renewable energy (RE) ventures continue to grow meanwhile, with revenue of just under RM1mn a year ago to RM9.9mn currently. Our Outperform call is reaffirmed, with an unchanged target price of RM2.70, based on a 9x multiple to a FY14 EPS of 30.1sen. We continue to see this valuation as conservative, as the discounted cash flow value of its renewable energy business alone is already RM2.74, and which will only contribute an eventual 70% to Group bottom-line.

Revenue (+16.2% q-o-q, +28.4% y-o-y): Stronger revenue growth was attributed to works related to its waste-to-energy (biomass) project. Though 1HFY13 revenue only makes up 42% of our full-year estimates, we are leaving our numbers unchanged as we anticipate greater RE and new EE contributions to pick up the slack in the coming quarters.

Net Profit (+59.6% q-o-q, +21.4% y-o-y): RE contributions were most telling at the net profit level, owing to its gradually rising income and also tax incentives granted. The Group‟s export capacity of green electricity has increased from 8MW to 19MW since the beginning of 2013.

Progress updates: With the exception of its biomass venture which has not commenced owing to General Election-related delays, all other renewable energy ventures are on track. 19MW of solar capacity has already been planted-up in Negeri Sembilan as well as sites in Johor and Perlis, all of which will be accorded feed-in-tariff rates of 95sen/KWh. A further 14MW will be completed throughout the course of this year, with the remaining 7MW capacity to commence in 2014. For biogas, 1.5MW has already been installed, but has not obtained the feed-in-tariff commencement date as yet. Another 1.5MW will be completed by 2HCY13, with its remaining 4MW to be done by next year. Its biomass project meanwhile, is currently awaiting Cabinet approval, with the concession expected to be signed in July.

Source: PublicInvest Research - 1 Jul 2013