• Cypark announced that its 98MWdc LSS2 Danau Tok Uban (DTU) floating solar farm has achieved its initial operations date (IOD) on 16th November 2024.

• We are positive on this as it will generate recurring income for the next 21 years. More importantly, the company no longer has delayed solar projects in hand and thus it will be able to fully focus on its next growth projects moving forward.

• No revision is made to our earnings forecast as we have included the earnings contribution from the project.

• Despite our positive outlook, we downgrade the stock to a SELL following recent rally in share price. We advise investors to revisit the stock at lower price level. Our TP is kept unchanged at RM0.61.

• Key risks to our recommendation include upside from: (i) new win in WTE concession asset, and (ii) further expansion in operation of solar assets such as from CRESS initiative.

LSS2 DTU Attained Initial Operation Date

Cypark announced that LSS2 98MWdc Danau Tok Uban (DTU) project - Malaysia’s largest floating solar plant - has achieved Initial Operation Date (IOD) on 16th November 2024. The DTU sites comprises of two interconnected floating solar plants (i.e. DTU 1 and DTU 2) and it will gain full commercial operation soon. To recap, Cypark is the turnkey financier and engineering, procurement, construction, and commissioning (EPCC) contractor for the project.

No More LSS Delayed Project in Hand

The commissioning of this project will expand Cypark’s solar asset in operation to reach 407MW. Earlier, its LSS3 Merchang hybrid solar project with a total capacity of 172MWdc have reached its commercial operation date (COD) in June 2024. Despite facing significant delay, we are positive as both projects finally will be able to generate recurring income to the group over the next 21 years. More importantly, the company no longer has delayed solar projects in hand and thus it will be able to fully focus on its next growth projects moving forward.

Opportunity from CRESS

In Nov 2024, Cypark (29%) has signed a MOA between Melaka Corporation (20%) and Jakel Capital (51%) for planning, generation, and distribution of energy to the German Technology Park in Melaka for at least 1,000 MW of solar electricity for over the next 5 to 7 years. The park aims to be a hub of innovation and sustainable development in Southeast Asia. Cypark guided that the project requires a total capex of RM4bn for the integration of RE and energy management systems including battery storage solutions (a lower wheeling charges via CRESS) to ensure firm and cost-efficient power supply. As compared to LSS project, CRESS allows developers and consumer to negotiate tariff directly, potentially translating to a better return. While we view it positively, we will review our earnings estimate once we get better clarity on the project progress from management.

Earnings Revision

No revision is made to our earnings forecast as we have taken into account the earnings contribution from the project in our estimate.

Downgrade to SELL at TP of RM0.61

Following the recent rally in share price, we downgrade Cypark to a SELL with unchanged TP of RM0.61. Our valuation is derived based on DCF valuation with a WACC of 4.7%. We think that its WTE segment outlook to remain uncertain at this juncture given persistent prolonged outage since Feb 2023. Key risks to our recommendation include: (i) new win in WTE concession asset, and (ii) further expansion in operation of solar assets such as from CRESS initiative.

Source: BIMB Securities Research - 18 Nov 2024