CYPARK has no major issue in securing more projects for their environmental remediation business as they have good reputation in the industry and there are no strong competitors in Malaysia. While the environmental engineering and the landscaping & infrastructure segments are the main contributors to the company's income, however, the most interesting part of CYPARK is actually came from its renewable energy business. Currently CYPARK has the largest integrated renewable energy plant of the Southeast Asia, which including solar and biogas power generations, in Pajam, Negeri Sembilan. The current capacity of the power plant is around 8 MW of power generated by the solar plant, the management aims 25 MW at the end of this year and expects the capacity will achieve 60 MW of power at the end of FY13.
Why renewable energy? It is because the promotion on green electricity is encouraging at the moment in Malaysia. Revenue is secured by Power Purchase Agreement (PPA) - CYPARK has inked 2 long-term contract with Tenaga - 21-year 8 MW solar PPA (worth RM 11 mil) and 16-year 2 MW biogas PPA. Besides, renewable energy might be a good option to substitute the current power-generating materials, i.e. coal, fuel, natural gas, etc. and more environmental friendly - lower carbon emission compare to coal and fuel.
Anyway, there are concerns that may take into consideration: Renewable energy is costly compare to current energy sources while Malaysians are still enjoying one of the lowest electric tariff in the region. Besides that, the efficiency of turning solar energy into electricity is still very low, which is just about 20% - 30%. And, the supply of solar energy might be affected by monsoon seasons in Malaysia, which is, there will be no sunlight if the rainfall is heavy, especially during the year end.
Currently CYPARK is trading at historical P/E of around 12x. All in all, I believe that their earnings will grow 10% in FY12 compare to FY11 mainly of higher profit margin, stable earnings from environmental remediation and the upcoming contribution from renewable energy division.
From technical charting, CYPARK closes above the support level of 1.70. A downward-trend triangle is formed and the selling pressure is testing the support line of 1.70. Should CYPARK close below 1.70, the immediate strong support is expected to be 1.64 and 1.55. The chart would only show upward trend if the price violates and closes above 1.84 & the resistance will be 1.98. Anyway, look for it to trade sideways between 1.70-1.84 in short term.
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blogging activity that purely share my investment thoughts & ideas and
should not be used as recommendation to buy or sell any securities. I
may already have position in the above securities. Any action that you take
from the opinions or information of this blog is solely on your own
responsibility. Please consult your investment advisor before you make any
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