Is Cypark Resources Bhd an Evergreen Stock To Bet On?

Listed on 15 October 2010, Cypark Resources Bhd (Cypark) is a leading provider of environmental engineering solutions, renewable energy and as well as green technology solutions in Malaysia. Presently, as of 15 October 2019, the firm has a market capitalisation of RM 654.4 million, which is a Nine-Year CAGR of 17.0% from RM 159.5 million when it was listed in 2010. In this article, I’ll be making a coverage on its financial results, future plans, and valuation ratios. 

Thus, here are 10 things to know about Cypark before you invest. 

  • Revenues
    Cypark has attained a CAGR of 8.4% in group revenues, increasing from RM 177.6 million in 2010 to RM 337.9 million in 2018. This is attributed to increasing order book in environmental engineering contracts and as well as growth achieved for its green technology and renewable energy division during the eight-year period. It has offsetted its fall in revenues from its landscaping division, which is a smaller division to Cypark.

Source: Cypark’s Annual Reports

  • Profitability
    Cypark had achieved 16.83% in shareholders’ earnings, increasing from RM 20.3 million in 2010 to RM 70.4 million in 2018. It is contributed by a stable growth from its environmental engineering division and higher  profit margins from its green technology and renewable energy division during the eight-year period.

    Despite rising earnings, Cypark has recorded dropping Return on Equity (ROE) from 23.22% in 2010 to 10.87% in 2018 because its shareholders’ equity has outgrown its growth in shareholders’ earnings for the past 8 years.

Source: Cypark’s Annual Reports

  • Cash Flow Management
    From 2010 to 2018, Cypark has brought in:

    – RM 169.2 million in net cash flows from operations.
    – RM 284.1 million in net equities.
    – RM 452.6 million in net long-term borrowings.
    – RM 18.4 million in net interest income.

    Out of which, Cypark has spent on the following:

    – RM 149.9 million on net capital expenditures (CAPEX).
    – RM 624.8 million on net acquisition of intangible assets.
    – RM 47.8 million in dividends to its existing shareholders.

    Overall, it has grown its cash reserves from negative RM 7.0 million to a total of RM 85.3 million in 2018.

Source: Cypark’s Annual Reports

  • Latest 12-Month Results
    Evidently, Cypark has maintained its growth trajectory in both revenues and earnings in the past four quarters. For the past 12 months, the firm had made RM 356.7 million in revenues and brought in RM 72.6 million in shareholders’ earnings or 15.53 sen in earnings per share (EPS).

PeriodQ4 2018Q1 2019Q2 2019Q3 2019Total
EPS (Sen)4.322.784.144.2915.53

Source: Cypark’s Quarterly Reports

  • Balance Sheet Strength
    As of 31 July 2019, Cypark’s non-current liabilities is RM 475.1 million & it has RM 707.0 million in shareholders’ equity. Thus, its gearing ratio is 67.2%. In addition, Cypark has current assets of RM 608.1 million and a total of RM 500.1 million in current liabilities. Hence, its current ratio is 1.28 presently.

  • Major Shareholders
    As of 23 January 2019, Cypark’s five largest shareholders are as follows:

Major ShareholdersShareholdings (%)
Dato’ Daud bin Ahmad (Daud) 15.26%
Tan Sri Razali bin Ismail (Razali)11.79%
Employees Provident Fund Board8.87%
Amanah Saham Bumiputera4.65%
Azmil Khalili bin Khalid3.83%

Daud is appointed as the Group CEO while Razali is made the Executive Chairman of Cypark.

  • Latest Contract: Access Road in Ladang Tanah Merah, Negeri Sembilan
    On 14 August 2019, Cypark had accepted the Letter of Award (LOA) for the design & building of Access Road to the Integrated Sanitary Landfill  Site at Ladang Tanah Merah, Negeri Sembilan. The contract value is RM 12.5 million and its stipulated completion date is on 25 August 2020.

  • Memorandum of Understanding (MoU)
    As of 10 October 2019, Cypark had signed three separate MoUs, where their details and purposes are summarised as follows:

MoU PartiesPurposes

NS Corporation
– Jointly Develop 50MW Solar Photovoltaic Projects
– Jointly Identify Potential Spots to be developed in Negeri Sembilan
– Effective Period: 2 Years

Petronas Chemical Group Bhd (PCGB)
– Assess Potential Collaboration to build Waste-to-Energy (WTE) Plant.
– Explore Joint Solutions for Plastic Pollutions in Malaysia.
– Effective Period: 5 Years

Menteri Besar Kedah Incorporated
– Jointly Develop 100MW Solar Photovoltaic Projects
– Jointly Identify Potential Spots to be developed in Kedah
– Effective Period: 12 Months
  • P/E Ratio
    As of 15 October 2019, Cypark is trading at RM 1.40 a share. Hence, its current P/E Ratio is 9.01, which is the lowest since its IPO in 2010.

  • P/B Ratio
    As of 31 July 2019, Cypark has net assets of RM 1.51 per share. Thus, it has a current P/B Ratio of 0.93, which is also the lowest since its IPO in 2010.

  • Dividend Yields
    In 2018, Cypark’s adjusted dividends per share (based on current no. of shares of 467.4 million) is 3.82 sen, which is an ongoing increase in DPS from 0.81 sen in 2010.

Source: Cypark’s Annual Reports

At stock price of RM 1.40 a share, its dividend yield is 2.73% a year. It is a bit higher than its eight-year average of 1.61%. But, it is still lower if it is to be compared with local FD rates of 3%-4% per annum currently. 

VIA’s Verdict 

Since IPO, Cypark has delivered increases in revenue, earnings and dividends to its shareholders. Moving forward, Cypark plans to work closely with both states of Kedah and Negeri Sembilan to further grow its renewable energy business in the next immediate few years. Cypark is trading below its long-term averages in terms of its P/E Ratio and P/B Ratio and offers 2.73% in dividend yields. 

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