cypark resources berhad : public issue of 30.0m new shares, and offer for sale of 20.0m shares -...

8/8/2019 Cypark Resources Berhad : Public Issue Of 30.0m New Shares, And Offer For Sale Of 20.0m Shares - 13/10/2010

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Table 1: Investment Statistics Bloomberg: CYP MK

Net EPSFYE Turnover Profit EPS Growth PER P/ NTA P/ CF ROE Gearing GDYOct (RMm) (RMm) (sen) (%) (x) (x) (x) (% ) (x) (%)2009 94.0 9.4 6.5 134.9 21.4 5.5 14.1 25.5 1.6 0.02010f 193.6 20.1 13.9 113.4 10.0 2.4 7.3 24.4 0.4 2.52011f 221.4 23.2 16.0 15.0 8.7 2.0 6.5 23.2 0.2 2.92012f 253.3 26.5 18.3 14.5 7.6 1.7 5.9 22.1 0.1 3.3Valuations based on estimated fair value of RM1.39/share

Issued capital (m shares) 145.0 (RM0.50 par) Market capitalisation (RMm) 201.6

Cypark Resources Bhd (Cypark) is primarily engaged in: (1) The provision of integrated environmental technology and engineering solutions; and (2) Theprovision of integrated landscape services. For FY12/09, environmentalservices and landscaping division contributed 63.5% and 36.5% to totalgross profit respectively. Going forward, the environmental services divisionis expected to be the main earnings driver for Cypark as its currentoutstanding orderbook and projects tendered are mostly for the provision of environmental services such as landfill restoration and construction of leachate treatment plants.

While Cypark originally started off predominantly as a landscaping company,it has ventured into the provision of environmental technology andengineering solutions since 2004 with its first environmental project, the

Taman Beringin landfill closure (see Table 1). At present, its outstandingorderbook stands at RM294m (see Table 2). Cypark claimed that it is biddingfor about RM431.8m worth of new projects at present (see Table 3), but wethink the amount should be lower given that the contract for Brunei’s wastemanagement systems was already awarded to a consortium comprisingSingapore Technologies Engineering Ltd and QAF Ltd in June 2010.

Notwithstanding that, Cypark has also pitched a few proposals to therespective governments and the total value estimated is close to RM1.3bn(see Table 4). We believe Cypark stands a good chance of securingcontracts from the Ministry of Housing and Local Government of Malaysiagiven its track record in completing the Taman Beringin landfill closure andalso its 16 on-going national landfills restoration projects (see Figure 1),which are on-track to be completed by Nov 2011.

We believe Cypark’s business model is sound. It operates in a relativelyniche market with little or no direct competitors. Furthermore, the FederalGovernment appears commited to tackling the solid waste issues in Malaysia,having taken back solid waste management from the local authorities. Wethink that two initiatives announced under the 10MP benefits Cypark,namely: 1) Private operators will be licensed to operate solid wastemanagement and public cleansing services; and 2) The existing 112unsanitary landfills in Malaysia will be closed and rehabilitated, with someupgraded to sanitary landfills.

N e w L i s t i n g

Cypark R esources

Public Issue Of 30.0m New Shares, And Offer For Sale Of 20.0m Shares

Offer Price : RM1.10

Fair Value : RM1 .39

13 October 2010

Please read important disclosures at the end of this report.

LISTING DETAILS

Listing Sought

Listing Date

Public Issue

:

:

:

Bursa MalaysiaMain Market

15 Oct 2010

30m new sharesincluding:- 7.25m toMalaysian public- 3.0m toemployees- 19.75m toselected

investors

MAJOR SHAREHOLDERS

Tan Sri Razali bin Ismail ……32.5%

Daud bin Ahmad……………………9.1%

Siow Kwang Khee…………………10.0%

RHB ResearchInstitute Sdn BhdA member of theRHB Banking GroupCompany No: 233327 -M

M a l a s i a

M A R K E T D A T E L I N E

P P

7 7 6 7 / 0 9 / 2 0 1 1 ( 0 2 8 7 3 0 )

Toh Woo Kim(603) 92802158

[email protected]

A comprehensive range of market research reports by award-winning economists and analysts are exclusivelyavailable for download from w w w . r h b i n v e s t . c o m



13 October 2010

Table 1. Major Projects Awarded I n The Past

ProjectYear

Awarded ClientValue

(RMm)

Design, build and maintenance of Putrajaya Waterfront Promenade 2001 Putrajaya Holdings 153.0

Landscape works for MAS Tanjung Rhy Resort (now known as FourSeasons Resort, Langkawi) 2002 MAS Hotel & Boutiques S/B 7.0

Plan, program, design and build 40 hectares park in Cyberjaya 2002 National Landscape Department 27.0

Taman Beringin landfill closure and landscaping works 2004 DBKL 28.3

Landscape works for Precinct 15, Putrajaya 2005 Putrajaya Holdings 26.0

Landscaping works for Asian Games Village, Doha 2005 AG Middle East 102.7

Landscape and irrigation contract for Emirates Hill Drive, Dubai 2006 Emaar Properties PJSC 7.0

Development of Business Park Phase II in Burj Dubai 2006 Al Nekhrer Contracting Co LLC 7.0

O&M contract for the leachate treatment plant at Taman Beringin 2008 DBKL 2.2

Landscaping and irrigation works for the Palm Jumerah MarinaApartments Project in Dubai 2008 Shimizu Corporation 32.1

National Landfill Restoration project covering 16 landfill sites in 5 statesi.e. Negeri Sembilan, Johor, Terengganu, Pahang and Perlis. 2009

Ministry of Housing and LocalGovernment, Malaysia 483.1

Source: Company

Table 2. Outstanding Orderbook

ProjectProject

Value (RMm)Outstanding

Orderbook (RMm) Duration

National Landfill Restoration project covering 16 landfill sites in 5states i.e. Negeri Sembilan, Johor, Terengganu, Pahang and Perlis. 483.1 289.7 May 09 – Nov 11

Site Services Putrajaya Development Phase 2 1.3 0.5 Jun 09 – Sep 10

Infrastructure and roadworks package R11C, rectification works,Putrajaya 9.3 3.6 Mar 09 – Aug 10

Total Outstanding Order Book 293.8

Source: Company

Table 3. Projects tendered

Project Client Submission Date

Energy Efficient Waste Management Systems for Brunei Darulsalam Brunei Economic Development Board Sep 2009

Hardscaping works at Istana Negara, Kuala Lumpur Maya Maju S/B Nov 2009

Taman Beringin Transfer Station, Kuala Lumpur DBKL Feb 2010

Pembangunan Taman Botani Shah Alam MARDI Feb 2010

Proposed Construction and Completion of Roadworks, Drainage, andUtilities at Precincts 7 and 8, Putrajaya Putrajaya Holdings Jun 2010

Design and Build Taman Beringin Transfer Station LeachateTreatment Plant, Kuala Lumpur

Jabatan Pengurusan Sisa PepejalNegara Jul 2010

Total Value of Projects Tendered RM 431.8m

Source: Company

Table 4. Proposals Pitched

Proposal Title Client

Proposed Integrated Solid Waste Management Facility for Kedah, Terengganu,Pahang, Johor & Negeri Sembilan (Private Finance Initiative) Ministry of Housing & Local Government,Malaysia.

The Waste Management Project in Timor LesteMinistry of State Administration andTerritorial Management, Timor Leste.

Proposed Safe Landfill Closure and Remediation in Kedah and PerakMinistry of Housing & Local Government,Malaysia

Operation & Maintenance (O&M) for 16 landfills currently being restored by CyparkMinistry of Housing & Local Government,Malaysia

Total Estimated Value of Proposals Marketed RM 1,294m

Source: Company

CYPAK 2 RESOURCESA comprehensive range of market research reports by award-winning economists and analysts are exclusivelyavailable for download from w w w . r h b i n v e s t . c o m



13 October 2010

Source: Company’s Website

We believe the growth prospects of Cypark’s environmental services division are good as the company will

benefit from the Government’s plan to close or upgrade existing 112 unsanitary landfills in Malaysia under the

10MP. Typical contract value for the closure and remediation of a landfill site could range from RM20-30m

depends on the size. Furthermore, there are also needs for O&M contracts subsequently for the operation of the

leachate treatment plant as well as constant monitoring and maintenance works post-closure of a landfill site.

O&M contract values are typically RM2-3m and for a 2-year period. On the current 16 national landfills being

remediated by Cypark, nine have been confirmed to require a leachate treatment plant onsite as the daily

leachate volume is substantial.

At the helm of the company are CEO Mr Daud bin Ahmad and executive director Mr Siow Kwang Khee, both are

the co-founders of Cypark. Mr Daud has over 19 years of experience in the area of accounting, finance and

business development. On the other hand, Mr Siow is a chemical engineer by profession with almost 25 years

of experience in managing various businesses throughout Asia.

At the offer price of RM1.10, the IPO will raise RM33.0m gross proceeds (see Table 5 for IPO proceeds

utilisation). Post-IPO, the company is estimated to be in a net gearing of 0.26x (proforma as at 31 March

2010, but adjusted for RM55.0m receivables collected subsequently).

Fig 1: Location of 16 national landfills currently being remediated by Cypark




13 October 2010

Table 5. Utilisation Of Proceeds From The P ublic Issue

RM m

Repayment of overdraft facility 10.0

Working capital for expansion of business 2.0

Working capital for existing and future operations 18.6

Listing expenses 2.4

Total 33.0

Source: IPO Prospectus

We project Cypark’s net profit to jump by 113% in FY10/10 and 14.5-15.0% p.a. in FY10/11-12, mainly driven

by on-going and future government contracts for its environmental services division. Indicative fair value is

RM1.39 based on 8.5x CY11 EPS of 16.4 sen, in line with the market capitalisation weighted average of

comparable companies engaging in environmental and waste management related services listed on Bursa

Malaysia (see Table 6).

Table 6: Comparative Valuations

Company Bloomberg ticker Market cap (RMm) FY11 PER (x)

Progressive Impact PICB MK 154.6 9.4Analabs Resources ALR MK 96.0 6.0

Texcycle Tech TEXC MK 46.1 7.7

Brite-Tech BTEC MK 27.7 15.5

Market cap-weighted average 8.5

Source: RHBRI and Bloomberg

Table 7: Earnings Forecasts

FYE Oct (RMm) FY08 FY09 FY10f FY11f FY12f

Revenue 87.8 94.0 193.6 221.4 253.3

Growth (%) 7.1 105.9 14.3 14.4

EBITDA 15.1 17.7 33.8 37.8 42.3

EBITDA margin (%) 17.2 18.8 17.4 17.1 16.7

Depreciation & amortisation (0.4) (0.3) 0.4 0.4 0.4

EBIT 14.7 17.3 34.1 38.2 42.7

EBIT margin (%) 16.7 18.4 17.6 17.2 16.8

Finance costs (4.2) (4.5) (7.3) (7.3) (7.3)

Pretax profit 10.4 12.8 26.8 30.9 35.4

Pretax margin (%) 11.9 13.6 13.9 13.9 14.0

Tax expense (6.4) (3.4) (6.7) (7.7) (8.8)

Net profit 4.0 9.4 20.1 23.2 26.5

Net profit margin (%) 4.6 10.0 10.4 10.5 10.5Source: Company data, RHBRI’s forecasts




13 October 2010

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB InvestmentBank Berhad (previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted byapplicable law. The opinions and information contained herein are based on generally available data believed to be reliable and are subject to changewithout notice, and may differ or be contrary to opinions expressed by other business units within the RHB Group as a result of using differentassumptions and criteria. This report is not to be construed as an offer, invitation or solicitation to buy or sell the securi ties covered herein. RHBRI doesnot warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claimwhatsoever against RHBRI. RHBRI and/or its associated persons may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances andobjectives of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investorsindependently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness ofa particular investment or strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of itsaffiliates, employees or agents accepts any liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well asproviding investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, anymember of the RHB Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts ofcustomers, in debt or equity securities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respectivedirectors, officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investmentbanking or other services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previousreports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may notreflect information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensationbased upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15%

or more over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing

to take on higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information onrecommended securities, subject to the duties of confidentiality, will be made available upon r equest.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoeverfor the actions of third parties in this respect.

CYPAK 5 RESOURCES

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13 October 2010

RHB DEALING AND RESEARCH OFFICES

MALAYSIARHB Investment Bank BhdLevel 10, Tower One, RHB Centre,Jalan Tun Razak50400 Kuala LumpurP.O. Box 1269950786 Kuala Lumpur, Malaysia

Tel (General) : (603) 9285 2233

Dealing OfficeTel (Dealing) : (603) 9285 2288Fax (Dealing) : (603) 9284 7467

RHB Research Institute Sdn BhdLevel 10, Tower One, RHB Centre,Jalan Tun Razak50400 Kuala LumpurP.O. Box 1269950786 Kuala Lumpur, Malaysia Tel (Research) : (603) 9280 2160Fax (Research) : (603) 9284 8693

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Lim Chee SingDirector RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation.Additional information on recommended securities, subject to the duties of confidentiality, will be made available uponrequest.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI andRHBRI accepts no liability whatsoever for the actions of third parties in this respect.

cypark resources berhad : public issue of 30.0m new shares, and offer for sale of 20.0m shares -...

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