by winston » Sun Jun 07, 2015 10:32 am
not vested
CYPARK RESOURCES BHD
Current share price: RM1.81
CYPARK manages waste landfills and solar farms in Negri Sembilan, Perlis, Pahang and Johor. There are various synergies in the company businesses. Treated landfills supplies feed stock at practically “zero-cost” for its renewable energy ventures.
The landfill grounds that are not suitable for other uses are ideal for the placement of solar panels to harvest sunlight. Methane gas emissions from rubbish decomposition, meanwhile, can be channeled toward the powering of a gas turbine while bio-degradable organic solid waste can be used in a biomass plant.
Cypark is one of the best proxies for renewable energy (RE) exposure in Malaysia. It has commenced the construction of its waste-to-energy (WTE) project, the SMART WTE, in Ladang Tanah Merah, Negri Sembilan, Malaysia while continuing its journey to bring economic transformation to remediated landfills.
It has obtained approval to operate a 20MW + 5MW waste to energy power plant which will be fuelled by waste from its landfill. This concession is for the period of 25 years at a tariff of RM0.455/kwh. The power plant will start producing power in 2017 but in the meantime, we estimate it will receive RM15mil from its landfill annually.
The cost of the project is RM400mil, which explains the high gearing currently. However, a simple discounted cashflow calculation shows that this project’s value is equivalent to that of its current market cap, and investors are obtaining other projects and assets for “free”.
With the current market volatility, we prefer stocks that are defensive and have secured business model like Cypark. The company has proposed a private placement of new shares to raise up to RM70mil with a substantial portion to be taken up by its co-founder and group chief executive officer Datuk Daud Ahmad.
We are comforted that its group CEO is confident to put about RM35mil of his own money into the company. We like companies where management’s motivation and our investment objective are aligned.
Source: TA Investment Management Bhd
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