PP 7767/09/2011(028730)

Malaysia
RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

New Listing 13 October 2010

MARKET DATELINE

Cypark Resources Offer Price : RM1.10

Fair Value : RM1.39

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

Table 1: Investment Statistics Bloomberg: CYP MK

Net EPS
FYE Turnover Profit EPS Growth PER P/NTA P/CF ROE Gearing GDY
Oct (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 0.0
2010f 193.6 20.1 13.9 113.4 10.0 2.4 7.3 24.4 0.4 2.5
2011f 221.4 23.2 16.0 15.0 8.7 2.0 6.5 23.2 0.2 2.9
2012f 253.3 26.5 18.3 14.5 7.6 1.7 5.9 22.1 0.1 3.3
Valuations based on estimated fair value of RM1.39/share

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

X Cypark Resources Bhd (Cypark) is primarily engaged in: (1) The provision of
LISTING DETAILS
integrated environmental technology and engineering solutions; and (2) The
Listing Sought : Bursa Malaysia
provision of integrated landscape services. For FY12/09, environmental
Main Market
services and landscaping division contributed 63.5% and 36.5% to total
gross profit respectively. Going forward, the environmental services division Listing Date : 15 Oct 2010
is expected to be the main earnings driver for Cypark as its current
outstanding orderbook and projects tendered are mostly for the provision of Public Issue : 30m new shares
including:
environmental services such as landfill restoration and construction of
- 7.25m to
leachate treatment plants. Malaysian public
- 3.0m to
X While Cypark originally started off predominantly as a landscaping company,
employees
it has ventured into the provision of environmental technology and - 19.75m to
engineering solutions since 2004 with its first environmental project, the selected
Taman Beringin landfill closure (see Table 1). At present, its outstanding investors
orderbook stands at RM294m (see Table 2). Cypark claimed that it is bidding
for about RM431.8m worth of new projects at present (see Table 3), but we MAJOR SHAREHOLDERS

think the amount should be lower given that the contract for Brunei’s waste Tan Sri Razali bin Ismail ……32.5%
management systems was already awarded to a consortium comprising Daud bin Ahmad……………………9.1%
Singapore Technologies Engineering Ltd and QAF Ltd in June 2010. Siow Kwang Khee…………………10.0%

X Notwithstanding that, Cypark has also pitched a few proposals to the

respective governments and the total value estimated is close to RM1.3bn
(see Table 4). We believe Cypark stands a good chance of securing
contracts from the Ministry of Housing and Local Government of Malaysia
given its track record in completing the Taman Beringin landfill closure and
also its 16 on-going national landfills restoration projects (see Figure 1),
which are on-track to be completed by Nov 2011.

X We believe Cypark’s business model is sound. It operates in a relatively

niche market with little or no direct competitors. Furthermore, the Federal
Government appears commited to tackling the solid waste issues in Malaysia,
having taken back solid waste management from the local authorities. We
think that two initiatives announced under the 10MP benefits Cypark,
namely: 1) Private operators will be licensed to operate solid waste Toh Woo Kim
(603) 92802158
management and public cleansing services; and 2) The existing 112
toh.woo.kim@rhb.com.my
unsanitary landfills in Malaysia will be closed and rehabilitated, with some
upgraded to sanitary landfills.

Please read important disclosures at the end of this report.

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 13 October 2010

Table 1. Major Projects Awarded In The Past

Year Value
Project Awarded Client (RMm)

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

Landscape works for MAS Tanjung Rhy Resort (now known as Four
Seasons 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 Marina

Apartments Project in Dubai 2008 Shimizu Corporation 32.1

National Landfill Restoration project covering 16 landfill sites in 5 states Ministry of Housing and Local
i.e. Negeri Sembilan, Johor, Terengganu, Pahang and Perlis. 2009 Government, Malaysia 483.1

Source: Company

Table 2. Outstanding Orderbook

Project Outstanding
Project Value (RMm) Orderbook (RMm) Duration

National Landfill Restoration project covering 16 landfill sites in 5

states 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, and
Utilities at Precincts 7 and 8, Putrajaya Putrajaya Holdings Jun 2010

Design and Build Taman Beringin Transfer Station Leachate Jabatan Pengurusan Sisa Pepejal
Treatment Plant, Kuala Lumpur Negara 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, Ministry of Housing & Local Government,
Pahang, Johor & Negeri Sembilan (Private Finance Initiative) Malaysia.

Ministry of State Administration and

The Waste Management Project in Timor Leste Territorial Management, Timor Leste.
Ministry of Housing & Local Government,
Proposed Safe Landfill Closure and Remediation in Kedah and Perak Malaysia

Ministry of Housing & Local Government,

Operation & Maintenance (O&M) for 16 landfills currently being restored by Cypark Malaysia

Total Estimated Value of Proposals Marketed RM 1,294m

Source: Company

CYPAK 2 RESOURCES
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 13 October 2010
Fig 1: Location of 16 national landfills currently being remediated by Cypark

Source: Company’s Website

X 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.

X 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.

X 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).

CYPAK 3 RESOURCES
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 13 October 2010

Table 5. Utilisation Of Proceeds From The Public Issue

RMm

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

X 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 9.4

Analabs 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 10.5
Source: Company data, RHBRI’s forecasts

CYPAK 4 RESOURCES
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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
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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.

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recommended securities, subject to the duties of confidentiality, will be made available upon request.

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CYPAK 5 RESOURCES

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 13 October 2010

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