Maybank Investment Bank Bhd (Maybank IB) has maintained its HOLD recommendation for Cypark Resources Bhd, setting a higher target price of 87 sen, an increase of 14 sen from the previous target of 73 sen. This adjustment follows an update to the bank's earnings forecasts, anticipating improvements in the company's performance in the second half of fiscal year 2025 (2HFY25).

Cypark's 2QFY25 results showed a headline net profit of RM0.3 million, though the first half of FY25 saw a net loss of RM26 million, exceeding both Maybank IB and consensus expectations. The core loss for 2Q stood at RM30 million, bringing the 1H core loss to RM55 million.

This miss was attributed to the de-recognition of deferred tax assets and higher financing costs. Despite the shortfall, Maybank IB raised its earnings forecasts for FY26 and FY27, driven by improved outlooks for the company's engineering, procurement, construction, and commissioning (EPCC) projects and waste-to-energy (WTE) operations.

The group's renewable energy (RE) and WTE segments saw revenue increases in 2Q, with RE revenue growing 21% quarter-on-quarter and WTE revenue increasing 13%. This was due to higher contributions from Cypark's newly completed Large-Scale Solar 3 (LSS3) project in Terengganu and insurance compensation following a fire incident in April 2024.

The RE operations recorded a pre-tax profit of RM24 million, largely due to a RM30 million reversal of provision, while the WTE segment's pre-tax loss narrowed to RM8 million, aided by the insurance payout. However, the group's tax burden was higher than expected in 2Q due to the one-off derecognition of RM7 million in deferred tax assets.

Looking ahead, Maybank IB expects Cypark's LSS2 projects in Kelantan to achieve commercial operations in January or February 2025, triggering scheduled payments from Tenaga Nasional Bhd for electricity sales. The WTE plant, which had been undergoing unscheduled downtime and upgrades since April 2024, resumed operations in October 2024, further improving the company's outlook.