KUALA LUMPUR (March 25): Cypark Resources Bhd (KL:CYPARK) is poised for a significant revenue boost in its fourth quarter after receiving government approval to nearly triple the tipping fee at its Negeri Sembilan waste-to-energy (WTE) facility. 

The Ministry of Housing and Local Government greenlit the increase, which is expected to align with the RM96/tonne rate proposed for Sungai Udang’s upcoming WTE plant — up sharply from the current RM33/tonne.

Further, analysts project that the revised fee could add up between RM300,000 to RM20 million annually to Cypark’s top line.

“Nevertheless, we are adopting a cautious stance and maintaining our current estimates for the time being, awaiting the release of the 3QFY2025 results later this week to confirm the effectiveness of the plant’s rectification works, following the recent fire incident,” said PublicInvest Research in a note on Tuesday.

Without giving specific estimates, PublicInvest Research said Cypark may see a substantial revenue boost in its 4QFY2025 to reflect two years’ worth of retroactive adjustments dating back to April 2023.

The house said the timing of the tipping fee proves fortuitous as the Ladang Tanah Merah plant resumed operations in October 2024, following fire-related downtime, during which Cypark implemented upgrades to improve efficiency.

Separately, Maybank Investment Bank (Maybank IB) estimated that based on a RM1/metric ton (MT)/day of municipal solid waste (MSW) increase in tipping fees could generate around RM300,000 in additional annual revenue for the segment.

“However, as we had already factored in the higher tipping fee in our financial projections, hence made no changes to our core earnings forecast,” said Maybank IB, maintaining its “buy” call on the stock, with a revised target price of 87 sen.

PublicInvest maintained its “neutral” rating on Cypark, with an unchanged 80 sen target price, pending verification of post-rectification performance in the firm’s upcoming 3QFY2025 results. 

It noted that the WTE facility, operational since December 2022 under an 18-year feed-in tariff agreement, now stands to benefit from both improved economics and enhanced operational reliability.

Market watchers await confirmation that the plant’s technical upgrades have addressed prior reliability concerns, added PublicInvest.

If proven effective, the combination of higher tipping fees and stabilised operations could deliver sustained earnings momentum, potentially warranting future estimate revisions, said the house.

For now, Cypark’s strategic positioning in Malaysia’s WTE sector grows stronger, though execution risks linger from its recent operational challenges.

Cypark shares shed half a sen or 0.7% to settle at 71.5 sen at the time of writing on Tuesday, valuing the group at RM588 million.