Excerpts from KGI Research report

Analyst: Joel Ng

♦ There were no surprises in CSE’s 1Q19 earnings, which made up 22% of our full-year forecast.

CSE GLOBAL

Share price: 
50 c

Target: 
58 c

 We are positive on CSE’s outlook on the back of 13-20% EPS growth in the next 3 years from better industry prospects and from synergies with its new major
shareholder.

 Maintain BUY. CSE’s valuations are attractive, trading at 12/11/9x 2019/20/21F EPS. We expect downside risks to be mitigated by its above-industry 5.5% dividend yield.


1Q19 review. Although revenue in 1Q19 declined 7% YoY to 
S$85.4mn, net profit rose 0.5% YoY to S$5.7mn on the back of a 90bps improvement in gross profit margins to 27.7%.

EddieFoo219CFO Eddie Foo. NextInsight file photo.Its 
Oil & Gas segment’s contribution declined to 68% of total revenues, down from 71% in the prior year period.

This was 
offset by an increase in its infrastructure segment, where contribution rose to 27% of total sales in the quarter, up from 26% in the prior year period.


Healthy order wins. CSE won S$87.5mn of new orders in 1Q19, bringing its net order book to S$182.2mn as at the end of the latest quarter.

67% of CSE’s outstanding orders 
are in the Asia-Pacific, and the remainder from the Americas and Europe/Middle East/Africa.

Sector focus in 2019. CSE will be focusing on several opportunities in its key business segments. In the Oil & Gas, management will continue its push into onshore shale projects in the US, as well as small greenfield or brownfield projects in the Gulf of Mexico.

Its infrastructure business will 
focus on Singapore government projects, and energy solutions and radio business in Australia.


Valuation & Action: CSE is currently trading at 13/11/9x 2019/20/21F EPS, which is attractive in our view given its solid balance sheet, asset light model and stable recurring free cash flows.

JoelNg10.16Management has guided that it will maintain the 2.75 SG cents dividend in FY19 - the same as in the last four years - implying an above-industry yield of 5.6%.

-- Joel Ng, analyst (photo)


We thus maintain our BUY recommendation and believe that average EPS growth of around 16% p.a. over 
the next 3 years is achievable on the back of improving industry dynamics.

Its balance sheet remains in an enviable net cash position of S$35mn as at end 1Q19.


Risks: Margin pressure due to competition and lower-than-expected new order wins. Foreign exchange risks due to its exposure to USD, AUD and EUR.

Full report here.


Share Prices

Counter NameLastChange
AEM Holdings1.1300.030
Alliance Mineral0.125-0.003
Anchor Resources0.014-
AusGroup0.027-
Avi-Tech Electronics0.2850.015
Best World Int.1.360-
China Sunsine1.1400.010
CSE Global0.480-0.005
Food Empire0.495-
Geo Energy0.157-
Golden Energy0.2050.005
GSS Energy0.0840.003
HMI0.715-
ISDN Holdings0.235-
KSH Holdings0.420-
Miyoshi0.043-
Moya Asia0.076-
Nordic Group0.2900.005
Oxley Holdings0.330-
REX International0.0680.001
Riverstone0.915-0.005
Roxy-Pacific0.390-0.005
Sing Holdings0.405-
SingMedical0.380-0.005
Sino Grandness0.0500.004
Straco Corp.0.755-0.005
Sunningdale Tech1.4000.010
Sunpower Group0.480-
The Trendlines0.078-0.002
Tiong Seng0.230-
Uni-Asia Group0.7550.010
XMH Holdings0.153-
Yangzijiang Shipbldg1.5200.010

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