CSE Global - RHB Invest 2019-01-16: Wins On Home Ground; Maintain BUY

CSE GLOBAL LTD (SGX:544) | SGinvestors.io CSE GLOBAL LTD (SGX:544)

CSE Global - Wins On Home Ground; Maintain BUY

  • CSE Global secured SGD84.8m infrastructure projects on home ground, bringing the segment’s order intake to SGD150.5m (+43.6% y-o-y) for FY18. The orders included government contracts for the provision of communication, and security solutions that involve surveillance work.
  • Taking into consideration the typical quarterly infrastructure order intake of SGD20-25m, we estimated the large orders to be SGD59-64m, consisting of the maintenance portion that should be recognised over several years.
  • Supposing 70-80% of the orders are project revenue, we estimate that project component to be recognised over the next few years should about SGD43- 49m.
  • Maintain BUY and DCF-backed TP of SGD0.59, 40% upside, plus 7% yield.

New projects in the pipeline to boost orderbook.

  • CSE GLOBAL LTD (SGX:544) is currently pursuing a few more projects in the infrastructure space. Recent contract wins are testament to its capabilities of providing mission-critical solutions. We are optimistic that it will be able to continue its winning streak.

Working on accretive acquisitions.

  • We understand that CSE Global is currently working with target companies, and remain hopeful that the acquisitions will be finalised in 1H19.
  • On 10 Jan 2019, it announced the acquisition of Blackstar Services for USD2.375m. This acquisition should boost product offering for the oil & gas segment.

Sound balance sheet and attractive 6.5% dividend yield.

  • Net cash of SGD 34.4m as at end-Sep 2018 should support its dividend payout, and the execution of its expansion plan.

Expect 4Q18 results to be in line, if not, better.

  • We believe that short-term volatility in the oil prices would not affect CSE Global’s oil & gas segment, as business flow remains stable. However, we do not foresee major greenfield projects coming on-stream anytime soon. Despite the lack of mega projects, we still see growth in the area of smaller brownfield and greenfield projects.
  • We keep our forecasts unchanged, as large greenfield projects (SGD42m) secured in 2017 are near completion, and new contracts secured (c.SGD59- 64m) would likely offset the absence of revenue from the oil & gas segment as earlier forecasted.
  • Overall, we expect 4Q18 and FY18 results to be in line with our forecasts, and do not expect any negative surprises.

Lee Cai Ling RHB Securities Research | Jarick Seet RHB Invest | https://www.rhbinvest.com.sg/ 2019-01-16
SGX Stock Analyst Report BUY MAINTAIN BUY 0.590 SAME 0.590