CSE GLOBAL LTD (SGX:544)
CSE Global 2Q19 - Awaiting The 2H Story
- CSE Global's 1H19 core net profit of S$9.6m accounted for 44% of both our and Bloomberg consensus' FY18 estimates of S$21.7m.
- CSE Global previously guided for a stronger 2H19F. 2Q19 order intake was strong at S$106.3m, padding end-2Q19F order backlog to S$188.1m
- 1.25Sct interim dividend declared (unchanged y-o-y); CSE Global maintains its full year dividend guidance of 2.75Scts. It will hold an analyst briefing tomorrow
Revenues up, margins intact
- CSE GLOBAL LTD (SGX:544)'s 1H19 revenue came in at S$185.3m (+0.5% y-o-y), buoyed by higher 2Q19 revenue of S$99.9m (+8.4% y-o-y, +17% q-o-q).
- The stronger 2Q19 revenue was due to
- higher oil and gas revenues (+8.8% y-o-y/+12% q-o-q) with the delivery of more offshore work; and
- strong mining and mineral revenue (+>100% both y-o-y and q-o-q) – we suspect due to more Australian mining work in 2Q19.
- 1H19 oil and gas and infrastructure revenue fell 4.5% and 5.4% y-o-y, respectively. We believe the completion of offshore projects secured in FY17 and Singapore infrastructure should occur from 3Q19F onwards.
Margins intact
- CSE Global's 1H19 gross profit margin (GPM) rose to 27.8% (1H18: 26.9%). We believe this was due to more higher-margin infrastructure and offshore oil projects were undertaken.
- 1H19 EBIT margin was 7.2% (1H18:7.1%).
- Overall core 1H19 net profit margin was 5.2% (vs. 1H18: 4.7%). We include SFRS lease expense of S$0.2m to derive our core net profit .
Strong order intake
- CSE Global's 2Q19 order win value rose to S$106.4m (vs. 1Q19: S$90.5m, 2Q18: S$89.1m) driven surprisingly by the mining & minerals division (S$13.8m, +200% y-o-y) and stronger infrastructure orders (+S$31.9m, +31.8% y-o-y).
- End-2Q19 order backlog was at S$188.1m (vs. S$182.2m at end-Mar 2019).
Interim dividend unchanged; balance sheet still shows net cash
- CSE Global announced an interim dividend of 1.25Scts, unchanged y-o-y, and maintained its full-year dividend guidance of 2.75Scts.
- It is still in a net cash position (5Scts/share).
Maintain Add; analyst briefing tomorrow
- CSE Global is hosting an analyst briefing tomorrow noon. We expect the main questions to centre on the company's
- forward order intake,
- 2H19 outlook, and
- future M&As.
- Our target price is based on 13.5x CY20F P/E (close to its historical 5-year mean of 13.1x).
- Stronger-than-expected order wins and GPM are potential stock catalysts.
- Lower-than-expected order wins and GPM are key risks to our ADD call.
Cezzane SEE
CGS-CIMB Research
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https://research.itradecimb.com/
2019-08-14
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