CSE Global - CGS-CIMB Research 2020-02-04: Bolstered Backlog!

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

CSE Global - Bolstered Backlog!

  • CSE GLOBAL (SGX:544) today revealed that it achieved c.S$230m new orders in 4Q19, taking its FY19 win to S$580m (+50% y-o-y).
  • While within our expectations, we are still excited with this as we see it as confirmation its end-FY19 order book exceeded S$300m (2018: S$181m).
  • We expect CSE to report FY19F net profit of S$22.5m (+9% y-o-y). We keep our forecasts, call and Target Price. Reiterate CSE as our favourite small cap.

S$230m order intake in 4Q19, padding order backlog

  • Order wins in 4Q19 include oil & gas greenfield projects worth a total of US$74.7m (S$103.7m) announced in Oct 2019, implying brownfield projects worth c.S$120m.
  • According to CSE, of the S$230m new orders won, S$190m were by its oil & gas division, S$25m by its infrastructure division, and S$16m by its mining division.
  • FY19 order intake rose 50% y-o-y to S$580m (vs. c.S$384m in 2018), fuelled mainly by CSE’s oil & gas (+c.100% y-o-y) and mining (c.+200% y-o-y) divisions.
  • We estimate that CSE could end FY19F with an order backlog of at least S$300m (end-3Q19: S$232.6m), its highest order backlog in five years.

4Q19F preview

Reiterate ADD

  • CSE has been our preferred small cap O&G pick in part due to its
    1. earnings growth potential,
    2. sustained dividend; and
    3. padded order backlog.
  • As at end-Sep 2019, CSE was in a net debt position due to acquisitions. Nevertheless, we look favourably on the acquisitions as they are earnings-accretive and could lead to cross-selling synergies for CSE’s Americas business.
  • Our Target Price of S$0.73 is based on 13.5x CY20F P/E (+0.5 s.d. of its 5-year mean due to the company’s better footing from FY19F onwards).
  • Stronger-than-expected order wins and GPMs are potential re-rating catalysts.
  • Lower than-expected order wins and GPMs are key downside risks to our ADD call.

Cezzane SEE CGS-CIMB Research | https://www.cgs-cimb.com 2020-02-04
SGX Stock Analyst Report ADD MAINTAIN ADD 0.730 SAME 0.730