CSE Global - UOB Kay Hian 2021-04-07: Safe Proxy For Oil Recovery Backed By Attractive Dividend Yield Of > 5%

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

CSE Global - Safe Proxy For Oil Recovery Backed By Attractive Dividend Yield Of > 5%

  • We turn more positive on CSE Global as its oil and gas segment could be turning a corner with the rise in oil prices. Its order intake from infrastructure and mining grew 22% y-o-y in 2020 despite COVID-19.
  • Furthermore, the last time CSE Global secured a large greenfield order win in the infrastructure space was over two years ago, providing scope for a sizeable infrastructure project win in the near term.
  • CSE Global's dividend yield is above average at 5.1%. Upgrade to BUY with a 28% higher target price of S$0.68.

CSE Global - Proxy for rise in oil price.

  • While oil price volatility continues, the steady price rise has underpinned the nascent recovery of the oil industry. WTI is currently trading at US$50- 66, a sequential recovery of 38% above the average of US$44 in 2H20. The supportive factors for the oil price include supply curbs by OPEC, cold weather that swept across the US, particular Texas, and potential oil demand recovery in 2H21 as COVID-19 vaccines are being rolled out globally.
  • We believe CSE Global (SGX:544) is well positioned to leverage on opportunities in the recovering oil sector, making it a safe proxy for the rise in oil prices. The orderbook in CSE Global’s oil and gas segment was down 41% y-o-y in 2020, partly due to the high base in 2019. That said, the order intake for the segment rose 30% q-o-q in 4Q20, signalling that the segment could be turning a corner.

Infrastructure and mining segment resilient despite the pandemic.

  • Despite the impact from COVID-19, the orderbook for infrastructure and mining grew 21% and 22% y-o-y respectively, proving to be strong pillars for the group. Earnings momentum from these segments should be sustained with greater orders and a growing orderbook as CSE Global builds on its dominant position as a nationwide player in the two-way radio communication industry in Australia.
  • Furthermore, we highlight that 4Q18 marked the last time CSE Global secured a large greenfield project from the Singapore government. Given that it was over two years ago coupled with the rise in infrastructure spending by the Singapore government, there is scope for a sizeable infrastructure project win in the near term. Our forecast has not incorporated any large greenfield order wins.

CSE's dividend yield is attractive at 5.1%.

  • See CSE Global's dividend history. We expect CSE Global to maintain its full-year dividend at S$0.0275 per share for 2021, translating into an above average dividend yield of 5.1% vs FSSTI’s 3.6%. We believe this is sustainable given CSE Global’s strong operating cash flow and low net gearing.

Recent share buyback underlines CSE management’s confidence in the company.

  • Since Mar 21, CSE Global has commenced share buybacks amounting to 2.2 million shares at an average of S$0.52 per share, potentially indicating management’s confidence in the outlook of the company.

Earnings Revision & Recommendation


  • Catalysts to CSE Global Share Price include:
    • Large greenfield O&G & infrastructure project wins.
    • Recovery in oil prices.
    • Accretive acquisitions.

John Cheong UOB Kay Hian Research | https://research.uobkayhian.com/ 2021-04-07
SGX Stock Analyst Report BUY MAINTAIN BUY 0.68 UP 0.530