CSE Global - CGS-CIMB Research 2021-09-02: Fret Not, The Storm Is Passing; Hurricane Ida Could Drive New Energy Order Wins

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CSE GLOBAL LTD (SGX:544)

CSE Global - Fret Not, The Storm Is Passing; Hurricane Ida Could Drive New Energy Order Wins

• We see a potential boost to energy order wins from damage inflicted by Hurricane Ida. Project delays are expected to be minimal, in our view.
• Infrastructure is still the key driver in 2H21F, with a record-high order book of S$133m and expected ramp-up in order wins from Singapore and Australia.
• CSE Global (SGX:544) is trading at an attractive 10x FY22F P/E (-0.5 standard deviation of 5-year mean) with ~6% dividend yield. We reiterate our ADD call with a target price of S$0.61.

Energy order wins could pick up

• Historically, new energy order wins have trended up after a major hurricane/storm in the Gulf of Mexico. Examples include Tropical Storm Gordon and Hurricane Michael in Sep-Oct 2018 (4Q18 new orders +5% q-o-q), Hurricane Barry in Jul 19 (3Q19 new orders +94% q-o-q), as well as Hurricane Delta and Zeta in Oct 20 (4Q20 new orders +30% q-o-q).
• In our view, we believe that this is attributed in part to more offshore order wins, as platforms/rigs require repairs and maintenance work post-hurricane.

Hurricane Ida could drive new energy order wins

• On 28 Aug 2021, Hurricane Ida struck the Gulf of Mexico, shutting down ~95% of oil and gas production in the region. Making landfall at Louisiana on 29 Aug 2021, Ida has caused significant damage to the state’s infrastructure. The Federal Emergency given the critical nature of CSE Global’s brownfield maintenance work.

Infrastructure continues to be the key driver

• Recall that CSE Global had already won S$80m of infrastructure new orders in 1H21 (+25% y-o-y, +43% h-o-h), a two-year high Temasek-owned companies (potential opportunities include SingTel (SGX:Z74)’s FY22F S$2.4bn capex guidance, SMRT rail expansion and ST Engineering (SGX:S63) urban solutions, in our view).

CSE's order book still healthy with attractive ~6% dividend yield

• We like that CSE Global’s order of ~6% looks very attractive to us. See CSE Global's dividend history.

Reiterate ADD on CSE with unchanged target price of S$0.61

• We reiterate our ADD call with an unchanged target price of S$0.61, based on 12x FY22F P/E (5- year historical average). At current share price (~6-month low), CSE Global's share price trades at an undemanding ~10x FY22F P/E (-0.5 standard deviation of 5-year mean), which presents a good buying opportunity.
• See
  • CSE Global's Share Price,
  • CSE Global's Target Price,
  • CSE Global's Analyst Reports,
  • CSE Global's Dividend History,
  • CSE Global's Announcements,
  • CSE Global's Latest News.
• Re-rating catalysts include higher-than-expected order wins. Downside risks are lower order wins and slower-than-expected recovery in the energy segment.

Kenneth TAN CGS-CIMB Research | LIM Siew Khee CGS-CIMB Research | https://www.cgs-cimb.com 2021-09-02

SGX Stock Analyst Report ADD MAINTAIN ADD 0.610 SAME 0.610