CSE GLOBAL LTD (SGX:544)
CSE Global - Strong Order Wins For 1Q22 But Delivery Remains Challenging
- CSE Global reported a strong order intake of S$232m (+119% y-o-y) in 1Q22 due to a major contract for the data-centre and wastewater markets in the Americas region, bringing its orderbook to S$344m (+49% y-o-y). However, CSE Global continued to face supply chain constraints which delayed the delivery of new equipment or components. These challenges will continue to impact CSE Global’s earnings for 1H22.
- Maintain HOLD call on CSE Global.
Strong order intake.
- CSE Global (SGX:544)’s order intake surged by 118.8% y-o-y to S$232.3m, attributed to a major contract secured to provide engineering solutions for the data-centre market and higher field services orders for the wastewater market in the Americas region, as well as stronger orders of radio communication equipment and solutions led by utility and renewables customers in Australia.
- In total, these boosted CSE Global’s orderbook to S$344m (+49% y-o-y). The order win is ahead of our expectation of S$520m in order wins for 2022, but the order could be lumpy in nature as it is a large project.
Marginal growth in revenue.
- CSE Global’s revenue was 5.8% higher y-o-y at S$117.6m in 1Q22, attributable to growth in infrastructure projects in the Asia Pacific region, particularly from utility and government customers in Australia.
- The energy sector’s revenue fell 16.0% y-o-y, mainly attributable to lower large project revenue recognised in the Americas region.
- Infrastructure revenue improved 56.6% y-o-y, mainly driven by higher revenue contributions across all key geographies of Australia, Singapore, the UK and the US due to increased investments in public and critical infrastructure.
- Mining & Minerals’ revenue increased by 3.8% y-o-y, as projects started to see more progress due to the easing of COVID-19 restrictions, compared to 1Q21 which saw delays in project execution due to poor weather conditions and COVID-19 disruptions.
Deliveries of orders remain challenging due to supply chain constraints.
- CSE Global has continued to face supply chain constraints, which have affected some of its current projects. Delivery of equipment was delayed and longer lead time is needed for purchases of new equipment or components. These operational challenges will continue to weigh on the financial performance of the group in 1H22, but this is expected to improve in 2H22. The challenges could impact CSE Global’s margins due to higher operational costs which include materials and wages.
Cautious on supply chain challenges and inflationary pressure.
- The current global economic outlook is impacted by CSE Global will continue to execute the S$344m orderbook as at 1Q22. It will also focus on improving its core business and drive its expansion into new geographical markets for Energy, Infrastructure and Mining & Minerals sectors with a view to securing additional order opportunities.
Maintain our earnings forecast for CSE Global
- Maintain HOLD and PE-based FSSTI’s of around 4.0%.
- See
- Share price catalysts:
- Large greenfield O&G and infrastructure project wins.
- Recovery in oil prices.
- Accretive acquisitions.
John Cheong
UOB Kay Hian Research
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https://research.uobkayhian.com/
2022-06-15
SGX Stock
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