CSE Global has reported a 4% y-o-y growth in revenue for 1QFY2025 ended March 31, to $205.5 million.

 

The group&rsquo s order book declined 14.4% y-o-y to $616 million in 1QFY2025, and order intake declined 11.3% y-o-y to $155.3 million in the reporting period.

 

The group&rsquo s revenue growth is driven by its communications and automation business segment in America. By segment, revenue contributions from the electrification, communications and automation business segments were 48%, 28% and 24%, respectively.

 

For 1QFY2025, revenue in the electrification business segment declined 4.1% to $97.5 million, mainly attributable to lower revenue contribution from Australia and New Zealand, as a result of some project delays.

 

The electrification business segment secured $36.1 million of new orders, which constitutes 23.2% of total order intake during the quarter.

 

The communications business saw revenue increasing 7.3% y-o-y to $57.9 million, largely driven by the revenue contributions from a newly acquired subsidiary, RFC Wireless, Inc.

 

The communications business segment accounted for approximately 41.0% of the total order intake in 1QFY2025, securing $63.7 million in new orders.

 

With a substation radio communication enhancement project secured in the Asia Pacific region and recent acquisitions that have expanded the communications business&rsquo s geographic footprint and market coverage in the US, 1QFY2025 order intake rose 20.4% y-o-y.

 

Automation business revenue for 1QFY2025 grew 19.6% y-o-y higher from revenue recognised for control system projects in the USA.

 

The automation business segment clinched $55.6 million of new orders in 1QFY2025. This is

mainly due to a large contract valued at approximately $13.1 million for a chemical injection

skid predominantly used in the oil and gas industry in the USA.

The impact from Trump tariffs will be minimal with the group&rsquo s existing US production facilities, says analyst

 

[SINGAPORE] Maybank securities analyst Jarick Seet cut his target price for systems integrator CSE Global to S$0.58 from S$0.67 in the light of fierce tariffs by US President Donald Trump.

 

However, he kept his &ldquo buy&rdquo rating on the company, citing the impact from Trump tariffs to be &ldquo minimal&rdquo , considering how CSE Global has production facilities in the US.

 

&ldquo We estimate about 10 per cent of the equipment sourced from Europe, Mexico and South-east Asia is likely to be impacted by tariffs, which could reduce CSE Global&rsquo s margins slightly,&rdquo wrote the analyst in a report on Monday (May 5).

 

But with the group&rsquo s US production facilities serving its customers in the country already, the majority of its equipment is already being sourced from the US.

 

With CSE Global also expanding its US facility, this plays well into avoiding the tariffs, too, said the analyst.

 

Acquisitions new and old service business expansion

Additionally, the group acquired telco service provider Chicago Communications on Apr 30 for US$8.5 million, where the deal was funded internally and by bank loans.

 

Chicago Communications &ndash which sells, rents, installs and maintains communications equipment for US customers mainly in Illinois and Indiana &ndash recorded a net profit before tax of about US$1.8 million and earnings before interest, taxes, depreciation and amortisation of US$1.9 million.

 

In a company announcement dated May 1, earnings per share after the acquisition was recorded as S$0.0416 (assuming it was effected on Jan 1, 2024), compared with S$0.0391 previously.

 

According to Seet, this move by the group has the strategic purpose of further expanding CSE Global&rsquo s critical communications business in the US.

 

Moreover, he noted that RFC Wireless, which was acquired by CSE Global in August 2024, helped the group enter the data centre market and secure over US$15 million of orders in the subsequent quarters.

 

&ldquo We believe this will be the first of many to come &ndash as the pipeline of data centres to be built globally, especially in the US, remains robust,&rdquo he wrote.

 

Strong Q1 order book

CSE Global announced on Monday that it secured S$155.3 million of new orders in the first quarter ended Mar 31. In particular, the communications business segment secured S$63.7 million in new orders, accounting for around 41 per cent of the total order intake for the quarter.

 

The automation business segment contributed around 35.8 per cent of the total order intake for Q1, or S$55.6 million in new orders while the electrification business segment secured S$36.1 million of new orders, which made up 23.2 per cent of the total order intake during the quarter.

 

The order intake in Q1 for the latter segment was 52.4 per cent lower year on year, due to the decline in orders from the municipal market with the shift to focus on the data centre and utility markets.

 

The group closed Q1 FY2025 with an order book of S$616 million with the new orders.

 

That said, if Trump&rsquo s tariffs remain, Seet noted that the US and the global economy will be affected, and CSE Global may face fewer orders or a delay in projects, which may hurt its profitability.

 

Still, the analyst noted that the company&rsquo s 50 per cent dividend guidance will provide stability for shareholders along with the upside from its positive outlook.

 

&ldquo We remain bullish on the outlook for CSE Global and expect more local government projects to boost its order book, as Singapore&rsquo s general election recently ended in May,&rdquo said Seet.

 

CSE Global has recorded $155.3 million new orders in the first quarter ended March 31, 2025, down 11.3% y-o-y from the $175.1 million recorded in the same period a year ago.

 

For the quarter, the company reported an ending order book of $616 million, down 14.4% y-o-y.

 

The ending order book is the total outstanding orders that the group has received but not fulfilled at the end of the specified period.

 

The group' s order book by business segment is as follows. Its communications business segment secured $63.7 million new orders in 1QFY2025, up 20.4% y-o-y. This accounts for about 41% of the group' s total order intake for the quarter.

 

This is attributable to a substation radio communication enhancement project secured in the Asia Pacific region and orders from recent acquisitions that have expanded the group' s communications business' s geographic footprint and market coverage in the USA.

 

The automation business, which contributes about 35.8% of total order intake for the quarter saw $55.6 million new orders, a 19.8% y-o-y increase. This is due to a large contract valued at approximately $13.1 million for a chemical injection skid primarily used in the oil and gas industry in the USA.

 

Meanwhile, the group' s electrification business saw a 52.4% y-o-y decrease to $36.1 million new orders. This is due to the decline in orders from the municipal market, arising from the strategic shift to focus on the data centre and utility markets.

CSE Global, through its indirect wholly-owned subsidiary, CSE Crosscom USA has entered into a sale and purchase agreement with Cynthia Glashagel Trust and Kurt Hessler to acquire all of the issued and outstanding equity interests of Chicago Communications LLC for US$8.5 million ($11.1 million).

 

Chicago Communications is a US-based company headquartered in Elmhurst, Illinois with an additional location in Dyer, Indiana. Operating since 1953, the company sells, rents, installs, and maintains communications equipment for customers located primarily in the states of Illinois and Indiana.

 

The acquisition, completed on April 30, will be paid in cash to two tranches. The first will be an amount of US$7.65 million on April 30, while the remaining amount of the will be payable subject to any post-closing adjustments to be determined within 90 days from the completion date.

 

Besides Chicago Communications being earnings-accretive, CSE Globalhighlights that the acquisition forms part of its strategy to expand and grow its communications businesses in the infrastructure industry markets and participate in an expanding sector where demand for increased connectivity and security is expected to continue to grow.

 

The acquisition will also strengthen CSE Global' s existing business partner and customer relationships for its communications business, as well as extend its geographic coverage into the US market to four states California, Florida, Illinois and Indiana.

 

CSE Global Limited' s wholly-owned subsidiary CSE Crosscom USA has secured orders worth US$15 million or $20.1 million to deliver critical communication services to major data centre hyperscaler.

 

The scope of work includes the engineering design, installation, and ongoing maintenance of

advanced communications networks, and is slated for execution from 2025 to 2028.

 

This involves the installation of mission-critical two-way radio systems and distributed antenna systems across a range of environments, including new builds, existing data centres, and office

facilities operated by the hyperscaler throughout the Americas, Asia-Pacific, and Europe.

 

These contracts are not expected to have any material impact on the consolidated net tangible

assets per share or earnings per share of the group for the current financial year.

 

CSE Global, known as a generous dividend payout stock, has cut its 2HFY2024 payout. Nonetheless, given the brighter prospects of stronger order wins, analysts have raised their respective target prices for the stock.

 

On Feb 26   CSE Global reported earnings of $36.8 million for its FY2024, up 63.2% over the preceding year ended Dec 31 2023. 

 

If the one-off gain of $10 million from an arbitration settlement was excluded, earnings increased by 16.9% y-o-y to $26.3 million.

 

In a bid to rechannel resources to generate new growth, the company trimmed its final dividend to 1.15 cents per share, down from 1.5 cents in the year-earlier period.

 

Jarick Seet of Maybank Securities, acknowledging the dividend cut, believes that going forward, the company will implement a dividend policy of at least 50% of net profit after tax to balance growth and cash needs due to its expansion plans in the US. 

 

" We expect short-time knee-jerk negative price reaction due to the reduction in dividends, but remain bullish on the longer-term growth potential of CSE and believe dividends will bounce back in FY2025, says Seet.

 

The company' s orderbook has reached some $672.6 million, with a bigger proportion of so-called large greenfield projects, to be executed in the coming two to three years.

 

" Larger orders are likely to follow through as it continues to expand in the US, especially with its new facility, which is 2-3x larger," says Seet, who estimates the company to incur capex of around US$50 million to get the expanded facility ready by end of FY2026.

 

Besides revenue growth of between 10 to 15% y-o-y, Seet believes that CSE Global' s net margins will further improve in the current FY2025.

With a corresponding better bottomline, Seet estimates that CSE Global' s dividends can potentially be higher than 2.75 cents per share that it used to pay prior to the dividend cut.

 

Seet has raised his earnings forecast for FY2025 by 32% and FY2026 by 24%, leading to a higher target price of 67 cents from 64 cents, based on based on 11.5x FY2025 earnings.

 

" With the stars aligning for CSE, we believe the expansion of its US facility signifies the strong confidence management has in its prospects. We expect share buybacks as well as higher net margins y-o-y," he adds.

 

Kenneth Tan and Lim Siew Khee of CGS International, meanwhile, are reiterating their " add" call but with a higher target price of 70 cents from 62 cents.

 

John Cheong and Heidi Mo of UOB Kay Hian, similarly, have raised their target price from 59 cents to 61 cents while maintaining their " buy" call.