CGS International, Maybank Securities and UOB Kay Hian have all kept their &ldquo buy&rdquo and &ldquo add&rdquo calls on CSE Global 544 0.00% following the company&rsquo s 372% y-o-y improved earnings of $22.5 million for its FY2023 ended Dec 31, 2023, results.

 

While the analysts at CGS and Maybank have raised their respective target prices to 62 cents from 57 cents previously and 71 cents from 65 previously, the analysts at UOB have lowered their target price to 57 cents from 61 cents.

 

CGS analysts, Kenneth Tan and Lim Siew Khee, note that the company&rsquo s 2HYFY2023 net profit of $11.5 million was in-line with their expectations, and the FY2023 net profit of $22.5 million formed 100% of their forecast and 105% of Bloomberg consensus&rsquo full-year forecasts.

 

Following this, their raised target price is based on a rolled forward valuation to 12 times calendar year 2025 price-to-equity ratio (P/E), still pegged to the FY2012 to FY2019 average.

 

Tan and Lim also note that the company&rsquo s FY2023 dividend per share (DPS) was &ldquo holding steady&rdquo at 2.75 cents.

 

For the year ahead, the analysts expect CSE Global&rsquo s FY2024 revenue to grow 16% y-o-y, from quicker order book executions due to shorter lead times and a ramp-up in its US infrastructure business.

 

&ldquo With a good bulk of infrastructure orders set to be executed in FY2024, we expect infrastructure revenue to rise to around 53% (from FY2023&rsquo s 47%) of [overall] revenue, driving operating profit margin expansion given the higher-margin nature of infrastructure contracts, in our view,&rdquo write Tan and Lim.

 

They add: &ldquo While we expect interest costs to stay elevated and peak in FY2024 we see room for CSE Global to lower its net gearing from FY2023&rsquo s 0.35 times, on the back of healthy operating cash flows.&rdquo

 

Tan and Lim conclude: &ldquo We cut our FY2024 to FY2025 core earnings per share (EPS) by 1% to 3% on slightly higher interest expense assumptions.&rdquo

 

Re-rating catalysts noted by the analysts include strong infrastructure order win momentum, large greenfield energy project wins, and consistent margin improvements, while downside risks include major project cost overruns, and a sharp decline in order wins as clients pull back on spending.

 

Meanwhile, Maybank analyst, Jarick Seet, likes the stock for its unique opportunity of riding the upcycle in attractive growth areas, accompanied by a sustainable 6.5% dividend yield. 

 

Additionally, he notes that CSE Global is also trading significantly lower than US electrification competitors at 15 times FY2024 P/E, compared to the latter&rsquo s 20 to 30 times P/E.

 

&ldquo We believe CSE Global has a clear multi-year growth ahead with the opportunities available and expect further accretive acquisitions along the way as well, which would boost its growth to a more rapid pace,&rdquo writes Seet.

 

The analyst also expects the company to secure more communications and electrification orders.

 

He expands: &ldquo We expect about $1.1 billion of orders in FY2024. In addition, we expect potential accretive acquisitions in Australia and the US for expansion in both key segments&rdquo

 

With this, Seet has raised his estimates for FY2024/FY2025 profit after tax and minority interests (patmi) by 10% and 23.4% respectively. 

 

Upside factors noted by him include its share price re-rating due to strong net profit after tax (NPAT) growth of 250% in FY2023 and 30% y-o-y in FY2024, its attractive dividend yield of 6%, and its trading at a significant discount compared to peers.

 

Additionally, Seet notes that potential mergers and acquisitions (M& As) are likely to boost CSE&rsquo s profitability. The company also offers upside to the US oil and gas upcycle, while a strong potential growth in data centres in the US is likely to benefit CSE.

 

Conversely, he points to potential execution errors causing cost overruns, foreign exchange (forex) fluctuations which may impact profitability due to the company&rsquo s global portfolio, and a recession, which could cause business and order slowdowns.

 

On the other hand, although the company&rsquo s earnings also beat UOB analysts John Cheong and Heidi Mo&rsquo s expectations by 7%, they have lowered their target price, which is now pegged to 14 times FY2024 P/E, based on 1 standard deviation (s.d.) above mean.

 

They explain that this is down from 15 times FY2024 P/E previously, as the P/E mean multiple has fallen.

 

Overall, the analysts at UOB agree with their peers on the company&rsquo s strong FY2023 results and outlook for the year ahead.

 

&ldquo We maintain our FY2024 earnings forecast and raise our FY2025 earnings forecast by 1% to $25 million/$28 million, while adding FY2026 estimates. We have incorporated 10% y-o-y growth in earnings, to reflect CSE&rsquo s Global&rsquo s robust order orderbook to be executed in the coming years,&rdquo write Cheong and Mo.

 

CSE Global has reported earnings of $22.5 million for FY2023, up 372%. Revenue in the same period was up 30% to $725.1 million, with growth seen across its major business lines.

 

The company plans to pay a final dividend of 1.5 cents per share, bringing full-year payout to 2.75 cents.

 

Group managing director and CEO Lim Boon Kheng says the company did " exceptionally well" for FY2023, with " record order wins and order book, strong revenue and net profit growth."

 

The company generated strong cash inflow from operations and a return on equity of 10.4%. 

 

" We are very grateful to our customers for entrusting us with their engineering needs, bringing our order wins to an all-time high.&rdquo

 

As at Dec 31 2023, the company had an orderbook of $730.6 million.

 

With continued growth in its electrification and communications businesses, the company says it is " well positioned" to achieve a stronger financial performance in the current FY2024.

 

CSE Global 544 has secured $300.3 million of new orders in 4QFY2023 ended Dec 31, 2023, up 23.7% from the new orders it clinched in 3QFY2022 and mainly driven by stronger demand for electrification and communications solutions in the infrastructure industry. 

 

During the quarter, the electrification business segment continued to lead the growth in order intake, increasing 58.5% y-o-y to $203.1 million. Notable contracts secured in 4QFY2023 include two contracts in the US worth $150.6 million for the design and manufacturing of power distribution centres, as well as the integration of complex electrical and control systems and equipment in the US, which are slated for execution between 2024 and 2025.

 

Order intake for the communications business segment also remained strong, bringing in $54.3 million of new orders in 4QFY2023. This 43.5% increase y-o-y is mainly attributable to new orders from recent acquisitions in the communications business to expand its geographic footprint and market coverage. 

 

In addition, about $42.8 million of new orders were secured by the company&rsquo s automation business segment in 4QFY2023, compared to $76.8 million in 4QFY2022 which included a one-off major contract relating to a multi-year system maintenance contract from the Singapore government.

 

For the full-year FY2023, the company posted order wins of a record total $990.2 million, up 20.9% y-o-y. Aside from the strong growth in the electrification and communications solutions segment, this was also fueled by increasing requirements in power management solutions and products and stronger demand in critical communications services. 

 

&ldquo We are pleased to achieve a record $990.2 million of order wins in FY2023, which marks a new milestone for us. We expect order intake momentum in 2024 to remain robust as we expand our engineering capabilities and technology solutions to capture opportunities brought about by the three key secular mega trends: urbanisation, electrification, and decarbonisation, which serve as CSE Global 544 - &rsquo s growth drivers going forward,&rdquo says CSE group managing director Lim Boon Kheng.

 

The company closed its FY2023 with an order book of $730.6 million.

 

Separately, CSE announced the expansion of its electrification business solutions offerings following the recent acquisition of Australian solar energy solutions provider Linked Group Services by wholly-owned indirect subsidiary CSE-Uniserve Corporation.

 

CSE&rsquo s electrification business currently offers a wide range of solutions, including power systems protection and control solutions, electric equipment centres and electrical drive and high/medium voltage systems to support the electricity grid and renewables. 

 

Going forward, the company will be able to supply and install commercial solar energy solutions, thereby enhancing CSE&rsquo s renewable energy capabilities. This includes turning existing commercial spaces into sustainable power sources and building entirely off-grid complexes. 

 

According to Lim, demand for electrification solutions has been growing for the past few quarters. &ldquo We expect this trend to continue with the increasing focus on sustainability and energy transition. Expanding our suite of electrification solutions is a natural progression for us to expand our share of the addressable markets globally. We look forward to delivering our more innovative, sustainable and diverse solutions to our clients,&rdquo he says.

 

AUTOMATION solutions provider CSE Global has secured two major contracts worth S$27.7 million in the United States, it said in a bourse filing on Monday (Dec 11).

 

The first contract is for the design, engineering and supply of power distribution centres for manufacturing fabs in the US, which are slated for execution between 2024 and 2025.

 

The second contract is for the design, engineering, procurement and installation of environmental systems and equipment in the US. This will be progressively executed and delivered by 2027.

 

CSE Global group managing director Lim Boon Kheng said: &ldquo These new contracts will strengthen our pursuit (of growth) in the infrastructure sector, which is currently driven by the growing megatrends of urbanisation and electrification.&rdquo

 

He expects the contracts will &ldquo contribute positively&rdquo to the company&rsquo s financial performance in the financial years from 2024 till 2027.

 

The company does not expect the contracts to have a material impact on its consolidated net tangible assets per share or earnings per share for the current financial year.