CSE Global reported 22.0% higher revenue y-o-y of $141.1 million for 3QFY2022 ended September.

 

This was attributed to growth in project, time and material revenues across all geographic regions. Higher revenues in the Asia Pacific region were mainly attributable to higher mining and minerals and infrastructure project revenue in Australia. Also, higher revenues from the Americas were driven by both the energy and infrastructure sectors, says the company in a Nov 17 press release.

 

Revenue improved across all three business sectors in 3QFY2022. Revenue in the Energy segment increased by 7.1% y-o-y to $72.4 million in 3QFY2022, mainly attributed to more project and time and material revenues recognised in the Americas.

 

Infrastructure revenue improved by 44.8% y-o-y from $37.0 million in 3QFY2021 to $53.6 million in 3QFY2022, mainly driven by higher revenue contributions across all key geographies in Australia, Singapore, United Kingdom and USA.

 

Mining & Minerals revenue increased by 37.7% y-o-y, as projects are progressing as compared to delays in project execution in 3QFY2021.

 

About 52.6%, or $86.8 million, of new orders were secured by the Group&rsquo s Energy sector in 3QFY2022, as compared to $73.8 million in 3QFY2021, representing a 17.7% increase. This was mainly due to higher field services orders in the Americas.

 

In 3QFY2022, new orders for the Group&rsquo s Infrastructure sector rose by 53.2% y-o-y to $55.1 million. This was due to several wastewater and industrial project orders secured in the Americas region arising from increased infrastructure spending.

 

The Mining & Minerals Sector clinched S$23.0 million worth of new orders in 3QFY2022, compared to $10.6 million in 3QFY2021, mainly a result of a steady pipeline of orders for radio communication network projects from mining customers in Australia.

 

With these new orders, the Group closed 3QFY2022 with an order book of $412.8 million.

 

Lim Boon Kheng, group managing director of CSE Global, says: &ldquo We are seeing strong momentum in orders received in 3QFY2022, where our total orders in the first nine months of 2022 have already surpassed that of the whole of 2021. This points to promising potential in terms of the healthy demand for our solutions, despite an uncertain operating environment impacted by continued supply chain disruptions and inflationary pressures.&rdquo

 

Lim adds: &ldquo Despite these uncertainties in the coming months and expected impact on our gross margins as a result of prolonged project execution timeframes and inflationary pressures, the Group envisages strong potential to grow orders across the various sectors. We also expect to see a steady inflow in terms of contribution, with the execution of these contract wins stretching over 2023 and beyond.&rdquo

 

CSE Global announced a $33.4 million rights issue in October. In a Singapore Exchange filing on Oct 10, the company says it intends to issue over 102.4 million new ordinary shares at 33 cents per share. Shares of CSE Global then closed 12.04% down on Oct 11.

Systems integrator CSE Global has announced a rights issue that is expected to raise net proceeds of $33.4 million for the company.

 

In an SGX filing on Oct 10, the company says it intends to issue over 102.4 million new ordinary shares at 33 cents per share.

 

For shareholders who hold the company&rsquo s shares, they will be provisionally allotted one new share for every five shares that they hold at the record date, which will be decided on.

 

The issue price represents a discount of approximately 20.5% to the last transacted price of 41.5 cents on Oct 10, which was the last trading day before the announcement, and a 17.7% discount to the theoretical ex-rights price of 40.11 cents per share.

 

The rights issue is likely to generate $33.8 million in gross proceeds and $33.4 million in net proceeds, after deducting estimated fees and expenses.

 

Explaining its rationale for the move, CSE Global says it intends to utilise about 90% of the capital for potential acquisitions of synergistic businesses in New Zealand and the US, and the remainder 10% to partially repay some of the loans previously drawn down for certain business acquisitions.

 

CSE Global says that the potential acquisitions form part of its strategy to expand and grow its communications businesses in the infrastructure industry markets, as well as participate in an expanding sector where demand for increased connectivity and security is expected to continue to grow.

 

It reveals that both the potential acquisitions relate to radio and critical communications business, which the company views as a &ldquo natural complementary fit&rdquo to its business.

 

&ldquo It is envisaged that the potential acquisitions will strengthen the company&rsquo s existing business partner and customer relationships, as well as extend its geographic coverage into the New Zealand and US markets for its communications business, thereby enhancing its market position in these markets,&rdquo CSE Global explains.

 

To demonstrate their commitment and as a vote of confidence in the company and the rights issue, CEO Lim Boon Kheng, chairman Lim Ming Seong and non-executive and independent director Tan Chian Khong have each given an irrevocable undertaking to subscribe for and pay in full their pro rata entitlements to the rights shares.

 

The three collectively have a deemed and direct interest of 3.21% in the company.

 

Furthermore, substantial shareholders Orchid 2 Investments and Orchid 3 Investments, which have a 12.27% and 12.70% stake in the company respectively, have also stated their intention to subscribe to their respective pro rata entitlement to the rights shares under the rights issue.

 

DBS continues to call &lsquo hold&rsquo

 

In response to the announcement, DBS Group Research has maintained its &ldquo hold&rdquo call on the stock, keeping a target price of 45 cents and 38 cent ex-rights, assuming a full subscription of the rights issue.

 

The brokerage is of the view that the irrevocable undertaking and expressions of intention for 28% of the rights by some directors and substantial shareholders is a display of confidence in the company.

 

As for the company&rsquo s outlook, DBS says it is still &ldquo promising&rdquo , except for large greenfield projects in the traditional energy sector, adding that &ldquo the flow business is still in recovery mode which should help to mitigate lower contributions from large greenfield projects.&rdquo

 

The flow business refers to &ldquo complete, end-to-end ' program' solutions developed from concept to final commissioning and handover&rdquo , according to CSE Global&rsquo s website.

 

Meanwhile, the outlook for its infrastructure and mining and minerals segment remains supported by a steady flow of projects.

 

On a broader view, DBS says structural trends such as digitalisation which requires increased connectivity and security will continue to be a key driver for CSE&rsquo s infrastructure segment.

 

Furthermore, the brokerage believes that the company&rsquo s 2HFY2022 (ending December) and FY2023 could be brighter on the backloading of recent contract wins, in view of the supply chain disruptions.