Excerpts from CGS-CIMB report
Analyst: Cezzane See
|CSE Global Bolstered backlog!
■ CSE today revealed that it achieved c.S$230m new orders in 4Q19, taking its FY19 win to S$580m (+50% yoy).
■ We expect CSE to report FY19F net profit of S$22.5m (+9% yoy). We keep our forecasts, call and TP. Reiterate CSE as our favourite small cap.
S$230m order intake in 4Q19, padding order backlog
● Order wins in 4Q19 include oil & gas greenfield projects worth a total of US$74.7m (S$103.7m) announced in Oct 2019, implying brownfield projects worth c.S$120m.
● According to CSE, of the S$230m new orders won, S$190m were by its oil & gas division, S$25m by its infrastructure division, and S$16m by its mining division.
● FY19 order intake rose 50% yoy to S$580m (vs. c.S$384m in 2018), fuelled mainly by CSE’s oil & gas (+c.100% yoy) and mining (c.+200% yoy) divisions.
● We estimate that CSE could end FY19F with an order backlog of at least S$300m (end-3Q19: S$232.6m), its highest order backlog in five years.
● CSE will likely report its 4Q19 results at end-Feb.
● We estimate 4Q19F revenue of c.S$111m on the back of higher project execution, and core net profit of c.S$5.6m on net profit margin of c.5%.
● We project FY19F revenue of S$407m (c.+8% yoy) and core net profit of S$22.5m (c.+9% yoy).
● Final DPS of 1.5Scts is also in the bag, in our view.
● As at end-Sep 2019, CSE was in a net debt position due to acquisitions. Nevertheless, we look favourably on the acquisitions as they are earnings-accretive and could lead to cross-selling synergies for CSE’s Americas business.
● Our TP of S$0.73 is based on 13.5x CY20F P/E (+0.5 s.d. of its 5-year mean due to the company’s better footing from FY19F onwards).
● Stronger-than-expected order wins and GPMs are potential re-rating catalysts.
● Lower than-expected order wins and GPMs are key downside risks to our Add call.● CSE has been our preferred small cap O&G pick in part due to its i) earnings growth potential, ii) sustained dividend; and iii) padded order backlog.
Full report here