Excerpts from RHB Research report
Analyst: Jarick Seet
|• Maintain BUY, DCF-based TP of SGD0.69, 30% upside plus c.5% yield. CSE Global secured new orders worth SGD230m in 4Q19, bringing the full-year order intake to SGD580m.
We also anticipate FY19 net profit (recurring) to be in line with our SGD24m estimate.
• Order intake of SGD230m in 4Q19. This consists of SGD25m from the infrastructure sector, SGD16m from the mining sector and SGD190m from the oil & gas sector.
Out of the SGD190m orders from the oil & gas sector, USD74.7m (SGD103.7m) were from two new projects in the Americas, which were announced on 29 Oct 2019.
The oil & gas sector’s order intake totalled SGD430m, up significantly from SGD218 in FY18.
This has resulted in a total of SGD580m in new orders secured last year, marking a surge of 52% YoY from FY18’s SGD380.6m.
• Impact of novel coronavirus (2019-nCoV). We believe that the nCoV situation will have minimum impact on the group’s business for now, as CSE Global does not have a significant presence in China. However, if the nCoV triggers a global epidemic, projects could be delayed or cancelled.
Hardly in China
• FY19 results to be in line. CSE Global is likely to release its full-year results on the last week of February.
9M19 revenue and net profit of SGD295.2m (+7.7% YoY) and SGD15.6m (+6.8% YoY) were at 71% and 69% of our forecasts.
Our full-year net profit forecast (recurring) of SGD24m remains intact.
A final DPS of 1.5 SG cents is expected to be declared, as the group is committed to maintaining a full-year dividend of 2.75 SG cents per share, translating to an attractive yield of 5.2%.
The stock is trading at 9.1x FY20F P/E, with an attractive dividend yield of 5.1%.With a high order intake and backlog, as well as the inclusion of profits from Volta, we are expecting CSE Global to produce strong results in FY20F.
• Key downside risks include oil price volatility, economic slowdown, FX risks, declining order intake, lower margins, and execution risks.
Full report here.