CSE: Minimum impact from coronavirus; target price 69 c

Excerpts from RHB Research report
Analyst: Jarick Seet

• 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.

MD Lim Boon Kheng. NextInsight file photoOut 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.

• 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%.

Maintain BUY and DCF-backed TP of SGD0.69, implying 11.9x FY20F P/E Jarick SeetWith 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. The stock is trading at 9.1x FY20F P/E, with an attractive dividend yield of 5.1%. • Key downside risks include oil price volatility, economic slowdown, FX risks, declining order intake, lower margins, and execution risks.

Full report here.