<Results First Take> 3Q21 EBITDA slightly below; Higher operating costs weighed on EBITDA margins

  • 3Q21 EBITDA slightly below our expectations
  • COVID-19 caused disruptions and resulted in delays in its projects
  • EBITDA margins were impacted by project delays and higher costs in preparation for the resumption of sales activities
  • 3Q21 new order intake (released on 28 October) was in line with our expectations
  • We currently have a BUY recommendation and TP of S$0.61

Our Thoughts

3Q21 EBITDA is slightly below our expectations as margins were negatively impacted. While revenue and new order intake were in line with our expectations, CSE’s EBITDA margins came in slightly below our expectations. A combination of factors caused by COVID-19 and uncertainty in the market led underutilised labour and project delays resulting in higher operating costs, especially in the US. It also cited higher marketing and business development costs related to the preparation of a resumption in its sales activities. In its commentary, management expects similar challenges in 4Q21. 

Our current view is that these should be near term issues which should resolve itself in the next 1-2 quarters. We seek to clarify this with management tomorrow. Hence, while margins were impacted, we believe that the more important development is that its new order intake was in line with our expectations. 

We currently have a BUY recommendation and TP of S$0.61. More updates post results briefing tomorrow.