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  • 3Q21 EBITDA slightly below our expectations; declined 22.7% y-o-y to S$9.9m
  • 3Q21 EBITDA impacted by COVID-19 and supply chain disruptions
  • New order wins above S$100m for the third consecutive quarter
  • Maintain BUY with a slightly lower TP of S$0.60

Investment Thesis:

Attractive entry opportunity to ride on the recovery and resilience. CSE is currently trading at a 9.7x FY22F PE, which is -0.4 SD below its four-year historical mean. We believe this is an attractive entry opportunity for a growth stock with an FY21-23F earnings CAGR of 33% and a dividend yield of 5.4%.

New order wins continue to recover in the past five quarters. 
We remain positive on CSE’s recovery as new order wins continue to recover and surpassed S$100m the last three quarters. We are also optimistic on CSE’s small acquisitions to enhance and strengthen its operations and recurring revenue stream as well as its pivot towards renewable energy projects (solar and wind). There is also potential for large contract wins in its Energy segment in FY22F.

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Infrastructure and Mining & Mineral segments offer sturdy, stable growth. These two segments remained resilient despite the pandemic. We are expecting its Infrastructure segment to continue growing on higher government spending on infrastructure projects and its Mining & Mineral segment to remain sturdy amidst higher commodity prices.

Valuation:
Maintain BUY with a slightly lower TP of S$0.60 (previously S$0.61)
. We cut FY21/22F earnings by 16/6% respectively, as CSE faces project disruptions due to COVID-19 and supply chain issues. Our TP is based on an 11.5x FY22F earnings (+0.7 SD of its four-year historical mean).

Where we differ:
We are more optimistic on CSE’s earnings growth.

Key Risks to Our View:
Protraction of the COVID-19 pandemic, low oil prices, global macroeconomic slowdown, and/or a lack of new order wins.