<News Analysis> 1Q22 new order intake of S$232.3m is above our expectations
- New orders in 1Q22 increased by 118.8% to $232.3m (vs $106.2m in 1Q21); above our expectations
- Revenue contributions from these projects will likely come in 2H22; backloading of recent contract wins is due to supply chain constraints
- Continued strong new order wins for infrastructure segment could enhance EBIT margins
- We currently have a BUY call with TP of S$0.59
Key highlights
- New orders in 1Q22 increased by 118.8% to $232.3m (vs $106.2 m in 1Q21); above our expectations
- Higher new order intake on the back of growth across all three key segments
- Revenue contributions from these projects will likely come in 2H22; Backloading of recent contract wins is due to supply chain constraints
- Orderbook as at 1Q22 stands at $344.0m (vs S$229.4m in 4Q21)
1Q22 Operational Update – Order Intake (S$m)
| Industry Sectors | 1Q2022 | 4Q2021 | 1Q2021 | Variance % 1Q2022 vs 1Q2021 | Comments |
| Energy | 105.5 | 85.5 | 56.6 | 86.4% | Attributed to a major contract for an offshore facility and higher orders for integrated systems |
| Infrastructure | 110.1 | 32.1 | 38.3 | 187.8% | Infrastructure sector experienced the highest growth following (i) a major contract for the data centre market (ii) stronger field services orders for the wastewater market (iii) higher orders of radio communication equipment and solutions |
| Mining & Minerals | 16.7 | 13.6 | 11.3 | 47.4% | New orders due to an LTE system project for a mine site in Australia |
| Total | 232.3 | 131.2 | 106.2 | 118.8% |
Source: Company, DBS Bank
Our Thoughts
- New order wins are above our expectations, forming 47% of our full year expectations. The higher order intake can be attributed to growth across all three segments, with the infrastructure segment recording the highest growth at 187.8%.
- Continued strong new order wins for infrastructure segment could enhance EBIT margins. New order intake for infrastructure segment made up 47.4% of total order wins in 1Q22. (vs 36.0% in 1Q21). CSE’s Infrastructure segment has EBIT margins of c.11-14% (vs the Group’s c.5-8%). EBIT margins could rise if the infrastructure segment continues to record strong new order intake.
- Increasing oil production with higher oil prices positive for CSE. Oil price is a key driver of oil majors’ capex spending, which translates to demand for CSE’s services. Historically, higher oil prices have led to higher revenues in CSE’s energy segment. A stabilizing oil price above the breakeven point for oil majors at c.US$50/bbl is beneficial to CSE and we believe that the elevated oil prices could potentially translate to large contract wins for CSE. At the start of the year, CSE secured a major contract for an offshore facility. In our view, we think this indicates that the positive correlation between oil production and CSE’s semi-annual oil and gas revenue is starting to resume.
We currently have a BUY recommendation with TPS$0.59, more updates to come after the release of 1Q22 business updates.
Legend:
- GoM – Gulf of Mexico
- EF – Eagle Ford
- PB – Permian Basin
Left: Show the positive correlation between oil production in its key operating regions and revenue for CSE’s Energy segment
Right: Shows the relationship between oil prices and oil production
