Slower path to recovery
? 1Q22 revenue of S$119m (+6% yoy) was driven by record-high infra
contribution (+57% yoy). Energy revenue saw a decline (-16% yoy) in 1Q.
? Supply chain disruptions should continue to weigh on project executions. We
cut our FY22-24F EPS by 3-11% to reflect lower segment margins.
? Huge order book of S$344m in 1Q22 (vs. 4Q21: S$229m) should help to
support earnings visibility. We keep our Add call, with a lower TP of S$0.54.
Strong infra revenue helped to offset weaker energy performance
CSE Global posted a 1Q22 revenue of S$119m (-1% qoq, +6% yoy), in line with our and
Bloomberg consensus’ estimates at 24% of FY22F forecasts. CSE hit a record-high
quarterly infrastructure revenue of S$47m (+31% qoq, +57% yoy), driven by: 1) utility and
government orders in Australia, 2) higher infrastructure spending in Singapore, and 3)
more executions in the US. Energy revenue dipped to S$58m (-16% qoq, -16% yoy) on
fewer large greenfield projects executed in Americas.
Record-high quarterly wins achieved; infra was the key driver
CSE achieved record-high quarterly order wins of S$232m in 1Q22 (+77% qoq, +119%
yoy); previous high was S$230m in 4Q19. 1Q22 infrastructure order wins were highest in
CSE’s operating history at S$110m (+243% qoq, +188% yoy), due to: 1) major datacentre contract won, and 2) stronger utility and renewables orders. Energy order wins
were robust at S$105m (+23% qoq, +86% yoy), due to a major offshore facility project.
Huge order book of S$344m in 1Q22 (vs. 4Q21: S$229m) should accord firmer income
visibility, of which c.60% should be recognised in FY22F. With stronger-than-expected
infra wins, we lift FY22F order wins forecast to S$570m and FY22-24F revenue by 2-4%.
1H22 will still be challenging amid macroeconomic uncertainties
Supply chain disruptions will continue to be a key concern in 1H22, resulting in: 1)
delayed deliveries of equipment, and 2) longer purchasing lead times. Management
shared that equipment deliveries have been delayed by 3-4 months on average. The
group also sees a lack of large greenfield O&G opportunities despite elevated oil prices.
Positively, labour utilisation has improved qoq in tandem with higher order executions.
Management expects 1H22 financial performance to remain challenging, before
improving in 2H22. We factor in lower segment margins in view of continued supply chain
disruptions and inflationary cost pressures; our FY22-24 EPS is lowered by 3-11%.
Reiterate Add at a lower TP of S$0.54; c.6% dividend yield
Despite margin pressures, we believe that CSE’s earnings visibility should be supported
by its strong order book. We keep our Add call with a lower TP of S$0.54, still based on
12x FY23F P/E (10-year average). CSE now trades at 10.4x FY23F P/E (0.6 s.d. below
10-year historical mean). Re-rating catalysts include stronger order wins. Downside risks
include prolonged supply chain disruptions and rising costs.