<Results First Take> Revenue of $117.6m in line with expectations
- CSE reported 1Q22 revenue of S$117.6 m (+5.8% yoy, vs S$111.2 m in 1Q21), in line with expectations
- Higher contributions from the infrastructure segment at 40% in 1Q22 (vs 27% in 1Q21) could lift margins
- Supply chain constraints still present, improvements expected in 2H22.
- We currently have a BUY call with TP of S$0.59
Results Review
- CSE reported 1Q22 revenue of S$117.6 m, in line with expectations. On a y-o-y basis, 1Q22 revenue is 5.8% higher, compared to S$111.2 in 1Q21 (accounting for 24.6% of our forecasts)
- Soaring order intake. New orders in 1Q22 increased by 118.8% to $232.3m (vs $106.2m in 1Q21); above our expectations
- Orderbook as at 1Q22 stands at $344.0m (vs S$229.4m in 4Q21 and S$231.0m in 1Q21)
Operational Update
| S$ million | 1Q2022 | 1Q2021 | Change (%) |
| Revenue | 117.6 | 111.2 | 5.8% |
| New orders received | 232.3 | 106.2 | 118.8% |
| Outstanding orders | 344.0 | 231.0 | 49.0% |
Revenue breakdown by Industry
| S$ million | 1Q2022 | 1Q2021 | YoY % | Comments |
| Energy | 58.1 | 69.1 | -16.0% | Lower large greenfield project revenues recognized in the Americas region |
| Infrastructure | 47.3 | 30.2 | 56.6% | Boosted by higher infrastructure spending in Singapore, higher revenue contributions from non-oil and gas markets in the US, and growth in utility and government customers in Australia. |
| Mining & Minerals | 12.3 | 11.9 | 3.8% | Higher business activity as Covid-19 restrictions ease |
| Total | 117.6 | 111.2 | 5.8% |
Our Thoughts
- Higher contributions from the infrastructure segment at 40% in 1Q22 (vs 27% in 1Q21) could lift margins. Revenue from the infrastructure segment grew by 56.6% compared to a 16% decline in revenues from the energy segment. Consequently, the proportion of revenue from the infrastructure segment has grown from 27% in 1Q21 to 40% in 1Q22. 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.
- Supply chain constraints still present, improvements expected in 2H22. 1Q22 was another challenging quarter with headwinds such as Covid-19, the Ukraine conflict, inflation, and supply chain constraints. CSE is still facing delays in equipment deliveries and longer lead time for the purchase of equipment or components. It is expected that these challenges will continue through 1H22, although improvements are expected in 2H22.
- 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 and TP of S$0.59. More updates to come after the results briefing.