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DBS: CSE Global Ltd – Buy Target Price $0.59

Posted on August 9, 2022August 9, 2022 By alanyeo No Comments on DBS: CSE Global Ltd – Buy Target Price $0.59

<News Analysis> 2Q22 new order intake exceeds our expectations; orders from the Energy segment surged >100% yoy

  • New orders in 2Q22 rose by 81.5% yoy to S$189.5m (vs S$104.4m in 2Q21), above our expectations
  • The surge in new order intake is mainly ascribed to higher flow orders and new large greenfield projects in the Energy segment
  • Supply chain disruptions persist and may continue to weigh on revenue and margins 
  • As at 2Q22, CSE has an orderbook of S$388.9m (vs S$344.0m in 1Q22)
  • We currently have a BUY recommendation with TP of S$0.59, more updates to come after the half year results release on 12 August 2022

Key highlights 

2Q22 Operational Update – Order intake (S$m)

Our Thoughts

  • Robust new order wins for FY22. New orders in 2Q22 rose by 81.5% yoy to S$189.5m (vs S$104.4m in 2Q21). As at 2Q22, CSE has an orderbook of S$388.9m (vs S$344.0m in 1Q22). Comparably, order wins for FY22 have been very strong, with 1H22 new order intake of S$421.7m (+100.3% yoy) constituting 91% of FY21’s new order intake of $462.1m, and accounts for 85% of our new orders forecast for FY22. This implies upside to our new order intake forecasts. The surge in new order intake is mainly ascribed to higher flow orders and new large greenfield projects in the Energy segment.
  • Energy sector seeing light, renewables a growing opportunity. The energy sector made up 70% of 2Q22’s new order intake (vs 48% in 2Q21). Our house view predicts that the average brent crude oil price will stay between US$102-107 per barrel for the year. We believe that the energy sector is seeing improvement, which could contribute to higher flow orders for CSE. In 2Q22, CSE managed to secure a large greenfield order in the Renewables space worth S$36.5m and they are also seeing more demand for projects comprising solar and wind energy. We think that the Renewables space could represent a growing opportunity that CSE can tap on for growth as it leverages on the global shift towards renewables. 
  • Supply chain disruptions persist and may continue to weigh on revenue and margins. The ongoing supply chain disruption is expected to bring about project delays. Execution of recent contract wins is expected to be backloaded towards the end of 2022 and 2023. The supply chain disruptions can also lead to increased costs of execution which may dampen margins. 
  • Overall, the strong order wins could mitigate the supply chain disruptions and lead to a better FY22/FY23. 

We currently have a BUY recommendation with TP of S$0.59, more updates to come after the half year results release on 12 August 2022

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Research - Equities Tags:CSE Global

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