Key Highlights of CSE Global’s Performance and Outlook

CSE Global, a leading integrated systems solutions provider across the Energy, Infrastructure, and Mining & Minerals sectors, is positioned for a transformative upcycle driven by electrification trends and a revitalized Oil & Gas (O&G) sector. This report provides an exhaustive analysis of its financial health, growth opportunities, and ESG initiatives.

Trump Administration and the Oil & Gas Revival

The report highlights President-elect Trump’s commitment to declaring a national energy emergency as a pivotal factor for the Oil & Gas sector. With plans to approve new drilling, pipelines, refineries, and power plants, the administration aims to slash electricity and gasoline prices by 50% in the first year. This policy shift is expected to significantly boost O&G-related activities in the U.S., benefiting companies like CSE Global, which previously had substantial exposure to U.S. O&G projects.

Expansion Plans for U.S. Facility

CSE Global plans to capitalize on the growing opportunities in the U.S. by expanding its facility to a size 2-3 times larger than its current 16.68-acre property with a 215,474 sq. ft. building. The expansion will likely occur in phases and may target states offering favorable tax incentives. This signifies management’s strong confidence in the company’s growth prospects, particularly in electrification projects for data and utilities centers.

Financial Performance and Projections

CSE Global has demonstrated robust financial performance, outlined as follows:

• Revenue Growth: Revenue grew from SGD 558 million in FY22 to an estimated SGD 725 million in FY23, with projections reaching SGD 1,101.9 million by FY26.
• Core Net Profit: Core net profit surged from SGD 5 million in FY22 to SGD 23 million in FY23, with FY25 and FY26 forecasts at SGD 33 million and SGD 40 million, respectively.
• Dividend Yield: The company offers an attractive dividend yield of 6.3%, maintaining its consistent payout of SGD 0.0275/share over the years.
• Order Book: A strong order book of SGD 633.6 million as of September 30, 2024, underpins its revenue visibility.

Valuation Metrics

CSE Global trades at a significant discount compared to peers, with a projected Price-to-Earnings (P/E) ratio of 8.9x for FY25 and 7.3x for FY26. The EBITDA margin is forecasted to improve steadily, reaching 4.4% by FY26.

Environmental, Social, and Governance (ESG) Initiatives

CSE Global has made strides in its ESG commitments, though challenges remain:

Environmental Efforts

The company is working to reduce its carbon footprint through green technologies like energy-efficient equipment, LED lighting, and solar power. However, it has yet to meet its FY22 carbon emission reduction targets.

Social Contributions

CSE Global emphasizes employee inclusion, offering flexible work arrangements and supporting education through bursaries. In 2022, it donated SGD 5,000 to Yellow Ribbon Singapore to aid inmate rehabilitation.

Governance Practices

The board comprises 25% female directors and enforces a whistle-blowing policy. A Risk Assessment and Control Self-Assessment exercise identifies material risks, including fraud and corruption, with zero recorded incidents in FY22.

Growth Drivers and Risks

Upside Potential

• Strong growth in U.S. data centers and O&G upcycle.
• Attractive dividend yield exceeding 6%.
• Potential mergers and acquisitions to enhance profitability.
• Significant revenue growth in electrification and infrastructure projects.

Downside Risks

• Execution errors leading to cost overruns.
• Macroeconomic recessions impacting order inflow.
• Foreign exchange fluctuations affecting profitability.

Analyst’s Recommendation

Maybank Research maintains a BUY rating on CSE Global with an unchanged target price of SGD 0.64, representing a 53% upside from the current share price of SGD 0.44. The recommendation is backed by the company’s strong fundamentals, growth prospects, and alignment with favorable macroeconomic trends.