UOB Kay Hian Private Limited
Friday, 16 May 2025
CSE Global (CSE SP): Maintaining BUY Rating After a Solid 1Q25 Performance
Company Overview
CSE Global is a systems integration and information technology solutions provider. The company specializes in computer network systems and industrial automation, and designs, manufactures, and installs management information systems. [[1]]
Investment Thesis
- Recommendation: BUY (Maintained) [[1]]
- Share Price: S\$0.445 [[1]]
- Target Price: S\$0.610 [[1]]
- Upside: +37.1% [[1]]
Stock Data
- GICS Sector: Information Technology [[1]]
- Bloomberg Ticker: CSE SP [[1]]
- Shares Issued (m): 706.6 [[1]]
- Market Cap (S\$m): 314.4 [[1]]
- Market Cap (US\$m): 242.3 [[1]]
- 3-mth Avg Daily Turnover (US\$m): 0.7 [[1]]
- 52-Week High/Low: S\$0.495/S\$0.375 [[1]]
Price Performance (%)
- 1 Month: 11.3 [[1]]
- 3 Month: (4.3) [[1]]
- 6 Month: 0.0 [[1]]
- 1 Year: 9.9 [[1]]
- Year-to-Date: 7.2 [[1]]
Major Shareholders (%)
- Temasek Hldgs: 23.0 [[1]]
- FMR LLC: 10.0 [[1]]
Key Financials
- FY25 NAV/Share (S\$): 0.39 [[1]]
- FY25 Net Debt/Share (S\$): 0.07 [[1]]
1Q25 Results: In Line with Expectations
CSE Global’s 1Q25 revenue of S\$206m (+4% yoy) is largely in line with expectations, forming 23% of the full-year estimate. Revenue growth was driven by strong performances from the communications and automation segments. The orderbook stood at a healthy S\$616m, supported by S\$155m in 1Q25 order wins. The Singapore dollar’s recent strength against the US dollar poses an earnings risk, partly mitigated by CSE’s recent accretive acquisition. The recommendation is to maintain BUY with an unchanged target price of S\$0.61. [[1], [2]]
1Q25 Financial Highlights
Key financial figures for 1Q25 compared to previous periods: [[2]]
| Year to 31 Dec (S\$m) |
1Q25 |
1Q24 |
yoy % chg |
4Q24 |
qoq % chg |
| Revenue |
205.5 |
197.5 |
4.0 |
218.4 |
(5.9) |
| – Electrification segment |
97.6 |
101.7 |
(4.1) |
113.2 |
(13.9) |
| – Communications segment |
57.9 |
54.0 |
7.3 |
56.7 |
2.2 |
| – Automation segment |
50.1 |
41.9 |
19.6 |
48.5 |
3.3 |
| New orders received |
155.3 |
175.0 |
(11.3) |
235.3 |
(34.0) |
| Outstanding orders |
616.0 |
719.3 |
(14.4) |
672.6 |
(8.4) |
Segment Performance Analysis
- Communications: Revenue rose 7% yoy to S\$58m, supported by new contributions from the acquisition of RFC Wireless. [[2], [3]]
- Automation: Revenue surged 20% yoy to S\$50m, underpinned by increased work on control systems projects in the US. [[2], [3]]
- Electrification: Revenue declined 4% yoy to S\$98m due to some project delays in Australia and New Zealand. [[2], [3]]
Orderbook Analysis
CSE recorded a healthy orderbook of S\$616m as of 31 Mar 25, driven by order wins of S\$155m (-11% yoy). [[3]]
- Electrification: Accounted for 23% of new orders (vs 43% in 1Q24), down 52% yoy due to fewer major contracts. [[3]]
- Communications-related orders: Rose 20% yoy to S\$64m, driven by a substation radio communication project in Asia Pacific and an expanded geographic footprint. [[3]]
- Automation orders: Grew 20% yoy to S\$56m, supported by a major contract in the oil and gas sector. [[3]]
Key Financial Forecasts
Summary of key financial forecasts for the years 2023-2027F: [[3]]
| Year to 31 Dec (S\$m) |
2023 |
2024 |
2025F |
2026F |
2027F |
| Net turnover |
725 |
861 |
868 |
952 |
974 |
| EBITDA |
55 |
72 |
83 |
87 |
86 |
| Operating profit |
38 |
54 |
57 |
61 |
63 |
| Net profit (rep./act.) |
23 |
26 |
37 |
39 |
41 |
| Net profit (adj.) |
23 |
37 |
37 |
39 |
41 |
| EPS (S\$ cent) |
3.7 |
5.4 |
5.5 |
5.8 |
6.0 |
| PE (x) |
12.1 |
8.2 |
8.1 |
7.6 |
7.4 |
| P/B (x) |
1.3 |
1.2 |
1.1 |
1.1 |
0.7 |
| EV/EBITDA (x) |
6.6 |
5.1 |
4.4 |
4.2 |
4.3 |
| Dividend yield (%) |
6.2 |
5.4 |
5.4 |
5.4 |
5.4 |
| Net margin (%) |
3.1 |
3.1 |
4.2 |
4.1 |
4.2 |
| Net debt/(cash) to equity (%) |
35.2 |
28.2 |
18.4 |
13.3 |
6.4 |
| Interest cover (x) |
5.5 |
8.6 |
9.8 |
10.3 |
10.2 |
| ROE (%) |
10.5 |
11.2 |
13.8 |
13.6 |
13.1 |
| Consensus net profit |
– |
– |
37 |
40 |
43 |
| UOBKH/Consensus (x) |
– |
– |
1.01 |
0.99 |
0.96 |
Strategic Acquisition of Chicago Communications
On 30 Apr 25, CSE announced the acquisition of Chicago Communications for US\$8.5m (~S\$11.1m). The company is a communications systems provider that sells, rents, installs and maintains equipment across Illinois and Indiana. This acquisition is earnings accretive at around 6x PE, and is expected to contribute around S\$1.2m in net profit on a pro-rated basis from May 25. It will be fully funded from a mix of the remaining proceeds from the Mar 24 placement and bank borrowings. This is viewed as a positive move for CSE to strengthen its critical communications network in the Americas region and support orderbook growth. [[2]]
Potential Forex Impact
CSE benefits from a stronger US\$ as around 60% of its total revenue is denominated in US\$. The Singapore dollar has strengthened c.5% to S\$1.29/US\$ ytd, which would lead to margin compression of c.0.5ppt. [[2]]
Earnings Revision
The 2025 earnings forecast has been lowered by 2%, after revising revenue assumptions to account for potential earnings risks arising from US\$/S\$ currency movements, partially mitigated by the new acquisition contribution. [[2]]
Valuation and Recommendation
Maintain BUY with an unchanged target price of S\$0.61. The target price is pegged to 11x 2025F PE or its long-term historical mean and implies a decent 2025 dividend yield of 5.4%. [[2]]
Share Price Catalysts
- Large infrastructure project wins. [[2]]
- Accretive acquisitions. [[2]]
Order Intake by Business Segment
Order intake by business segment showing year-over-year and quarter-over-quarter changes: [[2]]
| Year to 31 Dec (S\$m) |
1Q25 |
1Q24 |
yoy % chg |
4Q24 |
qoq % chg |
| Electrification |
36.1 |
75.8 |
(52.4) |
139.8 |
(74.2) |
| Communications |
63.7 |
52.8 |
20.6 |
55.8 |
14.1 |
| Automation |
55.6 |
46.4 |
19.9 |
39.8 |
39.7 |
| Total |
155.3 |
175.0 |
(11.2) |
235.4 |
(34.0) |
Financial Projections
Detailed profit and loss balance sheet projections for the years 2024-2027F: [[3]]
| Year to 31 Dec (S\$m) |
2024 |
2025F |
2026F |
2027F |
| Net turnover |
861.2 |
867.7 |
951.6 |
974.0 |
| EBITDA |
72.0 |
82.6 |
86.6 |
85.5 |
| Deprec. & amort. |
17.8 |
25.2 |
25.2 |
22.1 |
| EBIT |
54.2 |
57.4 |
61.4 |
63.5 |
| Total other non-operating income |
(10.1) |
0.3 |
0.0 |
0.0 |
| Associate contributions |
(0.0) |
0.0 |
0.0 |
0.0 |
| Net interest income/(expense) |
(8.4) |
(8.4) |
(8.4) |
(8.4) |
| Pre-tax profit |
35.7 |
49.3 |
53.0 |
55.0 |
| Tax |
(9.2) |
(12.4) |
(13.7) |
(14.3) |
| Minorities |
(0.1) |
0.0 |
0.0 |
0.0 |
| Net profit |
26.3 |
36.8 |
39.2 |
40.8 |
| Net profit (adj.) |
36.8 |
36.8 |
39.2 |
40.8 |
Balance sheet forecasts: [[3]]
| Year to 31 Dec (S\$m) |
2024 |
2025F |
2026F |
2027F |
| Fixed assets |
54.1 |
78.7 |
81.3 |
87.6 |
| Other LT assets |
138.8 |
134.0 |
129.1 |
124.2 |
| Cash/ST investment |
57.4 |
78.6 |
89.7 |
108.9 |
| Other current assets |
358.2 |
360.6 |
394.3 |
403.3 |
| Total assets |
608.5 |
651.8 |
694.5 |
724.0 |
| ST debt |
108.9 |
108.9 |
108.9 |
108.9 |
| Other current liabilities |
224.0 |
223.0 |
242.8 |
247.7 |
| LT debt |
20.6 |
20.6 |
20.6 |
20.6 |
| Other LT liabilities |
23.1 |
21.9 |
21.9 |
21.9 |
| Shareholders’ equity |
256.0 |
276.5 |
299.5 |
324.0 |
| Minority interest |
0.0 |
0.8 |
0.8 |
0.8 |
| Total liabilities & equity |
632.6 |
651.8 |
694.5 |
723.9 |
Cash Flow Analysis
Key cash flow metrics for the forecast period: [[3]]
| Year to 31 Dec (S\$m) |
2024 |
2025F |
2026F |
2027F |
| Operating |
33.1 |
68.6 |
60.3 |
68.8 |
| Pre-tax profit |
35.7 |
49.3 |
53.0 |
55.0 |
| Tax |
(7.2) |
(12.4) |
(13.7) |
(14.3) |
| Deprec. & amort. |
17.8 |
25.2 |
25.2 |
22.1 |
| Associates |
(0.0) |
0.0 |
0.0 |
0.0 |
| Working capital changes |
(24.3) |
(3.4) |
(14.1) |
(4.0) |
| Non-cash items |
0.3 |
0.0 |
0.0 |
0.0 |
| Other operating cashflows |
10.8 |
9.9 |
9.9 |
9.9 |
| Investing |
(33.3) |
(31.1) |
(32.9) |
(33.4) |
| Capex (growth) |
(20.7) |
(21.2) |
(23.0) |
(23.5) |
| Investments |
0.0 |
0.0 |
0.0 |
0.0 |
| Proceeds from sale of assets |
0.7 |
0.0 |
0.0 |
0.0 |
| Others |
(13.4) |
(9.9) |
(9.9) |
(9.9) |
| Financing |
19.3 |
(16.2) |
(16.2) |
(16.2) |
| Dividend payments |
(7.6) |
(16.2) |
(16.2) |
(16.2) |
| Proceeds from borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
| Loan repayment |
3.7 |
0.0 |
0.0 |
0.0 |
| Others/interest paid |
23.2 |
0.0 |
0.0 |
0.0 |
| Net cash inflow (outflow) |
19.1 |
21.3 |
11.3 |
19.2 |
Key financial ratios: [[3]]
| Year to 31 Dec (%) |
2024 |
2025F |
2026F |
2027F |
| EBITDA margin |
8.4 |
9.5 |
9.1 |
8.8 |
| Pre-tax margin |
4.1 |
5.7 |
5.6 |
5.7 |
| Net margin |
3.1 |
4.2 |
4.1 |
4.2 |
| ROA |
4.4 |
5.8 |
5.8 |
5.8 |
| ROE |
11.2 |
13.8 |
13.6 |
13.1 |
| Turnover |
18.8 |
0.8 |
9.7 |
2.4 |
| EBITDA |
30.4 |
14.8 |
4.8 |
(1.2) |
| Pre-tax profit |
20.7 |
38.1 |
7.5 |
3.9 |
| Net profit |
16.9 |
39.9 |
6.5 |
3.9 |
| Net profit (adj.) |
63.2 |
0.2 |
6.5 |
3.9 |
| EPS |
48.7 |
0.2 |
6.5 |
3.9 |
| Debt to total capital |
33.6 |
31.8 |
30.1 |
28.5 |
| Debt to equity |
50.6 |
46.8 |
43.2 |
40.0 |
| Net debt/(cash) to equity |
28.2 |
18.4 |
13.3 |
6.4 |
| Interest cover (x) |
8.6 |
9.8 |
10.3 |
10.2 |
