CGS International

May 16, 2025

CSE Global: Expecting Stronger 2H25F with a 50% Payout Ratio

Overview of CSE Global’s Performance and Future Outlook

• Management indicates contract momentum and project recognition could be weighted towards 2H25F. [[1]]
• 1Q25 order wins declined 11% year-over-year to S\$155m due to customer delays caused by trade tariff uncertainties. [[1]]
• Positive outlook driven by potential strong order intake from government projects, oil and gas, data centers, and infrastructure sectors. [[1]]
• Dividend policy is now fixed at 50% of net profit, implying a 6.2% yield based on our 2.8Scts DPS estimate. [[1]]
• Reiterate Add rating with a lowered TP of S\$0.68, still based on 12x CY26F P/E. [[1]]

1Q25 Financial Results: Automation Projects Driving Topline

• CSE reported 1Q25 revenue of S\$205m (-6% quarter-over-quarter, +4% year-over-year), accounting for 22% of our FY25F forecast. [[1]]
• Results are in line with expectations, considering 1Q is seasonally weaker. [[1]]
• Topline growth was propelled by automation (+20% year-over-year) and communication (+7% year-over-year) performance, driven by increased revenue contribution from RFC Wireless and control system projects in the US. [[1]]
• Electrification revenue declined (-4.1% year-over-year) due to project recognition timing from Australia and New Zealand, completed in April 2025. [[1]]

Communications Segment Expected to Drive Order Wins in 2Q25F

• 1Q25 order wins of S\$155m (-34% quarter-over-quarter, -11% year-over-year) fell below expectations, forming 18% of our FY25F forecast due to weaker electrification orders (-53% year-over-year). [[1]]
• Award delays were attributed to trade tariff uncertainties, leading to higher cost implications. [[1]]
• CSE intentionally reduced its focus on municipal water and renewable energy contracts, opting out of some bids. [[1]]
• Data center-related order momentum remains strong, highlighted by a recent US\$15m order from a major data center hyperscaler. [[1]]
• We have adjusted our order intake forecast to S\$800m (from S\$850m) for FY25F. [[1]]
• A significant multi-year public sector contract in Singapore is a key potential catalyst. [[1]]
• CSE is considering increasing building capacity for future electrification projects in the US. [[1]]

Maintaining Stability Amidst Uncertainty

• We have trimmed our FY25-27F core EPS forecasts by 2-3% to account for a slower pace of order wins affecting the topline, as clients may adopt a more cautious approach. [[1]]
• Management remains confident in stronger 2H25F order momentum. [[1]]
• We maintain a constructive outlook on CSE’s long-term fundamentals, supported by a healthy order book and diversified revenue streams. [[1]]
• The decision to increase the dividend payout ratio to a minimum of 50% reflects confidence in the company’s earnings resilience and stable cash flow. [[1]]
• Downside risks include cost overruns and a significant slowdown in order wins. [[1]]

Investment Recommendation

• Rating: Add (no change) [[1]]
• Current Price: S\$0.445 [[1]]
• Target Price: S\$0.68 [[1]]
• Previous Target: S\$0.70 [[1]]
• Up/Downside: 52.8% [[1]]

Key Changes in This Note

• FY25-27F core EPS reduced by 2-3% to reflect a shift in project mix, slower pace of order wins, and lower margins. [[1]]

Price Performance

• 1M Absolute: 9.9% [[1]]
• 3M Absolute: -3.3% [[1]]
• 12M Absolute: 9.9% [[1]]
• 1M Relative: -2.4% [[1]]
• 3M Relative: -6.6% [[1]]
• 12M Relative: -24.0% [[1]]

Major Shareholders

• Temasek Holdings: 23.0% [[1]]
• FMR LLC: 4.4% [[1]]
• Lim Boon Kheng: 3.2% [[1]]

Financial Summary

Updated Investment Thesis for CSE Global

• CSE is well-positioned to capitalize on electrification trends and data center growth over the next 2-3 years. [[2]]
• Our target price remains based on 12x CY26F P/E, aligning with the 10-year historical average. [[2]]
• Potential re-rating catalysts include a ramp-up in the data center business and margin improvements from a shift in project mix. [[2]]

Quarterly Revenue Trends and Segment Analysis

• 1Q25 revenue growth was primarily driven by the automation segment. [[2]]

Order Wins Analysis

• 1Q25 order wins decreased by 11% year-over-year, mainly due to a decline in electrification order wins (-52% year-over-year). [[2]]

Earnings Revision Discussion

• Earnings forecasts have been revised to reflect changes in revenue and profitability expectations. [[3]]

Peer Comparison Analysis

Company	Ticker (lcl curr)	Bloomberg Recom.	Price (lcl curr)	Target Price (lcl curr)	Market Cap (US\$ m)	P/E CY25F	P/E CY26F	P/BV CY25F	P/BV CY26F	Recurring ROE CY25F	EV/EBITDA CY25F	EV/EBITDA CY26F	Dividend Yield CY25F
CSE Global	CSE SP	Add	0.45	0.68	242	8.0	7.5	1.11	1.05	13.9%	4.2	3.6	6.2%
ABB Ltd	ABBN SW	NR	48	NA	99,707	22.0	19.8	6.26	5.36	28.4%	14.9	13.8	1.8%
Cisco Systems Inc	CSCO US	NR	64	NA	255,048	16.8	15.5	5.30	4.89	32.2%	12.6	12.0	2.6%
Eaton Corp PLC	ETN US	NR	290	NA	114,981	24.1	21.5	5.88	5.41	24.1%	19.0	17.2	1.4%
Fujitsu Ltd	6702 JP	NR	2,879	NA	41,341	15.9	17.7	2.92	2.68	16.2%	10.0	11.0	1.0%
Hitachi Ltd	6501 JP	NR	3,750	NA	116,780	22.0	18.3	2.78	2.55	12.8%	13.5	10.7	1.0%
Honeywell International Inc	HON US	NR	212	NA	138,361	20.3	18.5	7.57	6.95	36.0%	15.1	14.1	2.2%
International Business Machine	IBM US	NR	253	NA	234,079	23.5	Previous Post Singapore Airlines (SIA SP): Hold Rating, Target Price S$6.88 – FY25 Earnings Analysis & FY26 Outlook Next Post Marco Polo Marine (MPM): 1HFY9/25 Results, Target Price & Analysis (May 2025) Related Posts Market UpdatesSingapore SGX stocks Sheng Siong Group 2025 Outlook: Store Expansion, Financial Performance & Investment Analysis minichart November 3, 2025 Broker Name and Date of Report CGS International, October 31, 2025 Excerpt from CGS International report Report Summary Sheng Siong Group (SSG) saw strong sales growth in 3Q25, with core PATMI up 6% year-on-year,... Market UpdatesSingapore SGX stocks Sing Investments & Finance Ltd (SIF) Stock Analysis: Uptrend Resumes, Technical Buy Signals & Market Insights – November 2025 Singapore Retail Research minichart November 17, 2025 Broker Name: CGS International Date of Report: November 17, 2025 Excerpt from CGS International report. Report Summary Sing Investments & Finance Ltd (SIF) is showing strong technical signals for a potential bullish uptrend resumption,... Market UpdatesSingapore SGX stocks Global Oil Market Outlook 2025: Comfortable Supply Despite OPEC+ Cuts, Says IEA minichart December 16, 2024 Comprehensive Financial Insights: Analyzing Top Listed Companies Broker Name: Lim & Tan Securities Date of Report: December 16, 2024 Introduction In the ever-evolving landscape of financial markets, understanding the subtle nuances of company performances...