Broker: Maybank Research Pte Ltd
Date of Report: June 27, 2025

CSE Global Poised for Multi-Year Breakout: Riding the US Data Centre Wave and Singapore’s MAS SGD5bn Scheme

Overview: Strategic Positioning for Global Megatrends

CSE Global (CSE SP) is emerging as a key beneficiary of global trends in data centre infrastructure and US manufacturing reshoring, with a robust strategy focused on expanding its US capacity and securing significant new contracts. Management’s strategic shift towards high-growth sectors, coupled with resilient margins and strong dividend guidance, make CSE Global a compelling investment opportunity with multi-year growth potential.

Target Price Upgrade and Investment Thesis

– Target Price Raised: Maybank Research has upgraded its target price to SGD0.70 (from SGD0.58), reflecting a more optimistic outlook and a higher P/E multiple of 14.0x FY25E (previously 11.5x). – Investment Rating: BUY, with an expected 33% upside from the current share price of SGD0.55. – Rationale: Key catalysts include the US data centre boom, potential large-scale orders from top-tier US and Singapore government-related clients, and CSE’s positioning to benefit from the Monetary Authority of Singapore’s (MAS) SGD5bn market liquidity program.

Order Book and Strategic Capacity Reservation

– 1Q25 Orders: Declined 11.3% YoY to SGD155.3m, partly due to a weaker USD and a deliberate strategy to reserve capacity for higher-margin, larger-scale data centre and utilities projects. – Strong Order Book: SGD633.6m as of September 2024. – Margin Resilience: Management has secured back-to-back supplier pricing to hedge against potential tariff shocks. – Forecast: Order wins are expected to accelerate in 2H25, particularly in the US data centre segment and from Singapore government projects.

Beneficiary of MAS SGD5bn Scheme

CSE Global stands out as a likely beneficiary of the MAS SGD5bn scheme, which aims to enhance liquidity and valuations within the Singapore market. This program is anticipated to boost CSE’s valuation and support further order growth, especially as data centre projects in the US ramp up in the second half of the year.

Multi-Year US Growth and Shareholder Returns

– US Expansion: CSE is actively expanding its US capacity, including construction of a much larger facility, to fulfill rising demand from data centre and manufacturing clients. – Dividend Policy: Maintains a 50% payout ratio, offering stability and attractive yields for shareholders. – Dividend Yield: Prospective yield of 6.3%—one of the most attractive among peers.

Company Profile and Market Performance

– Business Description: CSE Global provides integrated systems solutions globally, serving Energy, Infrastructure, and Mining & Minerals sectors. – Market Capitalization: SGD388.8M (USD305M) – Issued Shares: 707 million – Major Shareholders: – Heliconia Capital Management Pte Ltd (22.6%) – CSE Global Ltd. (4.4%) – Fidelity Management & Research Co. LLC (4.1%) – 52-Week High/Low: SGD0.55/SGD0.39 – 3-Month Average Turnover: USD1.2m – Free Float: 62.1%

Financial Highlights and Forecasts

Value Proposition: Discount to Peers and Cash Generation

– Attractive Valuation: CSE trades at a significant discount to peers, with a prospective dividend yield exceeding 6%. – Strong Cash Flow: Free cash flow yield forecasted at 23.7% in FY25E. – Gearing Reduction: Ongoing improvements in cash flow and profitability are expected to further reduce net gearing, potentially turning CSE net cash positive by 2026.

Key Price Drivers and Share Performance

– Historic Catalysts: FY18 net profit grew by 50.8% YoY; COVID-19 caused a temporary sell-off; strong order wins and rights issues supported rebounds. – Dividend Stability: Dividends maintained at SGD0.0275/share for many years, providing yield consistency. – Share Price Performance: CSE Global has significantly outperformed the Straits Times Index over the past 12 months, delivering a 38% absolute return and 17% relative outperformance.

Upside and Downside Swing Factors

• Upside: Re-rating potential from strong NPAT growth (250% in FY23, 30% in FY24E), attractive dividend, potential M&A, and upside from the US O&G cycle and data centre growth.
• Downside: Risks include execution errors, recession-induced order slowdown, and FX volatility due to global operations.

ESG Performance and Sustainability Initiatives

– ESG Score: Overall score of 76 (above average), with quantitative score of 72 and qualitative score of 83. – Environmental: Targets include a 10% reduction in greenhouse gas CO2 index by 2030 (not yet achieved). Scope 1 and 2 emissions in 2023 totaled 4,661 tCO2e. Paper consumption index has decreased consistently. – Social: 16.6% of workforce are women; female board representation at 25%. Employee turnover rate at 27%, new hire rate at 30%. Donated SGD5,000 to Yellow Ribbon Singapore and supports staff education. – Governance: 90% of the board are independent; all directors except the Executive Chairman and CEO are independent. Zero incidents of corruption or regulatory non-compliance have been recorded. – Key Policies: ESG oversight is managed through a Corporate Sustainability Work Group. No direct linkage of senior management remuneration to ESG targets, but TCFD climate-related disclosures are in place. Carbon offsetting is part of net zero plans.

Key Financial Ratios and Metrics

• Net Profit Margin: Improving from 3.1% in FY24 to 4.1% in FY27E.
• ROAE: Climbing from 10.5% (FY23A) to 12.2% (FY27E).
• Free Cash Flow: Projected at SGD92.1m in FY25E, supporting both dividends and potential M&A.
• Net Gearing: Set to drop from 35.2% (FY23A) to net cash position by FY26E.
• Current Ratio: Improving from 1.2x in FY23A to 1.5x by FY27E, indicating rising liquidity.

Business Model and Industry Risk Factors

– Growth Levers: CSE’s multi-sector integration, focus on data centres, and electrification trends underpin its multi-year upcycle. – Supply Chain Risk: As a global operator, CSE faces supply chain risks that could impact project execution and cost controls. – Emissions Targets: While progress on emission reduction targets has lagged, ongoing investments in green technology and disclosure practices are expected to drive future improvement.

Conclusion: CSE Global Set for Dynamic Growth

CSE Global is strategically positioned to capture outsized gains from global shifts in data centres, US manufacturing, and Singapore’s liquidity initiatives. Backed by a resilient order book, disciplined financial management, robust dividend policy, and improving ESG metrics, CSE stands out as a value-driven, high-yield option for investors seeking both growth and income. With strong earnings momentum, a commitment to sustainability, and a clear path toward deleveraging, CSE Global offers a compelling multi-year investment story.
For investors, analysts, and market watchers seeking exposure to infrastructure, energy, and digital transformation trends, CSE Global represents a rare combination of growth, yield, and value in the Singapore market landscape.