CSE Global Ltd. Poised for Electrifying Growth Amid AI Boom
KGI Securities, March 21, 2025
Surging Data Center Demand Fuels Electrification Opportunities
CSE Global Ltd., a leading provider of technology-driven solutions, is well-positioned to capitalize on the growing demand for energy-efficient data centers driven by the surge in artificial intelligence (AI) investments. The company’s electrification business is expected to experience strong growth, benefiting from the rising power requirements of next-generation data centers.
Major technology companies, including Apple, Amazon, Microsoft, and Meta, have announced plans to significantly increase their capital expenditures in AI infrastructure, with collective spending projected to reach an unprecedented $200 billion in 2025. This heightened investment is fueling robust demand for data centers, which serve as the backbone for AI-driven applications. As AI workloads become more complex, data centers require enhanced power capacity and energy-efficient solutions, creating substantial opportunities for CSE Global’s electrification and power systems offerings.
Communication Business Expansion through Strategic Acquisition
CSE Global has also bolstered its communication business through the acquisition of RFC Wireless, a leading provider of advanced communication solutions. This strategic move enhances CSE Global’s market position by expanding its service offerings and increasing its presence in key industries such as public safety, utilities, and transportation.
The integration of RFC Wireless allows CSE Global to unlock growth through expanded market reach, cross-selling opportunities, and increased recurring revenue from long-term service contracts. Additionally, the acquisition aligns with CSE Global’s strategy of delivering high-value, technology-driven solutions, thereby strengthening its competitive edge and long-term growth potential in the communication sector.
Robust Order Books and Recurring Revenue Streams
CSE Global maintained a stable order book of S\$672.6 million in FY24, providing a solid foundation for revenue growth in FY25. This underscores the company’s resilience and ability to sustain its pipeline of projects. While order intake declined 19.1% year-over-year in 2H24 due to a slowdown in new project orders ahead of the U.S. Presidential Election, the company expects order momentum to recover as greater policy clarity under the Trump administration restores confidence and drives an uptick in new project orders.
Importantly, CSE Global continues to benefit from a robust recurring revenue base, with its flow business, including Brownfield and Small Greenfield Projects, contributing 68.9% of total revenue. This steady revenue stream enhances cash flow predictability and financial stability, reflecting the company’s operational excellence and project execution capabilities.
Potential Risks and Mitigation Strategies
The report highlights the potential impact of ongoing U.S. economic uncertainty, particularly the volatility surrounding trade policies and the risk of a recession. As the U.S. accounts for 63% of CSE Global’s revenue in FY24, this macroeconomic environment could weaken demand for the company’s services and impact its recurring revenue streams.
Additionally, the company is currently involved in legal proceedings with a customer, which could potentially affect its financial performance if the outcome is unfavorable. CSE Global is, however, committed to vigorously pursuing its claims to recover the disputed amount.
Outlook and Valuation
Despite these challenges, the report maintains an OUTPERFORM recommendation on CSE Global, with a 12-month target price of S\$0.60, implying a 29% upside. The company’s strong business model, focus on long-term growth, and ability to capitalize on the AI-driven data center boom position it well for continued success. The report also highlights CSE Global’s robust order books, expanding communication business, and stable recurring revenue streams as key drivers of its growth trajectory.
