CGS International
May 16, 2025
CSE Global: Expecting Stronger Second Half and a 50% Dividend Payout
Investment Overview
CSE Global’s management projects that contract momentum and potential project recognition could be weighted towards the second half of 2025. Despite a decline in first-quarter order wins, key positives include strong potential order intake from government projects, oil and gas, data centers, and infrastructure-related sectors. The company’s dividend policy is now fixed at 50% of net profit, implying a 6.2% yield based on our 2.8 Singapore cents dividend per share (DPS) estimate. We reiterate an Add rating with a slightly lowered target price of S\$0.68, based on 12x CY26F P/E. [[1]]
First Quarter 2025 Results: Automation Projects Drive Topline
CSE Global reported first-quarter 2025 revenue of S\$205 million, a 6% decrease quarter-over-quarter but a 4% increase year-over-year. This figure accounts for 22% of our full-year 2025 forecast and aligns with expectations, as first quarters are typically weaker. Topline growth was primarily driven by automation (up 20% year-over-year) and communication (up 7% year-over-year) segments, attributed to increased revenue contribution from RFC Wireless and control system projects in the U.S. However, electrification revenue declined by 4.1% year-over-year due to the timing of project recognition from Australia and New Zealand, which were completed in April 2025. [[1]]
Communications Segment to Propel Second Quarter Order Wins
First-quarter 2025 order wins totaled S\$155 million, a 34% decrease quarter-over-quarter and an 11% decrease year-over-year, falling short of expectations and representing 18% of our full-year 2025 forecast. The decline was mainly due to weaker-than-expected electrification orders (down 53% year-over-year). CSE Global noted that award delays were due to uncertainty in trade tariffs, leading to higher cost implications. The company also intentionally reduced its focus on municipal water and renewable energy contracts, opting out of some bids. However, data center-related order momentum remains robust, highlighted by a recent US\$15 million order from a major data center hyperscaler. Consequently, we have adjusted our order intake forecast to S\$800 million (from S\$850 million) for FY25F. A substantial multi-year public sector contract in Singapore is also a key potential catalyst. CSE Global is also considering increasing building capacity for future electrification projects in the U.S. [[1]]
Maintaining Stability Amidst Uncertainty
We have revised our core EPS forecasts for FY25-27F downward by 2-3% to account for a potentially slower pace of order wins impacting topline, as clients may take a more cautious approach. Management remains optimistic about stronger order momentum in the second half of 2025. We maintain a constructive outlook on CSE Global’s long-term fundamentals, supported by its robust order book and diversified revenue streams. 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: potential cost overruns and a significant slowdown in order wins. [[1]]
Investment Thesis: Reiterate Add, Lower Target Price to S\$0.68
We believe CSE Global is well-positioned to capitalize on electrification trends and data center growth over the next two to three years. Our target price is based on 12x CY26F P/E, aligning with the 10-year historical average. Potential catalysts for re-rating include the ramp-up of the data center business and margin improvements resulting from a shift in project mix. [[2]]
First Quarter Revenue Growth by Segment
The following table shows a detailed comparison of revenue by segment:
| FYE Dec (S\$ m) |
2Q22 |
3Q22 |
4Q22 |
1Q23 |
2Q23 |
3Q23 |
4Q23 |
1Q24 |
2Q24 |
3Q24 |
4Q24 |
1Q25 |
qoq (%) |
yoy (%) |
| Electrification |
58.0 |
58.6 |
77.0 |
74.1 |
89.5 |
85.9 |
85.0 |
101.7 |
115.1 |
104.8 |
113.2 |
97.5 |
-13.9% |
-4.1% |
| Communication |
42.2 |
38.2 |
41.6 |
45.4 |
61.7 |
55.1 |
58.4 |
54.0 |
59.6 |
61.8 |
56.7 |
57.9 |
2.1% |
7.2% |
| Automation |
44.3 |
44.3 |
35.8 |
39.9 |
38.7 |
44.4 |
47.0 |
41.9 |
56.7 |
47.3 |
48.5 |
50.1 |
3.3% |
19.5% |
| Group revenue |
144.5 |
141.1 |
154.4 |
159.4 |
189.9 |
185.4 |
190.3 |
197.5 |
231.4 |
213.9 |
218.4 |
205.5 |
-5.9% |
4.0% |
Earnings Revision
The following table details the earnings revision.
| (S\$m) |
FY25F New |
FY26F New |
FY27F New |
FY25F Old |
FY26F Old |
FY27F Old |
FY25F % change |
FY26F % change |
FY27F % change |
| Revenue |
917.6 |
962.3 |
1,010.4 |
932.9 |
993.4 |
1,044.0 |
-1.6% |
-3.1% |
-3.2% |
| Operating profit |
57.7 |
62.5 |
65.8 |
58.9 |
63.5 |
67.4 |
-1.9% |
-1.6% |
-2.4% |
| Reported net profit |
37.9 |
41.5 |
44.3 |
38.7 |
42.3 |
45.5 |
-2.2% |
-1.8% |
-2.7% |
| Core net profit |
37.9 |
41.5 |
44.3 |
38.7 |
42.3 |
45.5 |
-2.2% |
-1.8% |
-2.7% |
| Core EPS (Scts) |
5.5 |
5.9 |
6.2 |
5.7 |
6.1 |
6.4 |
-2.2% |
-1.8% |
-2.7% |
Peer Comparison
The table below compares CSE Global with its peers:
| Company |
Ticker (lcl curr) |
Bloomberg Recom. |
Price (lcl curr) |
Target Price (lcl curr) |
Market Cap (US\$ m) |
P/E (x) CY25F |
P/E (x) CY26F |
P/BV (x) CY25F |
P/BV (x) CY26F |
ROE CY25F |
EV/EBITDA (x) CY25F |
EV/EBITDA (x) 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
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