CSE Global' s business sectors secured S$104.4 million in new orders for Q2 2021, bringing its order book to S$212.1 million as at the end of the quarter.

 

The total order value was lower than the S$114.9 million secured a year ago due to a lower order intake in the energy segment.

 

Order intake in that segment fell to S$49.8 million from S$53.8 million due to delays in project awards. The recovery in demand for industrial automation systems and services was also slower than expected, mainly impacted by the disruption from the pandemic and uncertainty in energy prices, said the group.

 

New orders for the infrastructure sector increased 8.4 per cent to S$41.4 million. There was a growth in orders of radio communication equipment and solutions, mainly driven by customers in Australia' s government.

 

The mining and minerals sector secured S$13.2 million in new orders, up from S$11.3 million in Q1 but down from S$22.8 million a year ago. (see Amendment note)

 

Group managing director Lim Boon Kheng said: " The rise in new orders for the infrastructure sector shows promise, as more investments for public infrastructure projects are funded to support increasing requirements for digitalisation, automation, and physical and cyber security. We continue to see a steady stream of orders for the mining and minerals sector for the last few quarters, supported by higher commodity prices."

KEY POINTS
Oil prices continued to rally Wednesday, and analysts expect prices to continue to rise this summer, possibly spiking to $80 per barrel or higher.

The rise in prices comes as the demand outlook continues to strengthen. At the same time, the world is now dipping into oil inventories built up last year.

OPEC+ agreed to stick to its schedule to raise output, but a wild card for the global energy picture remains U.S. producers.

Photo: Bloomberg Analysts from CGS-CIMB Research and DBS Group Research have kept &ldquo add&rdquo and &ldquo buy&rdquo on CSE Global despite the group&rsquo s lower overall revenue for the 1QFY2021 ended March. See: CSE Global reports 22.3% lower EBITDA of $10 mil in 1Q business update To CGS-CIMB analysts Cezzane See and Kenneth Tan, the lower revenue, which were hurt by winter storms in the US, stood in line with expectations, as the quarter saw fewer contract executions. To them, the executions should &ldquo pick up&rdquo in the coming quarters.

Despite the seasonal weakness, CSE Global&rsquo s order intake of $106 million in the 1QFY2021 remained &ldquo healthy&rdquo , with the bulk of orders coming in from the energy sector at $57 million. CSE Global&rsquo s management also indicated that it remained &ldquo cautiously optimistic&rdquo on its order outlook as it hopes to secure greenfield projects over the rest of the FY2021. On this, See and Tan have kept their target price estimate of 63 cents, still pegged to 12 times FY2022 price-to-earnings (P/E), which is close to the group&rsquo s 2015-2020 historical average. &ldquo Despite uncertainties from Covid-19, we expect a better second-half performance as deferred projects from 1QFY2021 are gradually executed,&rdquo they write in a May 20 report. &ldquo Going forward, the energy segment could see gradual recovery as oil price recovers while the infrastructure segment should continue to be bolstered by orders from CSE&rsquo s key markets (Singapore and Australia),&rdquo they add. DBS analysts Chung Wei Le and Ling Lee Keng are also optimistic on CSE Global&rsquo s recovery. They have, however, trimmed their target price estimate on CSE Global to 63 cents from 64 cents. They have also lowered their earnings estimates for the FY2021 and FY2022 by 11% and 3% respectively due to the weather conditions in the US, which are impacting the group&rsquo s energy segment.

The lower target price is pegged to 11.1 times (+1 standard deviation or s.d. of its four-year average) of its FY2021 earnings. That said, the analysts deem the counter&rsquo s current share price as an &ldquo attractive entry opportunity for a growth stock with a recovery story&rdquo . &ldquo CSE is currently trading at 9.3 times FY2021 P/E, which is - 0.2 SD below its 4-year historical mean,&rdquo they write in a May 21 report. &ldquo [CSE&rsquo s] dividend yield is attractive at 5.2%,&rdquo they add. Looking ahead, Chung and Ling believe that the higher oil prices should translate into higher order wins. &ldquo The West Texas Intermediate (WTI) crude oil is currently trading at US$60-65 ($79.88-$86.54) per barrel, up more than 50% from its average trading range in 2HFY2020. We believe that the higher and stable oil prices will entice oil producers to increase their production, resulting in more new order wins for CSE,&rdquo write the analysts from DBS. Chung and Ling also expect CSE Global&rsquo s Infrastructure and Mining & Mineral segment to continue delivering growth as governments increase their spending on projects, and as commodity projects increase. The latter should spur on more mining projects in Australia, say the analysts.