RHB Bank Singapore has initiated coverage on CSE Global 544 with a &ldquo buy&rdquo call and target price of 58 cents, given its exposure to global growth and green energy across diversified segments.

 

RHB&rsquo s Alfie Yeo forecasts a compound annual growth rate (CAGR) of 16% for the group&rsquo s earnings between FY2023 to FY2026 earnings driven by its current strong orderbook, especially the electrification segment and acquisitions in the communications segment.

 

Yeo notes that CSE is a systems integrator providing electrification, communications and automation solutions, offering exposure on green energy such as renewable energy (RE) and EV infrastructure, critical communications and infrastructure development across US, UK, Singapore, Australia and New Zealand.

 

According to Precedence Research, the US electrification market is forecasted at US$30.28 billion ($40.56 billion) in 2024 and is projected to be US$72.94 billion in 2034, growing at a 9.2% CAGR during the forecast period.

 

This is driven by green energy adoption leading to electrical infrastructure development for electrification systems and infrastructure where CSE is a beneficiary.

 

&ldquo We see growth driven by the electrification and communications segments, with the automaton segment&rsquo s outlook remaining stable,&rdquo Yeo says, noting that the electrification segment is driven by infrastructure and RE development.

 

This is due to increasing demand for electricity due to digitisation, information technology (IT), automation, more data centres (DC), adoption of EV, more efficient utility installation which drives more power grid electrification.

 

The growth in the communications segment will be supported by acquisitions in the US, where it is looking to increase its contributions.

 

CSE&rsquo s critical communications business is present in the UK, US, Australia and New Zealand and Singapore.

 

The group recently announced the US$11.5 million acquisition of RFC Wireless Inc, an advanced communications solutions provider. The acquisition is earnings accretive and will contribute around 13% to CSE&rsquo s existing net profit, based on net profit ended 31 December 2023.  

 

Additionally, Yeo notes that CSE has a &ldquo robust&rdquo orderbook of $634 million as at September 2024, while its order intake continued to be strong at $565 million.

 

CSE typically recognises 50% - 150% of the previous year&rsquo s order revenue.

 

Yeo identifies key downside risks as including unforeseen project cost overruns and arbitration by customers for failure to deliver its services, which can potentially dampen earnings and margins.   

 

UOB Kay Hian' s John Cheong and Heidi Mo have kept their " buy" call and 59 cents target price on CSE Global 544 , following its 3QFY2024 business update where its revenue was in line with expectations.

 

The company reported a turnover of $213.9 million for the quarter to Sept 2024, up 15.4% y-o-y, bringing 9MFY2024 revenue to 75% of Cheong and Mo' s forecast for the full year.

 

However, they' ve observed that CSE Global' s 3QFY2024 order wins, at $187 million was down 38% y-o-y. 

 

Nonetheless, the order outlook for the current 4QFY2024 is " promising" . In the first half of Nov 24, CSE won three contract wins worth some $129 million in the US, slated for execution from 2024 to 2026. 

 

" These fall under CSE&rsquo s electrification business and reflect its strengthening position to capture demand in the space," state Cheong and Mo.

 

The company' s order book has reached some $634 million, " signalling a healthy pipeline for the coming quarters," the analysts add.

 

They expect the company to maintain its full-year dividend at 2.75 cents per share, implying an " above-average" yield of 6.3% versus STI' s 4%.

CSE Global, the global systems integrator providing electrification, communications and automation solutions, recorded a 15.4% y-o-y increase in its 3QFY2024 ended September to $213.9 million, led by broad-based growth across all business segments and geographical regions. 

 

The Electrification, Communications and Automation business segments contributed 49.0%, 28.9% and 22.1% of 3QFY2024 revenue respectively.

 

Revenue for the Electrification business segment rose 22.0% to $104.8 million in 3QFY2024 as compared to the corresponding quarter in 2023. This was mainly attributed to the faster than anticipated project execution milestones for two Electrification projects in the USA, which resulted in higher project revenues recognised for 3QFY2024. The Electrification business segment secured $78.3 million of new orders, which contributed about 41.9% of total order intake during the quarter. 

 

The Communications business segment posted a 12.1% increase in revenue y-o-y from $55.1 million to $61.8 million, largely contributed by growth in government sector and retail industry revenues in Australia. The Communications business segment accounted for approximately 32.4% of the total order intake in 3QFY2024, securing $60.5 million in new orders as compared to $66.4 million in 3QFY2023. 

 

Revenue for the Automation business segment grew 6.6% year-on-year during 3QFY2024 from higher government sector revenues in the Asia Pacific region. The Automation business segment clinched $47.8 million of new orders in 3QFY2024.

 

Lim Boon Kheng, group managing director and CEO of CSE Global 544 says: " The global economic outlook, geopolitical tensions and ongoing inflationary pressures continue to present uncertainties in the markets where we operate. Despite the challenges, CSE Global has shown resilience in its business performance and will continue to focus on the Electrification and Communications business segments. We remain cautious of macroeconomic volatility as we work towards achieving a healthy financial performance for FY2024.&rdquo

 

 

Global systems integrator CSE Global 544 has secured a major contract worth US$68.5 million ($90.7 million) in the US. 

 

According to the group, the contract is for the design, fabrication and installation of electrical houses, as well as the integration of medium voltage and low voltage switchgears, critical power equipment and automation systems and equipment. 

 

The contract is slated for execution between 2025 and 2026.

 

Lim Boon Kheng, group managing director, says: &ldquo We are delighted to have secured this major contract under the Electrification division. This is a testament to our capabilities as a trusted, long-term partner delivering quality projects, and we are grateful for the continued trust and confidence of our customers. We continue to see strong demand for our Electrification solutions, which is currently driven by the growing megatrends of urbanisation and electrification. This contract is expected to contribute positively to CSE Global&rsquo s financial performance for the financial years 2025 and 2026.&rdquo

 

On Nov 1, the group also secured two major contracts totalling US$28.8 million ($38.1 million) in the US, which are slated for execution from 2024 to 2026.