CSE Global Limited made a slow start to FY14 as expected, reporting a 3.5% YoY fall in its 1Q14 revenue to S$93.2m and a 12.1% decline in its PATMI from continuing operations to S$7.5m. This formed 23.1% and 20.9% of our full-year forecasts, respectively. We are expecting a stronger 2H for CSE. Management has echoed this, and has set a target of organically growing its core PATMI by 10-15% in FY14, which we believe is slightly conservative. We retain our forecasts and S$0.63 fair value estimate (pegged to 9x FY14F EPS) on CSE. Reiterate BUY, supported by a prospective FY14F dividend yield of 5.1%.
1Q14 results within expectations
CSE Global Limited made a slow start to FY14 as expected, reporting a 3.5% YoY fall in its 1Q14 revenue to S$93.2m and a 12.1% decline in its PATMI from continuing operations to S$7.5m. This formed 23.1% and 20.9% of our full-year forecasts, respectively. We are expecting a stronger 2H for CSE. The group experienced some startup project delays in the Americas, which resulted in an 8.0% YoY decline in revenue from this region. This was due to harsh winter conditions in the U.S., but the situation has since picked up from Mar. Management is confident that it will be able to do better for this region in FY14 as compared to last year, thanks to the still buoyant oil and gas sector. The main drag in 1Q14 came from its EMEA operations, which recorded a net loss of S$188k (1Q13: net profit of S$768k) due to a sharp 56.0% dip in revenue. Management updated us that there was no cost overrun in the Middle-East in 1Q14, and the decline in revenue was attributed to a lack of quality projects it could undertake. Hence, it plans to right-size its operations there in 2Q14.
Management still optimistic on prospects
CSE clinched S$73.4m of new orders in 1Q14, and ended the quarter with an outstanding order book of S$207.4m (versus S$227.2m as at end FY13 and S$261.5m as at 31 Mar 2013). Management remains optimistic on its outlook, and has set a target of organically growing its core PATMI by 10-15% in FY14, which we believe is slightly conservative.
Maintain BUY
Notwithstanding CSE’s slow start to FY14, we are expecting improvement in its operational performance ahead. We had previously highlighted in our 28 Mar 2014 report that we expect FY14 to be a backend-loaded year for CSE, given the timing of certain key projects and expectations of new order wins in 2H14. We retain our forecasts and S$0.63 fair value estimate (pegged to 9x FY14F EPS). Reiterate BUY, supported by a prospective FY14F dividend yield of 5.1%.
CSE Global Limited made a slow start to FY14 as expected, reporting a 3.5% YoY fall in its 1Q14 revenue to S$93.2m and a 12.1% decline in its PATMI from continuing operations to S$7.5m. This formed 23.1% and 20.9% of our full-year forecasts, respectively. We are expecting a stronger 2H for CSE. The group experienced some startup project delays in the Americas, which resulted in an 8.0% YoY decline in revenue from this region. This was due to harsh winter conditions in the U.S., but the situation has since picked up from Mar. Management is confident that it will be able to do better for this region in FY14 as compared to last year, thanks to the still buoyant oil and gas sector. The main drag in 1Q14 came from its EMEA operations, which recorded a net loss of S$188k (1Q13: net profit of S$768k) due to a sharp 56.0% dip in revenue. Management updated us that there was no cost overrun in the Middle-East in 1Q14, and the decline in revenue was attributed to a lack of quality projects it could undertake. Hence, it plans to right-size its operations there in 2Q14.
Management still optimistic on prospects
CSE clinched S$73.4m of new orders in 1Q14, and ended the quarter with an outstanding order book of S$207.4m (versus S$227.2m as at end FY13 and S$261.5m as at 31 Mar 2013). Management remains optimistic on its outlook, and has set a target of organically growing its core PATMI by 10-15% in FY14, which we believe is slightly conservative.
Maintain BUY
Notwithstanding CSE’s slow start to FY14, we are expecting improvement in its operational performance ahead. We had previously highlighted in our 28 Mar 2014 report that we expect FY14 to be a backend-loaded year for CSE, given the timing of certain key projects and expectations of new order wins in 2H14. We retain our forecasts and S$0.63 fair value estimate (pegged to 9x FY14F EPS). Reiterate BUY, supported by a prospective FY14F dividend yield of 5.1%.
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