CSE Global Limited’s (CSE) 1Q15 PATMI came in flat, just up 0.9% YoY at S$7.6m, while operating profit grew 20.7% to S$11.1m on the back of a 13.2% growth in revenue to S$105.5m. Higher operating expenses as well as higher tax expenses resulted in flat PATMI growth. Even though 1Q15 PATMI only formed 21.4% of our FY15 forecast, we think it is within our expectations on stronger quarters for the rest of FY15 based on its healthy outstanding order book. CSE’s 1Q15 new orders jumped 40.4% YoY to S$103.1m while outstanding order book as at end-1Q15 remains healthy as it grew 21.8% YoY to S$252.5m. We believe CSE should continue to see resilient earnings, especially since it derives more than 50% of its revenue from the recurring brownfield jobs. As we incorporate 1Q15 results, and update with slightly higher tax assumption, our forecast remains largely unchanged. Hence, maintain HOLD with an unchanged FV of S$0.62, supported by a decent FY15 dividend yield of 4.8%.
1Q15 PATMI came in flat at S$7.6m
CSE Global Limited’s (CSE) 1Q15 PATMI came in flat, just up 0.9% YoY at S$7.6m, while operating profit grew 20.7% to S$11.1m on the back of a 13.2% growth in revenue to S$105.5m. 1Q15 revenue was mainly driven by growth of 28.2% and 22.5% from the Americas and Europe/Middle East/Africa (EMEA) regions, respectively, but offset by a 5.4% decline from the Asia-Pacific region. Due to more brownfield projects, 1Q15 gross margin improved 1.0ppt YoY to 28.5%. However, higher operating expenses as well as higher tax expenses attributable to the write-back of deferred tax and non-recurring tax deductions recorded in 1Q14 resulted in the flat PATMI showing. Even though 1Q15 PATMI only formed 21.4% of our FY15 forecast, we think it is within our expectations as we expect stronger quarters for the rest of FY15 based on its healthy outstanding order book.
Earnings to remain resilient with healthy order book
CSE’s 1Q15 new orders jumped 40.4% YoY to S$103.1m despite headwinds face in Oil & Gas (O&G) industry. Outstanding order book as at end-1Q15 remains healthy as it grew 21.8% YoY to S$252.5m. Management noted optimism over opportunities available for brownfield and smaller greenfield (less than S$5.0m) projects, specifically in the O&G industry. Management also reiterated its strategy is to continue revenue growth without compromising gross margins. Also, IDC recently in Mar-15 highlighted that reductions in IT budgets among O&G companies were lower than expected, which is in-line with CSE’s optimism. Despite uncertain outlook over oil prices, we believe CSE should continue to see resilient earnings, especially since it derives more than 50% of its revenue from the recurring brownfield jobs.
FV unchanged; maintain HOLD
As we incorporate 1Q15 results, and update with slightly higher tax assumption, our forecast remains largely unchanged. While CSE is optimistic on its outlook, we prefer to be cautious and keep our FY16 forecast flat. Supported by a decent FY15 dividend yield of 4.8%, maintain HOLD with an unchanged FV of S$0.62.
CSE Global Limited’s (CSE) 1Q15 PATMI came in flat, just up 0.9% YoY at S$7.6m, while operating profit grew 20.7% to S$11.1m on the back of a 13.2% growth in revenue to S$105.5m. 1Q15 revenue was mainly driven by growth of 28.2% and 22.5% from the Americas and Europe/Middle East/Africa (EMEA) regions, respectively, but offset by a 5.4% decline from the Asia-Pacific region. Due to more brownfield projects, 1Q15 gross margin improved 1.0ppt YoY to 28.5%. However, higher operating expenses as well as higher tax expenses attributable to the write-back of deferred tax and non-recurring tax deductions recorded in 1Q14 resulted in the flat PATMI showing. Even though 1Q15 PATMI only formed 21.4% of our FY15 forecast, we think it is within our expectations as we expect stronger quarters for the rest of FY15 based on its healthy outstanding order book.
Earnings to remain resilient with healthy order book
CSE’s 1Q15 new orders jumped 40.4% YoY to S$103.1m despite headwinds face in Oil & Gas (O&G) industry. Outstanding order book as at end-1Q15 remains healthy as it grew 21.8% YoY to S$252.5m. Management noted optimism over opportunities available for brownfield and smaller greenfield (less than S$5.0m) projects, specifically in the O&G industry. Management also reiterated its strategy is to continue revenue growth without compromising gross margins. Also, IDC recently in Mar-15 highlighted that reductions in IT budgets among O&G companies were lower than expected, which is in-line with CSE’s optimism. Despite uncertain outlook over oil prices, we believe CSE should continue to see resilient earnings, especially since it derives more than 50% of its revenue from the recurring brownfield jobs.
FV unchanged; maintain HOLD
As we incorporate 1Q15 results, and update with slightly higher tax assumption, our forecast remains largely unchanged. While CSE is optimistic on its outlook, we prefer to be cautious and keep our FY16 forecast flat. Supported by a decent FY15 dividend yield of 4.8%, maintain HOLD with an unchanged FV of S$0.62.
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