CSE Global Limited (544.SI)

CSE GLOBAL LIMITED (544.SI)
Sector: O&G

Company Background:
1) Leading systems integrator, focusing on the provision and installation of a variety of control systems as well as turnkey telecommunication network and security solutions with an international presence in US, Asia Pacific, Europe, Middle East & Africa regions.
2) Customer base: Oil and gas, infrastructure and mining industries.
3) Revenue contribution by geographical segment – Americas 57%, Asia Pacific 36% & Europe/Middle East/Africa 7%
4) Revenue contribution by industry segment – Oil and gas 68% (50% onshore & 50% offshore), Infrastructure 25% & Mining 7%

Acquisition activities (6 acquisitions at SGD 23 million since 2016):
1) CC American Oilfield – manufacturing and repairing pressure vessels for wellhead oil & gas production in Corpus, Christie, Texas & USA
2) Mobile Masters – delivering two-way radio communication systems and infrastructures in Western Australia
3) Tetracom – delivering two-way radio communication systems and infrastructures in South Australia
4) Ezi Communications – provision of two-way radio communication system in Queensland, Australia
5) Gulf Coast Power & Control of Louisiana – provision of equipment & services for the midstream and downstream O&G industry, mainly Gulf Coast of USA
6) Combined Communication Solutions – provision of two-way radio communication system in Darwin, Australia

Financial highlights (2017 VS 2016):
1) Revenue from America ⬆️ by 30%, Middle East ⬇️ by 43%
2) Revenue from Infrastructure ⬆️ by 55%
3) ⬆️ in revenue but lower profitability due to lower gross margins from oil and gas projects.
4) Dividend – Dividend maintained at 2.75c (2.25c at downturn FY 2016)
5) Board fees has ⬇️ 17% over 3 years (WOW! 😱)
6) Maintained positive operating cashflow even after several acquisition activities was took place

Financial highlights (2018 Q1):
1) Outstanding order book stands at SGD 148.6 million as at Q12018.
2) New orders received decreased by 41.5% due to slow season (Q1 is usually slow) as claimed.

Other Information:
1) Top 20 shareholders holds around 74.71% of the shares.
2) Latest annual report cover’s slogan was “Ready to ride”, “Gathering momentum”. It seems that their management is confident in coming year performance.

Prospect:
Going forward, CSE will continue to improve the effectiveness of its business through
1) Revitalizing its existing solutions and services, improving delivery and new applications,
2) Adding new solutions and services,
3) Retaining and maintaining existing customer relationships,
4) Adding new customers, and
5) Cost control and cash generation
It will continue to explore acquisition opportunities to support its long term sustainable growth objectives & also explore available market opportunities with Serba Dinamik.

Potential Risks:
1) Foreign currency risk – from sales & purchase - USD, GBP, EUR, AUD. Their net investments in foreign subsidiaries are not hedged as the currency positions in respective countries is long-term.
USD – 50% (Benefit from USD weakening)
AUD - 30% (Benefit from AUD weakening)
Other – 20%
2) Acquisition risk - Change in global economic events which is unfavorable (to be monitor)
3) Oil price - indirectly affect CSE as when oil price is unfavorable, O&G customers tends to focus on cost-cuttings

Notes:
1) The group claimed that they have several large projects that will reach billing milestone in Q2 & Q3 2018.
2) With current outstanding order book at PE 8 - 10, the fair value of this stock is around S$0.46 – 0.56. It was traded at S$0.49 as per 25/05/2018’s closing.
However, the future growth of this company can be monitored as the acquisitions was just take place.
3) Serba Dinamik Bhd acquired 24.8% stake in CSE Global.

Disclaimer: Just for sharing purpose. Not buy call.

You may refer to my previous post on Serba Dinamik here: https://www.facebook.com/V.Invest.Together/posts/1974388769543447

Technical Analysis: https://www.facebook.com/V.Invest.Together/posts/1974877639494560