Analysts from DBS Group Holdings, CGS-CIMB Research, and RHB Research have maintained their “add” or “buy” calls following CSE Global’s 1H20 results.
KGI Securities analyst Joel Ng, on the other hand, has downgraded the stock to “neutral” due to the company’s strong 1H20 results being already priced in its current valuations.
On Aug 5, CSE Global reported a 53.4% y-o-y increase in net profit to $15.1million for 1H20, and a 25.7% y-o-y growth in its order intake to $242.1 million for the same period.
Ng has also lowered his target price on the stock to 52 cents from 61 cents previously.
“There is upside catalyst if it secures Singapore infrastructure projects, given that it now has the backing of Heliconia Capital Management, a unit of Temasek Holdings,” he says.
“CSE is currently trading at 12/11/11x 2020/21/22F EPS, slightly above its 5-year average of 10x P/E,” he adds, that risks to the stock include margin pressure due to competition, lower-than-expected new order wins, and foreign exchange risks.
Conversely, DBS analyst Ling Lee Keng has raised her target price to 61 cents from 54 cents previously on a “brighter outlook”. The revised target price is pegged to 10.0x or a four-year average on CSE Global’s FY21F earnings.
Ling has also raised her FY20/21F earnings by 16% and 13% respectively on the back of higher earnings before interest and taxes (EBIT) margins.
“We believe the outlook is brighter for this segment with oil prices stabilising at around US$40 ($54.92)/bbl and economies gradually lifting lockdown measures in late 1H20,” she says.
“Furthermore, with its Mining & Mineral generating substantially higher EBIT margins as it begins to scale up, and with potential opportunities from its new strategic investor, Heliconia, we are positive on CSE’s outlook,” she adds.
CGS-CIMB analyst Cezzane See has also increased her target price on CSE Global to 60 cents from 55 cents previously due to CSE Global’s 1H20 core net profit coming in slightly ahead of the brokerage’s FY20F estimates at 53.4%. The new target price is based 12x CY21F price-to-earnings ratio (P/E).
See has also raised CSE Global’s earnings per share (EPS) for FY20-22F by around 10%.
“We like CSE’s strong order backlog that could provide a cushion in these tough times, and its continued diversification to include more non-oil and gas contracts. We also think it can maintain its dividend yield as long as cashflow generation is intact,” See says.
“Potential re-rating catalysts are swifter project execution and higher-than-expected order wins (thus revenues). Downside risks are lower-than-expected order wins and potential cuts in DPS (distribution per share),” she adds.
RHB analysts Lee Cai Ling and Jarick Seet have also increased their target prices to 60 cents from 54 cents, as they continue to believe that CSE Global’s 2H20 results will be “solid”.
“With its 1H20 results being better than previously anticipated, we are cautiously optimistic on this company’s outlook. Our TP of 60 cents is based 10.8x FY21F P/E, which is also its 3-year mean,” they say.
As at 2.53pm, shares in CSE Global are trading 0.5 cent lower, or 1.0% down, at 52 cents.
