SINGAPORE (Apr 17): CIMB Research is raising the target price on CSE Global to 44 cents, from 39 cents previously, after Malaysia-listed Serba Dinamik (SDH) acquired a close to 25% stake in the company for $57.7 million.
This total consideration translates into a price of 45 cents per share.
“We believe the market may view SDH’s acquisition price as the nearest fair valuation,” says lead analyst Cezzane See in a Monday report.
However, CIMB is keeping its “hold” call on CSE Global.
“We stay lukewarm on CSE till large-scale contracts pick up or margin trends improve,” says See. “We await further details on collaborative strategies before making any earnings changes.”
According to See, potential collaboration with SDH opens CSE to downstream oil and gas (O&G), power, and utilities contracts from the Middle East and Malaysia, which will assist with order book replenishment.
But she cautions that downstream/onshore margins may be lower, as SDH’s margins are typically 8-10 percentage points lower than CSE’s 26%.
“The tie-up presents many potential contractual opportunities for CSE but we believe it could be premature to revise our earnings estimates now,” See says.
As at 11.10am, shares of CSE Global are trading half a cent up at 42.5 cents, implying an estimated price-to-earnings ratio of 14.8 times and a dividend yield of 6.4% for FY18.
