SINGAPORE (Oct 16): NRA Capital says CSE Global has caught its attention as a company that may have bottomed, and could see considerable upside ahead from its current share price.
“CSE offers the merits of stabilizing to recovering earnings, strong balance sheet with net cash, high dividend yield and most importantly, attractive valuation,” NRA says in a commentary on Monday.
CSE sank into the red in the 2Q ended June, reporting a net loss of $13.8 million during the quarter compared to earnings of $5.5 million a year ago.
However, this was due to an exceptional provision of $16.8 million arising from a settlement agreement with the US government to settle certain potential civil liabilities.
Revenue grew 15.1% to $85.5 million in 2Q17, from $74.3 million a year ago.
See: CSE Global swings to 2Q net loss of $13.8 mil
According to NRA, CSE’s operating profit appears to have stabilized since 2Q17. This is supported by some $90.7 million in new orders received during the quarter, compared to a low of $57.7 million added to the order book in 4Q16.
In addition, NRA notes that CSE’s net cash and investments amount to around $28.1 million, representing close to 16% of the company’s market capitalisation.
Further, NRA points to the company’s high dividend yield of 8%. CSE declared an interim dividend of 1.25 cents per share for 1H17 and has signalled its intention of maintaining its full-year dividend of 2.75 cents per share for 2017.
But most importantly, NRA opines that CSE offers an attractive valuation.
Pegging the company’s valuation at 10x EV/EBITDA or 1.07x P/B, NRA derives estimated valuations of 47.5 cents or 46.5 cents, respectively. This implies an upside of between 36.8% and 39.7% to CSE’s current trading price.
As at 2.55pm, shares in CSE Global are trading half a cent lower at 34 cents. The stock is trading some 38.7% lower than its year-to-date high of 55.5 cents in March.
