Brokers' take: Analysts cut targets on CSE Global amid challenging outlook

DBS Group Research and CGS-CIMB have cut their target prices on CSE Global but maintained their "buy" and "add" calls respectively.

CGS-CIMB lowered its target price on the mainboard-listed technology solutions provider to S$0.57 from S$0.61, representing a potential upside of 18.8 per cent from the counter's last trading price of S$0.48 as at 1.58 pm on Wednesday (Mar 2).

Shares of CSE Global were down 1 per cent or S$0.005 at the time.

CGS-CIMB said CSE Global is trading at 10 times the research team's estimates for FY2023 earnings, which is 0.7 standard deviation below the group's 10-year historical mean.

Meanwhile, DBS trimmed its target price to S$0.59 from S$0.60, representing a potential upside of about 22.9 per cent. The new target price is 13.8 times the research team's earnings estimates for FY2022, and more than 1 standard deviation of CSE Global's 4-year average price-to-earnings ratio.

This comes as the research team cuts its FY2022-13 earnings estimates by 14 per cent to 18 per cent. The cut in earnings estimates was to account for lower margins due to the still challenging environment amid supply chain disruptions.

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While near-term margins could be under pressure, CGS-CIMB said it still like CSE Global for its "decent 5.7 per cent" dividend yield and diversification into higher-margin infrastructure projects. Although CSE Global's outlook remains challenging, wins from its infrastructure segment could surprise, CGS-CIMB said.

"We think the recent infrastructure contract win (first major data-centre project won) could pave the way for more order wins in this field," said CGS-CIMB analysts Kenneth Tan and Lim Siew Khee.

DBS is also positive on CSE Global's recovery as new order wins from all segments continued to gain ground in the past 4 quarters. The research team also noted the potential for large contract wins for the group's energy segment in FY2022.

"We are also optimistic on CSE Global's small acquisitions to enhance and strengthen its operations and recurring revenue stream as well as its pivot towards renewable energy projects (solar and wind)," said DBS analyst Ling Lee Keng.