Brokers' take: KGI upgrades CSE Global to 'outperform' on infrastructure diversification

KGI Securities on Wednesday upgraded CSE Global to "outperform" from "neutral". The research team also raised its target price to S$0.61 from S$0.52.

This comes as KGI sees the technology solutions provider accelerating its transformation into a key infrastructure player in Singapore and Australia.

The research team expects major infrastructure projects to be the key earnings catalyst for CSE Global, as it would mean better diversification from the oil and gas sector.

This is further boosted by having Temasek unit Heliconia Capital Management as a new major shareholder, which should provide a favourable tailwind to new project wins.

The oil and gas industry made up more than half of CSE Global's revenues in the last two years. The group is also well diversified between onshore and offshore projects which are almost equally split.

The raised target price of S$0.61 is based on the stock trading at 12 times the research team's estimates for FY2021 earnings.

CSE Global shares closed 1.9 per cent or one Singapore cent higher at 54.5 cents on Wednesday, implying a potential upside of 11.9 per cent.

The counter is currently trading at 10 times KGI's projections for FY2021 earnings per share (EPS), 10 times the research team's estimates for FY2022 EPS and nine times KGI's forecast for FY2023 EPS.

KGI analyst Joel Ng called CSE Global's strong balance sheet a "key differentiator" among its peers.

The strong balance sheet allows the technology solutions player to consistently pay out steady dividends to shareholders, while also providing flexibility to scoop up EPS-accretive acquisitions in the current environment, he noted.

Moreover, the recovery of oil and gas projects and commodity upcycle should give CSE Global enough runway to support its "above-industry" 5 per cent dividend yield, KGI said.


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