Brokers’ take: Maybank initiates CSE Global with ‘buy’ on strong profitability prospects 

MAYBANK Securities has initiated coverage on technology group CSE Global with “buy” and a target price of S$0.62.

The research house said the group is now at an “inflection point towards a multi-year upcycle” post the restructuring of its business division in the US, along with recent key acquisitions in the radio communications space.

On Monday (Jul 24), it projected CSE’s profitability to surge 250 per cent year on year in FY2023 on the back of the global oil and gas (O&G) upcycle, as well as robust demand from data centres and infrastructure projects in Australia and Singapore.

Maybank analyst Jarick Seet said he expects the group to post strong revenue of S$850 million in FY2025 from S$558 million in FY2022, translating to a three-year compound annual growth rate of 15 per cent.

In his view, revenue from the energy segment will continue its upward trajectory in H2 2023 and the years ahead due to strong global O&G demand.

Revenue contribution from the data centre segment is forecast to rise to 30 per cent in the next three to five years, from below 10 per cent currently, as CSE obtains more data centre projects on higher demand.

“We believe that CSE is in a sweet spot to win contracts from multiple sectors, and we remain confident that in the coming months, it should be able to secure some contracts for public infrastructure like water treatment facilities as well as more data centre-related solutions,” said Seet.

Based on his projections, the group’s current order book of S$480 million is expected to surge to some S$900 million by end-FY2023 upon winning near-term contracts.

CSE’s predicted dividend yield of 6.2 per cent, or S$0.0275, is also “attractive and sustainable”, he said.

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The stock is undervalued, in Seet’s view, as it is currently trading at an “undemanding” valuation of 13.7 times the brokerage’s estimates for FY2023 earnings – compared to its O&G peers’ average multiple of 22.3 times.

“We think (CSE’s) current share price represents an attractive entry level given its robust growth potential from its energy, infrastructure and data centre businesses,” added the analyst.

As at 10.47 am, shares of CSE, helmed by chief executive Lim Boon Kheng, were trading flat at S$0.445.