Brokers’ take: UOBKH upgrades CSE Global to ‘buy’ following acquisition of US radio group 

UOB Kay Hian (UOBKH) has upgraded CSE Global : 544 0% to “buy” from “hold” following the technology company’s acquisition of a US radio communication group for US$11 million and its securing of two major contracts worth US$87.3 million. 

The company’s target price has also been raised by 22 per cent to S$0.45 from S$0.37 to account for the acquisition of Radio One Group, which UOBKH views as “highly accretive”. 

In its analysts’ view, the deal could lift CSE’s earnings FY2023 by 20 per cent, or S$3.6 million, assuming Radio One Group’s 2022 earnings can be sustained. 

UOB analysts noted in a report that the value of the company’s acquisition of Radio One Group is “attractive” at around four times the price to earnings ratio in 2022. 

“However, we are taking a more conservative view in our 2023 earnings estimate for the acquisition for now, pending the delivery of earnings from the new acquisition in H1 FY2023,” they said in a report on Wednesday (Feb 1).  

Following CSE’s Jan 30 announcement that it had won two major contracts in the US and Singapore, UOB also raised its earnings per share forecast for 2023 by 12 per cent to factor in the positive developments. 

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The company’s US contract is for the design, engineering, installation and integration of systems and equipment for wastewater treatment plants, which is slated for execution from 2023 to 2027. Meanwhile, the second deal relates to a multi-year system maintenance contract from the Singapore government in the infrastructure sector. 

Noting that total orders in the first nine months of FY2022 exceeded that of the previous year, UOBKH analysts are now expecting CSE to achieve a record order win of more than S$700 million for all of FY2022. 

The analysts are also positive on the stock as they believe supply chain disruptions – particularly for chip sets – will abate as regional restrictions ease and demand for semiconductor chips falls. 

“Project execution time frames which have been facing delays previously due to supply chain issues could normalise,” they added. 

The brokerage is also forecasting CSE to maintain its full-year dividend of 2.75 Singapore cents per share for 2022, translating to a dividend yield of 7.3 per cent which is above average, in its view. 

CSE Global shares were trading down 1.3 per cent or S$0.005 at S$0.39 as at 12.46 pm on Friday.