CSE Global responds to activist fund Quarz's open letter

Quarz Capital Management said it is satisfied with the dividend guidance provided by CSE Global following a meeting on March 5 with the management of the mainboard-listed company.

In a letter to the CSE board on March 7 - which was put up on the same day on the Singapore Exchange website by CSE - Quarz said it "welcomes CSE's board and management for providing a clear dividend guidance of 2.75 Singapore cents a share for 2018...amounting to a potential attractive dividend yield of 7.4 per cent".

The activist fund had published an open letter on Feb 26, calling for "cash discipline" and higher dividends from the process control and communications network system integrator.

It also said it wanted to engage with the CSE board to unlock shareholder value and may propose measures at annual general meetings or extraordinary general meetings to "expedite" this process.

This could involve electing new board members or a sale of the firm, Quarz had said.

In a more conciliatory tone in its letter on March 7, Quarz wrote that following a discussion they had "concluded together that a reasonable dividend guidance can serve as the best tool to reassure CSE's shareholder base on the continuing strong fundamentals of the firm".

Quarz also added that it was supportive of CSE's commitment to turnaround its existing US business and achieve a long-term target return on equity of over 10 per cent.

In reply, CSE thanked Quarz for the March 5 meeting "and the opportunity to discuss the issues that were raised in the open letter".

It added that it "welcomes Quarz as a shareholder" and that it is welcome to attend CSE's annual general meetings.

"The annual general meetings and results briefings have provided opportunities where many of the issues highlighted in the open letter have been raised and considered," the board said.

CSE Global sank into the red in the fourth quarter ended Dec 31 with a net loss of S$37.3 million, reversing from a net profit of S$6.2 million in the previous year. This was on the back of challenging business and operating environments, and a one-off impairment on its financial assets.