Company Update: CSE Global Ltd. (CSE SP/544.SI)
Company Update: 29 November 2024
Riding on Global Trends.
- Lagging AI play. The significant advancement in AI, especially Gen AI, has been driving up energy demand from data centres, as the computing processes required to run such AI systems become more resource intensive. Going forward, we continue to expect more companies to hop onto the AI trend, pushing energy demand higher and hence translating to a higher demand for electrification projects globally.
Robust order book and high order intake
CSE Global continued to report a strong order book of S$633.6mn in 9M24, slightly lower compared to S$638.0mn in 9M23. Order intake declined by 18.1% to S$565.4mn in 9M24 compared to S$690.0mn in 9M23, mainly attributable to a high base in 3Q23. The continuation of a strong order book presents strong cash flow for the company going forward, alongside an enhanced market position within the market.
9M24 business updates
The company reported a total revenue of S$642.8mn for 9M24, increasing by 20.2% YoY, compared to S$534.7mn in 9M23, mainly attributed to growth across all business segments and geographical regions. In the company’s 1H24 financial results, net profit increased by 36.4% YoY to S$15.0mn, compared to S$11.0mn in 1H23. The group’s EPS was 2.31 Singapore cents in 1H24, compared to 1.79 Singapore cents in 1H23.
Valuation & Action
We initiate with an OUTPERFORM recommendation and a TP of S$0.60, based on a financial analysis using Discounted Cash Flow (DCF), with a terminal growth rate of 2.0% and a WACC of 9.2%. CSE Global’s strong business model positions the company well to hop onto emerging trends and reap benefits from it, driving future growth. The company’s continued strong order book and order intakes also reaffirmed the company’s growth trajectory. Our TP of S$0.60 implies a 28.0% upside.
Risks
The company is exposed to currency translation risk as well as foreign exchange risk as the company operates its business in several key markets, with its key market primarily in the United States, Australia and the United Kingdom.
