Fundamentals still stable<\/strong><\/p>\n\n\n\n With the recent acquisition of Chicago Communications, CSE Global have established a presence in four states for its Communications business in the United States of America, supporting its regional expansion strategy. While the acquisition cost was US$8.5mn, the acquisition will expand the group\u2019s communication businesses in the infrastructure industry where demand for increased connectivity and security is expected to grow.<\/p>\n\n\n\n In addition to providing clients with engineering solutions across different industries and different markets, CSE Global also provides their existing clients with other services, such as routine checks and maintenance for their infrastructures. This business model creates a layer of revenue drivers for the company, allowing it to derive recurring revenue from each project with their clients through maintenance and checks after the initial projects are completed, while simultaneously maintaining stable cash flow. The company\u2019s recurring business makes up around 67% of the company\u2019s revenue.<\/p>\n\n\n\n We change our recommendation to UNDERPERFORM <\/strong>and raise our 12-M TP to S$0.73<\/strong>, based on our Discounted Cash Flow (DCF), with a terminal growth rate of 2.0% and a WACC of 7.5%. Going forward, CSE Global\u2019s strong business model positions the company well to capitalize on ongoing AI trends and reap benefits from them, driving future growth. The company\u2019s continued robust order book and order intake resulted in recent run up of the stock. Early November company update will determine if re-rate is intact and any wobble will trigger consolidation. Our TP of S$0.73 implies a 14.1% downside excluding dividends.<\/p>\n\n\n\n The company is exposed to currency translation risk and foreign exchange risk as it operates its business in several key markets, with its key market primarily in the United States, Australia and the United Kingdom.<\/p>\n\n\n\n\n
\n\n\n\nAcquisition Of Chicago Communication To Boost The Company\u2019s Communication Business<\/h2>\n\n\n\n
Recurring Businesses To Sustain Growth<\/h2>\n\n\n\n
Valuation & Action<\/h2>\n\n\n\n
Risks<\/h2>\n\n\n\n
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