Consistent dividend payout and order book intake make CSE Global a worthy investment, say analysts

SINGAPORE (Feb 29): Oil, gas and telecommunications operator CSE Global has posted earnings of $8.1 million for 4QFY2019 ended December, 60.1% up from the $5.1 million it logged in the corresponding period a year ago.

This is on the back of a 57.7% increase in revenue to $156.6 million that follows growth in income across all its geographic regions, led by the Americas and Asia-Pacific regions, the company noted in a regulatory filing on Thursday.

CSE Global engages in greenfield and brownfield oil and gas projects in the Americas and Infrastructure services ranging from security, energy and radio in Singapore and Australia.

Notably, order intake in the quarter surged by 59.2% to $230.1 million, led by two major oil and gas greenfield project orders worth $103.7 million it secured in October. This was supported by growth in flow orders.

In this time, operating expenses was up 38.6% to $30.6 million from higher personnel costs of $6.9 million which comes from increased headcounts and a higher amortisation of intangible assets.

Overall, CSE Global’s earnings for FY2019 was up 19.6% to $24.0 million, from $20.1 million in FY2018.

This translates to earnings per share (EPS) of 4.66 cents on a fully diluted basis, compared to 3.89 cents in FY2018.

Revenue for the year was up 21% to 451.8 million, on the back of higher oil and gas revenues in the Americas regions and infrastructure revenues in the Asia-Pacific regions.

By geography, income from Asia-Pacific grew 28.8% to $165.1 million following the recognition of revenue from projects in Singapore and Australia. Americas’ revenue increased 17.1% to $279.4 million, mainly from higher time and material revenues and income from the inclusion of newly acquired subsidiaries. Meanwhile, income from Europe/Middle East/Africa was up 9.2% to $7.2 million.

Operating expenses was up 22.1% to $93.6 million, following an increasing in administrative costs and selling and distribution costs.

As at end December, cash and cash equivalents stood at $58.6 million, down from $74.1 million in FY2018.

CSE’s board has proposed a final dividend of 1.5 cents – in line with its payout in FY2018 and FY2017. Once approved by shareholders at its April 16 annual general meeting, the dividend will be paid out on May 12.

Including an interim dividend of 1.25 cents paid last September, the group’s total dividend for the year is 2.75 cents.

Looking ahead, the group is poised to continue delivering in 2020. “Despite ongoing trade tensions, a global economic slowdown and the outbreak of Covid-19, we anticipate a steady flow of orders from our existing clients while we strive to haul in larger contract wins,” says Lim Boon Kheng, the group’s managing director.

This involves “focus[ing] on growing our business organically and exploring value accretive and strategic acquisitions to further enhance the group’s profitability,” adds Lim.

Analysts are optimistic of the stock, with DBS’ Lee Keng Ling saying “CSE’s strong order book of $303.7 million and its FY2019 revenue constituting 95% from flow value projects reaffirms our view of its anticipated strong performance heading into FY2020F”.

RHB Securities’ Jarick Seet expects this to continue. “We expect larger size contract wins and a steady stream of flow orders in the near-term as the order intake momentum remained high”.

“In addition to organic growth, we think CSE Global is likely to continue its expansion plan and see its footprint widen in the UK after its acquisition of Chatterbox last year,” he adds.

To this end, Ling, Seet and CGS-CIMB analyst Cezzane See are posting ‘buy’ or ‘add’ calls on the stock at target prices of 70 cents, 73 cents and 77 cents.

“CSE remains our preferred small-cap oil and gas pick due to its i) earnings growth potential, 2) sustained dividend and 3) padded backing,” explains See.

Shares at CSE Global were down 4.59% to close at 52 cents on Friday.