CSE Global Limited’s (CSE) 1Q15 PATMI came in flat, just up 0.9% YoY to S$7.6m, while revenue increased 13.2% to S$105.5m. Its revenue was mainly driven by growth of 28.2% and 22.5% from the Americas and Europe/Middle East/Africa (EMEA) regions, respectively, but offset by a 5.4% decline from the Asia-Pacific region. This translates to a 20.7% YoY increase in 1Q15 EBIT to S$11.1m, as 1Q15 gross margin improved 1.0ppt YoY to 28.5%.

However, it saw higher operating expenses as well as higher tax expenses attributable to the write-back of deferred tax and non-recurring tax deductions recorded in 1Q14. While the oil & gas industry is facing headwinds, CSE’s 1Q15 new orders received still jumped 40.4% YoY to S$103.1m. This led to a 21.8% increase in outstanding order

Henc e, even though 1Q15 PATMI only formed 21.4% of our FY15 forecast, we think it is within our expectations as 1Q14 saw similar proportion and we expect stronger quarters for the rest of FY15 based on its healthy outstanding order book. Pending management briefing later, we maintain HOLD on CSE but place our FV of S$0.62 under review.

Source: OCBC Research - 12 May 2015