CSE Global Ltd’s (CSE) 1Q17 PATMI missed expectations as it plunged 45.5% YoY to S$3.0m and formed only 13.5% of our FY17 forecasts. 1Q17 revenue fell 11.5% YoY to S$74.5m due to lower contributions from Europe/MiddleEast/Africa (-26.3%) and the Americas (-21.5%) regions, but offset by a 14.6% growth in the Asia-Pacific region.

While CSE’s 1Q17 gross margin improved 0.6ppt to 29.2%, EBIT fell 35.7% YoY to S$4.1m, dragged by the Americas region, which swung from positive EBIT in 1Q16 to loss of S$0.03m in 1Q17 as a result of delays in award of project orders and lower margins achieved due to competition.

By Industry, CSE’s O&G segment 1Q17 EBIT dropped 68.2% YoY to S$1.4m. However, CSE’s new order intake for 1Q17 jumped 57.3% YoY to S$117.9m as it secured two major deepwater offshore O&G projects valued at S$42m, ending the quarter with a solid outstanding order book of S$204.2m.

Pending the analysts’ briefing later, we keep our HOLD rating but place our FV of S$0.44 under review for now.

Source: OCBC Research - 12 May 2017