• Maintain BUY and DCF-backed Target Price of SGD0.61, 39% upside plus 6% yield.
• CSE GLOBAL LTD (SGX:544)'s 2Q19 revenue rose 8.4% to SGD99.9m boosted by contribution from the mining sector, but offset by the lower contribution from large greenfield projects in the oil & gas sector.
• 1H19 revenue/PATMI of SGD185.3m and SGD10.2m were 46.2% & 45.2% of our FY19F.
• We remain cautiously optimistic on CSE Global as its orderbook continues to grow.

1H Results Snippet

• Despite CSE Global's 1H19 results slightly missing estimates, we are heartened to see that topline growth is back on track with revenue from the mining sector rising 150.8% y-o-y to SGD15.8m in 1H19 from SGD6.3m in 1H18.
• Offshore oil & gas revenue remained flat at SGD70.9m (+1.9% y-o-y), while onshore oil & gas and infrastructure segments dipped 12.1% and 5.4% y-o-y to SGD51.6m and SGD47m respectively.
• GPM remained resilient at 27.8% (+90bps) in 1H19. Operating profit of SGD12.1m (+6.3% y-o-y) was due to higher gross profit, partially offset by higher administrative and marketing expenses as well as one-off professional fees related to acquisitions.
• Order intake increased by 22.6% to 193.9m in 1H19 and flow business remained strong. Its outstanding orderbook of SGD188.1m as at 30 Jun 2019 was at its highest in the last six quarters.

Entering Into the UK

• CSE Global acquired Chatterbox Ltd, which provides radio communication solutions in the UK for GBP552,000.
• We believe that the group intends to replicate the business model in Australia by consolidating smaller-sized enterprises under its arm. However, management is mindful of the uncertainties surrounding Brexit and hence, we believe there will not be acquisitions in the near term.

Maintain Dividend at 2.75 SG Cents for FY19

• CSE Global has guided for a full year dividend of 2.75 SG cents, consistent with FY18. See CSE Global's dividend history.
• Net cash position of SGD8.6m as at 30 Jun 2019 was down from SGD34.8m as at 31 Mar 2019 mainly due to working capital purposes. Operating cash flow is expected to increase by end-FY19F.

Maintain BUY

• Maintain BUY and DCF-backed Target Price of SGD0.61, implying 13.7x FY19F P/E. It is currently trading at 10x FY19F P/E, with an attractive dividend yield of 6.3%.
• Key downside risks include oil price volatility, economic slowdown, forex risks, declining order intake, lower margins, and execution risks.

Source: RHB Invest Research - 16 Aug 2019