• CSE GLOBAL (SGX:544) today revealed that it achieved S$230m new orders in 4Q19, taking its FY19 win to S$580m (+50% y-o-y).
• While within our expectations, we are still excited with this as we see it as confirmation its end-FY19 order book exceeded S$300m (2018: S$181m).
• We expect CSE to report FY19F net profit of S$22.5m (+9% y-o-y). We keep our forecasts, call and Target Price. Reiterate CSE as our favourite small cap.

S$230m Order Intake in 4Q19, Padding Order Backlog

• Order wins in 4Q19 include oil & gas greenfield projects worth a total of US$74.7m (S$103.7m) announced in Oct 2019, implying brownfield projects worth S$120m.
• According to CSE, of the S$230m new orders won, S$190m were by its oil & gas division, S$25m by its infrastructure division, and S$16m by its mining division.
• FY19 order intake rose 50% y-o-y to S$580m (vs. S$384m in 2018), fuelled mainly by CSE’s oil & gas (+100% y-o-y) and mining (+200% y-o-y) divisions.
• We estimate that CSE could end FY19F with an order backlog of at least S$300m (end-3Q19: S$232.6m), its highest order backlog in five years.

4Q19F Preview

• CSE will likely report its 4Q19 results at end-Feb. We estimate 4Q19F revenue of S$111m on the back of higher project execution, and core net profit of S$5.6m on net profit margin of 5%.
• We project FY19F revenue of S$407m (+8% y-o-y) and core net profit of S$22.5m (+9% y-o-y).
• Final DPS of 1.5Scts is also in the bag, in our view.

Reiterate ADD

• CSE has been our preferred small cap O&G pick in part due to its
  1. earnings growth potential,
  2. sustained dividend; and
  3. padded order backlog.
• As at end-Sep 2019, CSE was in a net debt position due to acquisitions. Nevertheless, we look favourably on the acquisitions as they are earnings-accretive and could lead to cross-selling synergies for CSE’s Americas business.
• Our Target Price of S$0.73 is based on 13.5x CY20F P/E (+0.5 s.d. of its 5-year mean due to the company’s better footing from FY19F onwards).
• Stronger-than-expected order wins and GPMs are potential re-rating catalysts.
• Lower than-expected order wins and GPMs are key downside risks to our ADD call.

Source: CGS-CIMB Research - 4 Feb 2020