SINGAPORE (July 18): CGS-CIMB Securities is keeping its “add” recommendation on CSE Global with a target price of 50 cents.
In a Tuesday report, analyst Cezzane See estimates that the group’s 2Q18/6M18 revenue will come up to $96.6 million/$188.8 million, compared to 2Q17/6M17 revenue of $85.5 million/$160 million, on the back of firm contract execution by its O&G and infrastructure divisions.
Meanwhile, the analyst forecasts that the group’s O&G division will see 2Q18/6M18 revenue of $70 million/$135.9 million, fuelled by improved brownfield project flow and sustained execution of large greenfield contracts won in 1Q17. And for the infrastructure division, the analyst estimates 2Q18/6M18 revenue of $24.0 million/$47.7 million.
The group guided that gross margins in 1Q18 were stable at around 26-27%, to which See expects 2Q18/6M18 gross margins of 26.8% in 2Q18.
In addition, the group also mentioned in 1Q18 that several large projects will reach their billing milestones in 2Q-3Q18.
“We believe this implies positive operating cashflow in 2Q18F (vs. negative net operating cashflow of $7.3 million in 1Q18),” says See.
The group also said that it was confident of achieving positive operating cashflow for FY18, to which the analyst has forecasted FY18 net operating cashflow of $22.4 million, compared to a negative net operating cashflow of $7.2 million in FY17 (excluding a one-off payment of a $16.6 million penalty settlement in 3Q17).
The group in its March business and financial update said that it intends to keep FY18 DPS at 2.75 cents, but will commit to 2.25 cents first. It will assess the additional 0.5 cents after reviewing its 1Q-2Q18 cash position and cash generation for the year.
Since the group is still in a net cash position in 1Q18 and given guidance that billing cycles pick up in 2Q/3Q18F, this strengthens the case for a firmer cash position by end-FY18 of $50.4 million, to which the analyst believes that the group will be able to achieve FY18 DPS of 2.75 cents and forecasts 2Q18 interim DPS of 1.25 cents.
As at 11.00am, shares in CSE Global are trading at 44 cents or 1.30 times FY18 book with a dividend yield of 6.11%.
