UOB Kay Hian and Maybank Securities have kept their "buy" calls and respective target prices for CSE Global 544 , following its 1QFY2024 business update where revenue growth was in line.
Thanks to higher recognition of contracts from the infrastructure segment, CSE Global reported revenue of $197 million for the three months ended March, up 24% y-o-y.
In the quarter, the company won new orders worth $186.2 million, up 17% y-o-y, bringing its total order book to $719.3 million, up 49.8% over 1QFY2023.
About 45% of the new orders were secured by the electrification segment while automation-related orders surged 65% yoy to $52 million.
"CSE's healthy order inflow attests to its established track record, which has allowed it to expand its customer base and achieve further order book growth," write UOB Kay Hian analysts John Cheong and Heidi Mo in their May 13 note.
They've maintained their "buy" call and 56 cents target price, pegged to 15x FY2024 earnings, which is at +1SD above the mean.
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Given the projected full-year dividend payout of 2.75 cents per share, the target price translates too into a yield of 6.7%.
Jarick Seet of Maybank Securities has a more bullish target price of 64 cents.
Besides the attractive dividend yield, CSE has a "clear multi-year growth outlook" and Seet expects the company to execute further accretive acquisitions, especially in the critical communications segment in the US and Australia which could accelerate its growth.
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"There is also a strong possibility of management share buy-backs and company share buy-backs," adds Seet.
Kenneth Tan of CGS International in his May 10 note maintained his "add" call but trimmed his target price to 57 cents from 62 cents, to reflect an enlarged share base of 9% from a recent placement of new shares.
The placement, completed in March, helped raise $24 million which CSE plans to use for acquisitions.
Tan, citing the company's management, says that CSE is still in talks with potential targets, which are in the critical communications sectors within the US and Australia.
"We believe CSE’s targets will likely be profitable, similar to its past acquisitions," says Tan, adding that the targets' net profit could be in the range of $2 - 4 million each.
His new target price of 57 cents is based on 12x FY2025 earnings, which is the average of the valuation multiple achieved between FY2012 and FY2019.
For Tan, re-rating catalysts include strong infrastructure order wins momentum, large greenfield energy project wins, and consistent margin improvements as its infrastructure order book grows.
On the other hand, downside risks include major project cost overruns and a sharp decline in order wins amid a global economic slowdown.
