Maybank Securities has maintained its "buy" call on CSE Global , and with "stars aligned" for its prospects, analyst Jarick Seet has raised his target price to 64 cents from 60 cents.
On Jan 3, CSE Global announced plans to sell and lease back a facility used for manufacturing in Texas for US$29.25 million, and then channel net gain estimated at US$8.6 million into acquiring a bigger property in the US.
From Seet's perspective, having a bigger space is a sign of the management's "strong confidence" in its prospects.
"We believe this is due to the substantial growth opportunities available for the electrification of US data and utilities centres.
"We believe it will also explore new states with better and friendlier tax incentives which add more positives for CSE Global," says Seet in his Jan 6 note.
He expects the company to undertake share buybacks as it generates better margins from its operations.
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Seet has raised his FY2024 and FY2025 earnings estimates by 29.8% and 5% respectively.
Based on a valuation multiple held steady at 13x FY2025 earnings, thereby implying a higher target price of 64 cents from 60 cents.
UOB Kay Hian's John Cheong and Heidi Mo, in their Jan 7, have similarly maintained their upbeat stance on the company, given its growing market position.
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"Despite the ongoing legal proceedings, we believe CSE’s strategic initiatives and healthy order backlog demonstrate its positive growth prospects," write the analysts, who call this a "buying opportunity".
They observe that while CSE Global's 3QFY2024 order wins dropped 38% y-o-y to $187 million, they foresee q-o-q recovery in 4QFY2024, during which there were three major order wins in electrification projects totalling around $129 million in the first half of Nov 2024 alone. This brings its 9MFY2024 order book to $634 million.
"In the oil and gas space, we note that US President Donald Trump’s push to increase US oil and gas drilling could create more project opportunities for CSE Global in the future," add Cheong and Mo, who expect the company to also focus on growing its presence in data centre and automation projects.
They have maintained their earnings forecast for now and their target price of 59 cents is pegged to 13x FY2025 earnings, which is 1 standard deviation above its mean. Its dividend yield is also deemed attractive with a full-year payout of 2.75 cents seen, which implies a yield of 6.5%, above the 4% mean of the Straits Times Index.
