CSE Global: Orders flowing regularly

Tuesday, July 14, 2009

Significant order wins from the Middle East. CSE Global announced that it recently won four contracts worth a total of S$45m in Saudi Arabia and the United Arab Emirates. As CSE announces only bigger order wins of >S$10m, we believe that the company is on track to secure S$100m new orders each quarter. In 1Q09, CSE secured S$160m worth of new orders, buoyed by the S$58m healthcare win. We maintain our assumption of S$400m non-healthcare order wins for FY09F.

Sound operating cash flow is the key. CSE is expected to generate c.S$12m operating cash every quarter as more payment milestones are reached in 2Q/3Q 09. We estimate S$40m operating cash flow (similar to FY07 level) and only S$3m capex in FY09F. CSE could pay back S$22m of debt to reduce its net gearing to 50%. This leaves S$15m; enough for meeting our forecast dividend of S$13m (DPS of 2.7 Scents), translating to 5.5% yield. Additionally, CSE is expected to convert the majority of its short-term debt (c.S$117m) to a 3-year term loan, providing flexibility in its cash management.

Attractive 35% upside. Our target price of S$0.66 is pegged at 7.5x FY09F PER, attractive compared to the average valuation of 8x PER for mid-tier oil & gas peers.


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