CGS International ‘add’ 62 cents Maybank Securities ‘buy’ 71 cents UOB Kay Hian ‘buy’ 57 cents

Multi-year growth path ahead

CGS International, Maybank Securities and UOB Kay Hian have kept their “buy” and “add” calls on CSE Global after FY2023 ended December 2023 earnings surged 372% y-o-y to $22.5 million. With its hefty new orders of some $300 million, CSE Global can provide clear revenue growth.

For CGS International’s Kenneth Tan and Lim Siew Khee, CSE Global’s 2HFY2023 earnings of $11.5 million were in line with expectations, as were its FY2023 earnings.

For the current FY2024, they expect CSE Global to grow its revenue by 16% y-o-y from quicker order book executions due to shorter lead times and a ramp-up in its US infrastructure business.

As they expect the company to incur higher

interest payments in FY2024, they have trimmed their FY2024 and FY2025 earnings estimate by 1% to 3%. Following this, their raised target price of 62 cents is based on a rolled forward valuation to 12 times 2025 P/E ratio, still pegged to the FY2012 to FY2019 average.

Meanwhile, Jarick Seet of Maybank Securities likes the stock for its unique opportunity of riding the upcycle in attractive growth areas, accompanied by a sustainable 6.5% dividend yield.

He points out that CSE Global is also trading at a significantly lower P/E of 15 times FY2024 earnings, versus 20– 30 times the forward P/E fetched by its US competitors.

The analyst expects the company to secure more communications and electrification orders worth $1.1 billion in FY2024.

Seet has raised his earnings estimate for FY2024 and FY2025 by 10% and 23.4% respectively, thereby deriving a new target price of 71 cents, which is based on 15 times FY2024 earnings. His previous target price was 65 cents.

On the other hand, although the company’s earnings also beat the expectations of John Cheong and Heidi Mo at UOB Kay Hian by 7%, they have lowered their target price from 61 cents to 57 cents, which is now pegged to 14 times FY2024 P/E, based on 1 standard deviation (s.d.) above mean.

They explain that this is down from 15 times FY2024 P/E as the P/E mean multiple has fallen.

They have kept their FY2024 earnings forecast at $25 million and have raised estimates for FY2025 by 1% to $28 million. —