CSE Global - DBS Research 2022-08-16: Hold On Tight Amid Supply Chain Disruptions

• CSE Global (SGX:544)'s 1H22 revenue stood at $262.2m, 11.8% higher y-o-y. This represents 55% of our full year forecasts.
  • The higher revenues can be ascribed to a 47.9% growth in infrastructure revenues in Australia and the Americas region.
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  • The mining and minerals segment grew 18.4% y-o-y on the back of stable commodity prices and higher mining activities.
• CSE Global's 1H22 net profit declined by 55% y-o-y to S$4.5m (vs S$10.1m in 1H21), below expectations due to supply chain disruptions, changes in the sales mix and higher operating expenses. 1H22 net profit only amounted to 21% of our full year forecasts.
• Gross margins came in 2.1 percentage points lower at 27.8% owing to
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  • lower margins of new infrastructure projects.
• CSE Global also reported lower net margins of 1.7% (vs 4.3% in 1H21) which was negatively impacted mainly by higher operating expenses from
  1. the newly acquired subsidiaries (+S$2.7m),
  2. increased staffing costs (+S$1.8m),
  3. selling & distribution expenses (+S$1.8m), and
  4. upkeep of building and equipment cost (+S$1.1m).
• The higher personnel costs can be attributed to unabsorbed labour costs as CSE Global expanded its technical workforce to meet the demands of new orders. Overall operating expenses increased by 13.7% y-o-y, which was higher than the 11.8% y-o-y increase in revenue, resulting in lower margins. We should expect an improvement in margins when supply chain disruption eases.
• CSE Global's order intake in 1H22 soared 100.3% to S$421.7m (vs S$210.6m in 1H21). Robust growth was recorded across all three segments, led by the energy sector which recorded 124.0% y-o-y growth to S$238.3m (vs106.4m in 1H21). As at 2Q22, CSE Global’s orderbook stood at S$388.9m (vs S$344.0m in 1Q22).

CSE Global - Outlook

Outlook more promising except for the absence of large greenfield projects in the traditional energy sector.

• Read more at SGinvestors.io.

Above is an excerpt from a report by DBS Group Research.
Clients of DBS may access the full PDF report @ https://www.dbs.com/insightsdirect/.

Read also DBS's most recent report:
2023-03-01 CSE Global - Earnings Delivery Hinges On Execution.

Price targets by 3 other brokers at CSE Global Target Prices.

Listing of research reports at CSE Global Analyst Reports.

Relevant links:
CSE Global Share Price History,
CSE Global Announcements,
CSE Global Dividend Payout Dates & Corporate Actions,
CSE Global News