CSE Global sold a US facility for US$29.25m and we expect it to recognise a gain of US$8.6m after tax expense, which will offset the one-off US$8m settlement in Sep 2024. Proceeds from the sale will be used to buy a larger property in the US for business expansion while it will continue to lease the facility it sold at an estimated rental of US$2.5m/year.
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Sale & leaseback of US facility
CSE Global sold its US facility to Gladstone Commercial Ltd partnership in Texas, US for US$29.25m. The current net book value of the property is US$17.8m. We expect CSE Global to recognise a gain of US$8.6m after an estimated 25% tax. This should offset the US$8m settlement incurred in Sep 2024.
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Expansion to a larger facility
CSE Global intends to deploy the sale proceeds as capital for the purchase of a larger property in the US, which will likely be built-up in phases. We believe this is due to the substantial growth opportunities available for the electrification of US data and utilities centres etc.
We believe it will also explore new states with better and friendlier tax incentives which add more positives for CSE Global.
Lastly, we expect the new facility to be more than double of its existing facility which comprises 16.68 acres of land and 215,474 sqft of building size.
Maintain BUY with a higher target price of S$0.64
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Above is an excerpt from a report by Maybank Research. Clients of Maybank Securities may be the first to access the full PDF report @ https://www.maybanktrade.com.sg/.
