On 6 August 2024, CSE Global Ltd (“CSE”) have announced their half year result for FY2024. Their revenue continued to increase which is able to translate to profits from operations. With the strong earnings, it looks like CSE can sustain their dividend payout despite the large shareholder base. CSE still has a high gearing ratio, therefore they are reliant on external sources to fund their operations.
Do note that this article is based on a snapshot of CSE’s performance for the first half of FY2024. On 10 September 2024, there is an announcement that CSE agrees to a USD8 million (approximately SGD10.5 million) settlement with customer of subsidiary. This is substantial as CSE generated SGD15 million profits in the first half of FY2024. If extrapolated, this will amount to profits of SGD30 million for the full financial year, and the settlement of SGD10.5 million will be approximately 35% of its profits for FY2024. With the announcement, share price saw a decrease by 11.7% on 10 September 2024. Investors should monitor if there are any further updates to the settlement.
Website: Financial Statements and Related Announcement::Half Yearly Results
Website: CSE Global agrees to US$8 million settlement with customer of subsidiary
Photo source: 5 things I like about CSE Global
Background
CSE is a Singapore-based technology company, which offers total integrated solutions to industries in the automation, telecommunications and environmental sectors. The Company is engaged in the business of systems integration solution and the provision of computer network systems.
The Company operates through Process Controls and Communications & Security segments. The Process Controls segment provides process control solutions that utilize supervisory control and data acquisition systems (“SCADA”), distributed control systems (“DCS”), programmable logic controllers (“PLCs”), motors, drives and plant transducers.
Its geographical segments include Asia-Pacific, America and Europe/Middle East. It offers safety critical solutions, including emergency shutdown systems, process shutdown systems, and integrated control and safety systems. Its products and services are installed on production facilities, as well as on drilling rigs.
Financial highlights
Revenue
| Metrics | Current | Previous |
|---|---|---|
| Revenue | +22.8% | +23.9% |
Revenue for the first half of FY2024 increased by 22.8% to SGD428 million from SGD349 million for the same period in the previous financial year. The increase was mainly attributed to broad base growth across all business segments. Take note as well that the order book as of end of the quarter has increased by 32.7% to SGD692 million, compared to SGD521 million a year ago. The metric is Favorable.
Earnings per share
| Metrics | Current | Previous |
|---|---|---|
| Earnings per share | +29.1% | No Info |
Earnings per share for the first half of FY2024 have increased by 29.1% to SGD0.0231 per share from SGD0.0179 per share for the same period in the previous financial year. The significant increase was mainly due to the increase in gross margins by 29.8%, with operating expenses only increasing by 22.2% which is less than proportionate than revenue. Do note that the increase was less than the increase if profit by 36.8% to SGD15 million, as there are a higher amount of shares outstanding as of 30 June 2024 with the placement done in March 2024. Nonetheless, this metric remains Favorable.
Do note that with the settlement of USD8 million (approximately SGD10.5 million), profits for the first half of FY2024 will decrease by half. This will translate to a fall in earnings per share which will be Unfavorable.
Operating Cash Flows
| Metrics | Current | Previous |
|---|---|---|
| Operating Cash Flows | +1,487.5% | No Info |
Operating cashflows for the first half of FY2024 have increased by 1,487.5% with a cash inflow of SGD15.8 million. The significant increase was due to a lower base with cash outflow of SGD1 million for the same period in the previous financial year. The improvement is mainly attributable to their higher profits and supported by better working capital. This metric is Favorable.
Gearing ratio
| Metrics | Current | Previous |
|---|---|---|
| Gearing ratio | 63.0% | No Info |
Using the computation for Real Estate Investment Trusts (“REITs”), gearing ratio was 63.0% as of 30 June 2024, with total assets of SGD686 million and total liabilities of SGD433 million. The metric remains Unfavorable as this is an indication that CSE is reliant on external funding for operations.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest Coverage | 5.5x | No Info |
The interest coverage stands at 5.5 times as of 30 June 2024. This was computed using profit before tax of SGD20.4 million and interest expense of SGD4.5 million. The metric remains Favorable as it is above my preferred coverage of 3.0 times.
Price-to-book ratio
| Metrics | Current | Previous |
|---|---|---|
| Price to Book Ratio | 1.13 | 1.17 |
Price-to-book (“P/B”) ratio currently stands at 1.13. This is based on the NAV of the Group as of 30 June 2024 of SGD0.366 per share and closing share price of SGD0.415 as of 10 September 2024. The metrics is Neutral as you are paying a small premium for the book value of the asset.
As of 10 September 2024, the Market Capitalization is approximately SGD298 million.
Dividend
| Year | Yield | Total |
|---|---|---|
| 2024 | 6.63% | SGD 0.028 |
| 2023 | 6.63% | SGD 0.028 |
| 2022 | 6.63% | SGD 0.028 |
| 2021 | 6.63% | SGD 0.028 |
| 2020 | 6.63% | SGD 0.028 |
The Company does not have a formal dividend policy, but the Board have represented that they will strive to provide sustainable dividend payout. Since 2015, CSE have been consistently giving dividends of 2.75 cents per share.
With a closing share price of SGD0.415 on 10 September 2024, this translates to a dividend yield of 6.63%. For my benchmark, a reasonable yield would be around 5.75%. CSE dividend yield is Favorable.
Website: Reasonable Dividend Yield 2024Q3 – 5.75%
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Revenue | +22.8% | Favorable |
| Earnings per share | +29.1% | Favorable |
| Operating Cash Flows | +1,487.5% | Favorable |
| Gearing ratio | 63.0% | Unfavorable |
| Interest Coverage | 5.5x | Favorable |
| Price to Book Ratio | 1.13 | Neutral |
| Overall | Favorable |
Overall, the metrics indicate that it remains Favorable to invest in CSE. With its strong order books, this provides a good income visibility and stability for CSE. Nonetheless, investors should monitor the settlement, as it will have a material impact to the financial position of CSE.
Disclaimer: Not financial advice. All data and information provided on this site is for informational purposes only.
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