On 9 November 2023, CSE Global Ltd (“CSE”) have announced their 2023 third quarter business update. It is a short update, mainly on the revenue section. Although the increase for the quarter 2023Q3 is smaller than previous, overall they still see increases of more than 30%. A good sign of recovery.
Worth noting in 2023Q4, there have been some changes in the shareholdings. The Group Managing Director and Chief Executive Officer of CSE Global had increased his shareholdings while substantial shareholders have decreased their stakes. These may be early indicators of what the financial performance will be for FY2023.
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 | +32.6% | +33.2% |
Revenue increased by a total of 32.6% to SGD534.7 million for the first 9 months of FY2023 when compared to the SGD403.2 million in the same period of the previous financial year. The metrics is Favorable.
Earnings per share
| Metrics | Current | Previous |
|---|---|---|
| Earnings per share | No Info | +110.6% |
Based on the announcement on 9 November 2023, earnings per share was not included in the business update for the third quarter of 2023.
The metrics was Favorable as at 30 June 2023 as it has increased by 110.6% to SGD0.0179 per share.
Operating Cash Flows
| Metrics | Current | Previous |
|---|---|---|
| Operating Cash Flows | No Info | -128.6% |
Based on the announcement on 9 November 2023, cash flow was not included in the business update for the third quarter of 2023.
The metrics was Unfavorable as at 30 June 2023 as operating cashflows for the 6 months had decreased by 128.6% and there was an outflow of SGD1.1 million this half the year despite the increase in profits.
Price-to-book ratio
| Metrics | Current | Previous |
|---|---|---|
| Price to Book Ratio | 1.21 | 1.25 |
Based on the announcement on 9 November 2023, Net Asset Value (“NAV”) was not included in the business update for the third quarter of 2023.
NAV of the Group as at 30 June was SGD0.345 per share. Based on the closing share price of SGD0.420 as at 19 December 2023, this translates to a Price-to-book (“P/B”) ratio of 1.21. The metrics is Neutral as you are paying a premium for the book value of the asset.
Debt-to-equity ratio
| Metrics | Current | Previous |
|---|---|---|
| Debt-to-equity ratio | No Info | 166.9% |
Based on the announcement on 9 November 2023, financial position was not included in the business update for the third quarter of 2023.
The metrics was Unfavorable as at 30 June 2023. Debt-to-equity ratio was 166.9% based on the total equity of SGD357 million and liabilities of SGD357 million.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest Coverage | No Info | 4.1x |
Based on the announcement on 9 November 2023, interest expense and profit before tax was not included in the business update for the third quarter of 2023.
The metric was Unfavorable as at 30 June 2023 with interest coverage at 4.1 times. Using profit before tax of SGD14.7 million and interest expense of SGD4.7 million. It was lower than my preference of 5.0 times. It may improve however as the Federal Reserve on 13 December 2023 held its key interest rate steady for the third straight time and set the table for multiple cuts to come in 2024 and beyond. The interest rates are therefore maintained at a range between 5.25% and 5.50%, which was increased on 26 July 2023, the highest level in 22 years.
Website: Fed holds rates steady, indicates three cuts coming in 2024
Dividend yield
| Year | Yield | Total |
|---|---|---|
| 2023 | 6.55% | SGD 0.028 |
| 2022 | 6.55% | SGD 0.028 |
| 2021 | 6.55% | SGD 0.028 |
| 2020 | 6.55% | SGD 0.028 |
| 2019 | 6.55% | SGD 0.028 |
| 2018 | 6.55% | 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 payouts. Since 2015, CSE have been consistently giving dividends of 2.75 cents per share.
At 19 December 2023, with a closing share price of SGD0.420 and dividend payout of SGD0.0275, this translates to a dividend yield of 6.55%. For my benchmark, a general reasonable range would be around an average of 6.0% to 7.0% in the current environment. CSE is within the range.
Website: Reasonable Dividend Yield 2023Q4
The dividend yield is Favorable.
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Revenue | +32.6% | Favorable |
| Earnings per share | No Info | Favorable |
| Operating Cash Flows | No Info | Unfavorable |
| Price to Book Ratio | 1.21 | Neutral |
| Debt-to-equity ratio | No Info | Unfavorable |
| Interest Coverage | No Info | Unfavorable |
| Overall | | Neutral |
Overall, the metrics indicate that it remains neutral to invest in CSE. The business update mainly informed investors on revenue which definitely has a good year. Investors will need to keep an eye out next quarter for the full year update to determine if there are any changes in the other metrics.
Disclaimer: Not financial advice. All data and information provided on this site is for informational purposes only.
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