On 27 February 2024, CSE Global Ltd (“CSE”) have announced their 2023 full year result. They have seen significant improvements in the second half of 2023 and are able to generate sufficient cashflow from operations to sustain their dividend payout. This is a good reversal from the downtrend noted in 2022, and if the trend continues will be able to further strengthen their financial position and provide investors with a peace of mind for future dividend payouts.
Take note however that on 14 March 2024, the company has made a proposed placement of 60 million new ordinary shares for an aggregate consideration of SGD24 million. The use of this proceeds will be to increase resources available to it to pursue further inorganic growth through strategic acquisitions or investments primarily in its existing markets, including the United States of America, Australia and New Zealand. It would seem that CSE is now on a trend of aggressive equity raising for their expansion plans. Investors will need to take note of their risk appetite as they may be asked to continuously subscribe into new offerings.
Website: Financial Statements And Related Announcement::Full Yearly Results
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 | +30.0% | +32.6% |
Revenue increased by 30.0% to SGD725 million for FY2023 from SGD558 million in the previous financial year. The increase was mainly attributed to broad base growth across all business segments. The metrics is Favorable.
Earnings per share
| Metrics | Current | Previous |
|---|---|---|
| Earnings per share | +311.2% | No Info |
Earnings per share have increased by 311.2% to SGD0.0366 per share from SGD0.0089 per share in the previous financial year. The significant increase was mainly due to the increase in gross margins by 36.7%. While operating expenses only increased by 17.6%. The metrics is Favorable.
Operating Cash Flows
| Metrics | Current | Previous |
|---|---|---|
| Operating Cash Flows | +558850.0% | No Info |
Operating cashflows have increased by 558850.0% and there is an inflow of SGD55.9 million this year. The significant increase was due to an extremely small based of only SGD10,000 inflow in the previous financial year. The improvement is mainly attributable to their higher profits and supported by better working capital. The metrics is Favorable.
Debt-to-equity ratio
| Metrics | Current | Previous |
|---|---|---|
| Debt-to-equity ratio | 177.5% | No Info |
Debt-to-equity ratio as of 31 December 2023 stands at 177.5%. This is based on the total equity of SGD216 million and liabilities of SGD384 million. There is also SGD136 million of loans and borrowings outstanding as at year end. The metrics is Unfavorable as it is an indication that CSE is reliant on external funding for operations.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest Coverage | 3.7x | No Info |
The interest coverage stands at 3.7 times as of 31 December 2023, using profit before tax of SGD28.7 million and interest expense of SGD10.7 million. The metric is Favorable as the interest coverage is above my preference of 3.0 times. Keep in mind however that the coverage is on a downtrend, mainly due to the continued increase in loans and borrowings. It may improve should interest rates decrease over the next few quarters.
The Federal Reserve on 20 March 2024 have voted to hold interest rates at a 23-year high for a fifth consecutive meeting, while signalling that it still expects to make three cuts this year. This was after increasing the interest rates to a range between 5.25% and 5.50% on 26 July 2023.
Website: US Federal Reserve holds key rate, pencils in 3 cuts this year
Price-to-book ratio
| Metrics | Current | Previous |
|---|---|---|
| Price to Book Ratio | 1.24 | 1.21 |
Price-to-book (“P/B”) ratio currently stands at 1.24. This is based on the NAV of the Group as of 31 December 2023 of SGD0.352 per share and closing share price of SGD0.435 as at 22 March 2024. The metrics is Neutral as you are paying a small premium for the book value of the asset.
Dividend yield
| Year | Yield | Total |
|---|---|---|
| 2024 | 3.45% | SGD 0.015 |
| 2023 | 6.32% | SGD 0.028 |
| 2022 | 6.32% | SGD 0.028 |
| 2021 | 6.32% | SGD 0.028 |
| 2020 | 6.32% | SGD 0.028 |
| 2019 | 6.32% | 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.
On 22 March 2024, with a closing share price of SGD0.435 and dividend payout of SGD0.0275, this translates to a dividend yield of 6.32%. For my benchmark, a general reasonable range would be around an average of 5.25% to 6.25% in the current environment. CSE is within the range. The dividend yield is Favorable.
Website: Reasonable Dividend Yield 2024Q1
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Revenue | +30.0% | Favorable |
| Earnings per share | +311.2% | Favorable |
| Operating Cash Flows | +558850.0% | Favorable |
| Debt-to-equity ratio | 177.5% | Unfavorable |
| Interest Coverage | 3.7x | Favorable |
| Price to Book Ratio | 1.24 | Neutral |
| Overall | | Favorable |
Overall, the metrics indicate that it is favorable to invest in CSE. The business saw improvements in the second half of 2023, with the higher revenue translating to higher profit margins. With management intending to work with their customers to secure a steady flow of projects, this will enable CSE to build its growing backlog for the rest of 2023 and beyond.
Disclaimer: Not financial advice. All data and information provided on this site is for informational purposes only.
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Website: CSE Global Ltd. (SGX: 544): 2023 Third Quarter Business Update
