CSE Global’s 3QFY2025 revenue of $258 million, up 21% y-o-y, was largely in line with the expectations of Cheong and Mo, while 9MFY2025 revenue of $699 million was 76% of their full-year estimate.
“This displayed strength in CSE’s top-line, despite being impacted y-o-y by unfavourable forex movements, particularly from USD and AUD. The growth was mainly driven by strength from its electrification business,” states the team.
The UOB Kay Hian analysts predict that CSE Global’s electrification segment stands to benefit from growing DC demand as AI adoption increases, especially in the US.
For one, in August, CSE Global won a $59 million DC extension order from its existing US hyperscaler client. In addition, CSE is in the qualification phase with more hyperscaler clients. “We believe the size of the contract wins will continue to increase due to increased adoption of AI,” the team adds.
Meanwhile, in his report dated Nov 24, Alfie Yeo of RHB Bank Singapore continues to like CSE Global for its positive outlook, led by a firm orderbook of $467 million as of September and a sequentially stronger 2HFY2025 on better earnings traction.
“We view CSE Global’s warrant issue to Amazon.com (Amazon) positively, backed by the latter’s planned US$1.5 billion of orders going forward,” he adds.
“While there is an 8% warrant dilution to EPS, we see strong earnings outlook for CSE Global with Amazon’s US$1.5 billion in orders coming in for projects including DCs, which support CSE Global’s electrification and communications-focused initiatives. Valued at an average of $400 million a year, Amazon’s order quantum is significant, representing about 46% of FY2024’s total revenue of $861 million,” Yeo explains.
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Hence, he is maintaining a “buy” call on CSE Global with a target price of $1.22. The target price is based on 20 times FY2026 P/E ratio.
Finally, Lim Siew Khee and Tan Jie Hui of CGS International highlighted in their report dated Nov 21 that CSE Global’s management remains optimistic about securing sizeable orders in 4QFY2025, particularly in the electrification segment, with several large negotiations - including Amazon Web Services’ FY2026 delivery contract - in advanced stages.
“We anticipate more contract conversions within 1 to 1.5 months, which should help rebuild orderbook after recent project completions in FY2025,” the team adds.
The company’s management had guided that overhead expenses will likely be front-loaded as the company gears up for upcoming large-scale contracts. This includes hiring additional technical and engineering staff, rental expenses for the new 241k sq ft of facility, and early investments in equipment.
“With this addition, total capacity rises to c.700k sq ft, and we anticipate it expanding further to c.800k sq ft by end of FY2025 to support anticipated contract volumes. While these steps are essential for operational readiness, we expect near-term costs to rise with limited immediate revenue, which results in temporary margin compression before utilisation and production scale improve from FY2026 onwards,” Lim and Tan add.
“We trim FY2025 and FY2026 EBITDA margins to reflect front-loaded opex ahead of a sizeable AWS contract starting FY2026. This leads to FY2025 and FY2026 EPS cuts while FY2027 EPS remains intact as margins normalise,” the team explains.
The team is retaining their “add” call on CSE Global, supported by strong multi-year visibility from the AWS programme, which may exceed US$1.5 billion over five years. Their target price remains at S$1.15, based on 15 times FY2027 P/E ratio, 0.5 standard deviation above 10-year average.
As at 9.50 am, shares in CSE Global are trading 0.5 cents higher or 0.53% up at 94.5 cents.
