President Trump’s declaration of a national energy emergency which will see the approval of new drilling, pipelines, refineries, powerplants and reactors will be positive for CSE Global , says Maybank Securities in its Jan 20 note.
The number of oil & gas related projects will rise after a “lukewarm” past few years, resulting in CSE pivoting to electrification previously. With all three engines firing now, Maybank’s Jarick Seet maintains his “buy” with an unchanged target price of 64 cents for CSE Global.
However, the analyst notes that CSE Global has more room for growth in terms of sustainability strategies.
CSE Global has had significant exposure previously to oil & gas projects in the US. On Jan 5, the company said that it plans to sell a US industrial property for US$29.25 million ($40.01 million) into buying a larger property. This will likely be built-up in phases, says Seet.
“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,” he adds.
The analyst expects the new facility to be more than double of its existing facility which comprises 16.68 acres of land and 215,474 sq ft of building size.
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As a global systems integrator, Seet says that CSE is on the verge of a multi-year upcycle, with an “attractive” prospective dividend yield of 6.3%, trading at a “significant discount” compared to peers and with a strong order book of $633.6 million as at Sept 30, 2024.
Over time, Seet expects maintenance revenue to build as CSE completes more projects, and gearing to continue to decrease as its financial performance and operating cash flow improves.
He expects dividends to be maintained at 2.75 cents per share, which has been CSE’s pay out for many years.
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On the environmental, social and governance (ESG) front, Seet says that a risk for the company is its plans to reduce emissions as its current targets are still far away from actual emissions.
“CSE’s FY2022 targets of reducing carbon emissions have not been met, and this has occurred for the past few years,” he says. The company “plans” to measure its scope 3 emissions and is negotiating with banks for possible sustainability linked loans. It is also planning to disclose its Task Force on Climate-Related Financial discussion roadmap.
As at 10.08 am, shares in CSE Global are trading 1 cent higher or 2.30% up at 44.5 cents.
