Seet estimates that about 10% of the equipment sourced from Europe, Mexico/Southeast Asia is likely to be impacted by tariffs, which could reduce CSE Global's margins slightly. He points out that CSE Global is also expanding its US facility, which will play well into avoiding these tariffs.
"However, if the tariffs remain, the US and global economy will be impacted and CSE Global might be faced with fewer orders or delay in projects, which may impact profitability," he adds.
Later in the day, CSE Global reported $155.3 million in new orders in the first quarter ended March 31, 2025, down 11.3% y-o-y from the $175.1 million recorded in the same period a year ago. For the quarter, the company reported an ending order book of $616 million, down 14.4% y-o-y.
The company is moving into new markets with growth potential.
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For example, its move to acquire Chicago Communications for US$8.5 million, which had a profit before tax of US$1.8 million for FY2024, is for the "strategic purpose" of further expanding CSE Global's critical communications business in the US.
Earlier, RFC Wireless, acquired by CSE Global last August, helped in penetrating the data centre market and secure more than US$15 million in orders in the following quarters.
"We believe this will be the first of many to come as the pipeline of data centres to be built globally, especially in the US, remains robust," says Seet.
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Nonetheless, Seet is still bullish on this stock, given its 50% dividend payout guidance, which will provide stability for shareholders as well on top of the positive outlook, with local orders seen as well.
Taking into a "conservative" assumption that US tariffs remain in place and the US economy slows down, Seet has lowered his FY2025 patmi by 14.7% and FY2026's by 18.8%, leading to his lowered target price of 58 cents based on11.5x FY2025 earnings.
CSE Global changed hands at 43 cents as at 9.50 am.
