13 August 2013

CSE Global - 4.86 cents EPS in 1H 2013 Result

Extracted from Company's announcement

Review of Performance  - 1  st  Half  In 1H13

CSE Group recorded profit after tax of S$25.1 million  compared to profit after tax of S$23.3 million in   1H12 before  discontinued operations and one-time transactions.  This was an increase of 7.6%  compared to   1H12.  Profit after tax of S$25.1 million in 1H13 compared to profit after tax of  S$33.7 million in 1H12  (including discontinued operations and one-time transactions).  

Revenue  reduced by 15.4% in 1H12 compared to 1H12 due to  lower revenue in the Americas and EMEA   regions. Basic earnings per ordinary share from continuing operations and before one-time gains of 4.86 cents was 8% higher compared with 1H12. Basic earnings per ordinary share was 4.86 cents in 1H13  compared to basic earnings per ordinary share of 6.53 cents in 1H12 (which included the one-time gain on the disposal of eBworx   Berhad).   New orders received for the first half year  of  2013 were S$222.4 million compared with S$201.1 million for the corresponding period in 2012, an increase of 10.6%. The Group generated operating cash inflow of S$47.1 million in 1H13 and improved Group net gearing to 6.2% at the end of 1H13 from 19.2% at the end of 4Q12 and 25.6% as at 1H12.

Performance of Geographical Segments

In 2Q13, the geographical regions of Asia-Pacific, The Americas and Europe/Middle East/Africa contributed   31.0%,  38.4% and  30.6% to revenue and  35.8%,  25.9% and  38.3% to profit after tax and minority interest   respectively.  The increase in profit for 2Q13 compared with 2Q12 in the Asia-Pacific region was mainly due to an exchange gain contributed in 2Q13 compared with an exchange loss in 2Q12. The Americas region  recorded lower revenue by 20.5%  with a slight decrease of  5.4% in profits for 2Q13  compared with 2Q12 mainly due to lower  level  of  less profitable  onshore activity in the USA compared to 2Q12.  The EMEA region recorded lower revenue by 31.6% and a decrease of 6.7% in profits for 2Q13 compared with 2Q12  mainly  due to lower revenues in the Middle East caused by delays in some projects.  In 1H13, the geographical regions of Asia-Pacific, The Americas and Europe/Middle East/Africa contributed 28.5%, 40.2% and  31.3% to revenue and  30.1%,  29.9% and  40.0% to profit after tax and minority interest   respectively.  Revenue and profit for 1H13 compared with 1H12 in the Asia-Pacific region was slightly decreased by 2.3%   and 3.6% respectively.  The Americas region showed a large increase in profit despite a 16.3% decrease in revenue for 1H13 compared   with 1H12. This was due to a  higher contribution from the offshore market, which more than offset the lower   level of activity in the onshore market.  The EMEA region recorded an increase in  profit despite a decrease of 23.6% in  revenue for 1H13 compared   with 1H12 due to  lower revenue and the  lower level of zero-margin revenue in the Middle East, as the loss making projects there are completed or nearing completion.

Liquidity and Capital Resources  

CSE significantly improved its operational cash inflow to S$30.2 million in 2Q13 after accounting for S$2.3  million  in  foreign currency translation differences on non-monetary assets and liabilities of its subsidiaries   whose functional currencies are in USD, EUR, GBP and AUD. At the end of  2Q13, CSE reduced its net gearing to 6.2% from 19.2% as at end of 4Q12. Gearing at the end of 2Q12 was 25.6%.

Outstanding Orders

CSE received S$127.0 million new orders in  2Q13.  Outstanding orders  increased by 1.4% to S$375.0 million   as at end of 2Q13 from S$369.9 million as at end of  2Q12.  Outstanding orders as at end of 2Q13 comprised S$316.9 million of outstanding orders for Oil & Gas, Infrastructure and Mineral & Mining and S$58.1 million of outstanding orders for Healthcare.

Outlook  

With a healthy outstanding order book of S$375.0 million at the end of 2Q13, CSE remains confident of an  improvement in  its overall profitability from operations in  2013 as compared to 2012. While some large greenfield projects are being delayed the Group will continue to focus on brown-field projects, which generally have  lower revenues but higher gross margins.  CSE is currently pursuing a full divestment of its wholly owned subsidiary CSE Global UK through a separate listing on the London Stock Exchange (“Listing”). There is no guarantee that the Listing will proceed as it will be subject to market conditions, valuation and amongst other things, the relevant regulatory and other approvals being obtained, execution of definitive agreements by the relevant parties and the approval of CSE’s shareholders.

My View

CSE Global stands as a group with stable revenue stream business model. With current low debt level and positive cash flow from operating, I think that there is a higher chance for the group to continue its dividend payout policy. Current PB Ratio stands at 1.78 X with annualized PE 8.6 X. However please note that this is a smaller capital size counter and you may experience in liquidity issue when trading in it.


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