[SINGAPORE] Maybank securities analyst Jarick Seet cut his target price for systems integrator CSE Global to S$0.58 from S$0.67 in the light of fierce tariffs by US President Donald Trump.
However, he kept his “buy” rating on the company, citing the impact from Trump tariffs to be “minimal”, considering how CSE Global has production facilities in the US.
“We estimate about 10 per cent of the equipment sourced from Europe, Mexico and South-east Asia is likely to be impacted by tariffs, which could reduce CSE Global’s margins slightly,” wrote the analyst in a report on Monday (May 5).
But with the group’s US production facilities serving its customers in the country already, the majority of its equipment is already being sourced from the US.
With CSE Global also expanding its US facility, this plays well into avoiding the tariffs, too, said the analyst.
Acquisitions new and old service business expansion
Additionally, the group acquired telco service provider Chicago Communications on Apr 30 for US$8.5 million, where the deal was funded internally and by bank loans.
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Chicago Communications – which sells, rents, installs and maintains communications equipment for US customers mainly in Illinois and Indiana – recorded a net profit before tax of about US$1.8 million and earnings before interest, taxes, depreciation and amortisation of US$1.9 million.
In a company announcement dated May 1, earnings per share after the acquisition was recorded as S$0.0416 (assuming it was effected on Jan 1, 2024), compared with S$0.0391 previously.
According to Seet, this move by the group has the strategic purpose of further expanding CSE Global’s critical communications business in the US.
Moreover, he noted that RFC Wireless, which was acquired by CSE Global in August 2024, helped the group enter the data centre market and secure over US$15 million of orders in the subsequent 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,” he wrote.
Strong Q1 order book
CSE Global announced on Monday that it secured S$155.3 million of new orders in the first quarter ended Mar 31. In particular, the communications business segment secured S$63.7 million in new orders, accounting for around 41 per cent of the total order intake for the quarter.
The automation business segment contributed around 35.8 per cent of the total order intake for Q1, or S$55.6 million in new orders; while the electrification business segment secured S$36.1 million of new orders, which made up 23.2 per cent of the total order intake during the quarter.
The order intake in Q1 for the latter segment was 52.4 per cent lower year on year, due to the decline in orders from the municipal market with the shift to focus on the data centre and utility markets.
The group closed Q1 FY2025 with an order book of S$616 million with the new orders.
That said, if Trump’s tariffs remain, Seet noted that the US and the global economy will be affected, and CSE Global may face fewer orders or a delay in projects, which may hurt its profitability.
Still, the analyst noted that the company’s 50 per cent dividend guidance will provide stability for shareholders along with the upside from its positive outlook.
“We remain bullish on the outlook for CSE Global and expect more local government projects to boost its order book, as Singapore’s general election recently ended in May,” said Seet.
Shares of CSE Global were trading flat at S$0.425 as at 2.07 pm on Tuesday.
