CSE Global

(16-08-2013, 10:54 AM)Thriftville Wrote: Hi dzwm87, hope to hear your views divesting of CSE UK?

Hi Thriftville,

Not much details have been disclosed in the announcement but some of my thoughts:

1. CSE is already a small to mid cap company, which means CSE UK will be a very small spin-off. At 33% annualized 2013 earnings, CSE UK is only a US$13mln earnings company. Assuming they are selling off at 10x earnings and 10% of proceeds (arbitrary) goes as listing expenses, then net proceeds should be at least US$116mln or around S$0.29/share. I presume they will sell the subsidiary at above current P/E valuations of 8x else there is really no monetizing value at all.

2. My concern is CSE will be divesting 100% of the unit. How will this work? Is this a management buyout from CSE UK? The full divestment won't work well for the listing. Even when CSE spun out back in the 90s, Sing Tech still holds a stake in the company.

3. Minority investors' interests are at the discretion of management's decision. We don't know how much they will pay out as a special dividend. So far, markets are not expecting much - maybe around S$0.04?

4. At the very least, management is streamlining their business. UK division has always been centered in its healthcare segment [Oceano and Rio] but healthcare accounts for only 6% of revenue in 2012, so the rest should comes from their automation segment. Also, how will management use the cash? Acquire other businesses?? With reference to starbugs' comment, CSE has always been making acquisition over the past many years. I guess they have reached a point where diseconomies of scale is setting in and we are seeing issues such as the Middle East cost overruns. Recent acquisitions this FY have not been associate with its UK business, so I doubt they are ramping up their subsidiary to prepare for the listing. In any case, it's more of the opposite - focusing on their other core business.

5. Of course, the final question is whether CSE still holds value. I believe there is in a market which is currently so expensive. Where do you find something that is 8x historic P/E and generates such decent cash flow? Recovery has been MUCH slower than expected and investors are now skeptical which I believe this has been priced in. Unless something drastic happens, I think the downside risk is rather limited. That being said, it's also not that rosy for CSE. It is after all a black box [who really understand their business?] and earnings visibility is rather poor with its order driven nature.

dzwm87 Wrote:Assuming they are selling off at 10x earnings and 10% of proceeds (arbitrary) goes as listing expenses, then net proceeds should be at least US$116mln or around S$0.29/share... Is this a management buyout from CSE UK?

CSE UK was bought at a P/E of 11.7x in 2000. I would imagine that it won't look too good if it's sold for less. It was known as Servelec then, and Alan Stubbs was one of the founders.

Management buyout is in the blood of both CSE & Servelec. Alan + other founders bought Servelec from De La Rue in 1995, with the support of private equity. I won't be surprised if Alan is doing it again.

dzwm87 Wrote:We don't know how much they will pay out as a special dividend. So far, markets are not expecting much - maybe around S$0.04?

Vickers said: "CSE plans to return most of the IPO proceeds to its shareholders unless it spots an acquisition opportunity."

Hi Guys, just want to check with you, anyone knows the IR contact for CSE Global?

Quite hard to get access unless you attend the AGM.

I don't think they publish the contact on their website. Even if you can speak to them, my experience is they will not disclose much meaningful information.

(16-09-2013, 11:40 AM)dzwm87 Wrote: Quite hard to get access unless you attend the AGM.

I don't think they publish the contact on their website. Even if you can speak to them, my experience is they will not disclose much meaningful information.

Hi, I see. Thanks. Is there any reason why they are rather protective?

No idea but my guess is the business is opaque itself. They don't even disclose margin breakdown for each of their business segments, citing competitive reasons.

Was a longer than expected recovery since late 2011 with some hiccups in between. The market probably got tired though recent days have seen some renewed interests.

CSE is looking good to me now

(18-08-2013, 04:08 PM)lanoitar Wrote:

dzwm87 Wrote:Assuming they are selling off at 10x earnings and 10% of proceeds (arbitrary) goes as listing expenses, then net proceeds should be at least US$116mln or around S$0.29/share... Is this a management buyout from CSE UK?

CSE UK was bought at a P/E of 11.7x in 2000. I would imagine that it won't look too good if it's sold for less. It was known as Servelec then, and Alan Stubbs was one of the founders.

Management buyout is in the blood of both CSE & Servelec. Alan + other founders bought Servelec from De La Rue in 1995, with the support of private equity. I won't be surprised if Alan is doing it again.

dzwm87 Wrote:We don't know how much they will pay out as a special dividend. So far, markets are not expecting much - maybe around S$0.04?

Vickers said: "CSE plans to return most of the IPO proceeds to its shareholders unless it spots an acquisition opportunity."

Alan Stubbs was not one of the original founders of Servelec. It was founded by 4 engineers in 1977 and after several years of operation only two of the original founders of Servelec were left and they sold the business to Portals in 1988 becoming multi millionaires. After several more years only one of the founders remained and he became CEO of the Portals Technology Division which included Servelec as one of the operating businesses. In 1995 De La Rue purchased Portals for the high security paper making business and decided they did not want the Technology division. The remaining founder was tasked with selling off the various companies and then he left to pursue other business opportunities. Alan Stubbs was by then the technical director of Servelec and one of the MBO team that purchased Servelec in 1995 which was then acquired by CSE in 2000.

CSE Global has made announcement with regards to the proposed IPO. It says IPO probably in Dec 2013

http://infopub.sgx.com/FileOpen/Servelec...eID=261901

Assuming the 11.9 pound PBT and a 12x valuation for IPO, the proceeds will be approx. s$284M. I hope that CSE will distribute half of the proceeds to shareholders.

(vested)

(30-10-2013, 08:16 PM)CY09 Wrote: CSE Global has made announcement with regards to the proposed IPO. It says IPO probably in Dec 2013

http://infopub.sgx.com/FileOpen/Servelec...eID=261901

Assuming the 11.9 pound PBT and a 12x valuation for IPO, the proceeds will be approx. s$284M. I hope that CSE will distribute half of the proceeds to shareholders.

(vested)

Similar UK company to Servelec but about half the size was sold to multinational engineering group Imtech last year for 5xPBT.
IMHO think the above is optimistic but I hope you are right as I am CSE shareholder. Think the answer may lie somewhere between the two?