CSE Global

[Nick]

CSE Global announced the acquisition of Australian telecommunication solution provider, ASTIB Group, for S$46.75 million. ASTIB Group deals in the O&G and mining sector in Australia and it reported a net profit of S$5.8 million in the previous financial year ending June 2010.

http://info.sgx.com/webcoranncatth.nsf/V...6000B1CD8/$file/CSE-Proposed_acqn_ASTIB_271210.pdf?openelement [SGX Announcement]

http://info.sgx.com/webcoranncatth.nsf/V...6000B1CD8/$file/PressRelease_AcquisitionOfASTIBGroupPtyLtd.pdf?openelement [Press Release]

It will be interesting to see how this acquisition will impact their earnings and order-book for FY 2011. CSE Global will offer up to 15 million new shares to ASTIB vendors if certain profit targets are met in 2011 and 2012.

(Vested)

[hongonn]

Hi Nick,

I tried to find out how much the price to pay for this acquisition, only to realize that there are whooping 7 terms and conditions given to the acquired company on how the CSE going to pay.

I am quite impressed the way CSE structured the payment terms. If i not mistaken this is not a norm that Singapore company will bother to apply such stringent rules on their acquisition exercise. Mostly is just pay and pay and even at a premium.

This acquisition seem to me is like hiring a salesman and give a very basis pay. If the salesman want to earn more he got to strive for his own commission. This set a good example how acquisition should be structured, perhaps SGX can learn a thing or 2 from this, both are acquiring an Aussie company.

Put the price aside, i hope the due diligence will be done thoroughly on this.

[egghead]

Copy and paste from The Edge:
========================
DBS Vickers Securities in a Dec 28 research report says: "CSE has agreed to acquire Australian based ASTIB Group Pty Ltd (‘ASTIB’) for an initial consideration of $46.7 million (comprising cash of A$30 million and 5 million ordinary shares of CSE), valued at 7.35x FY10 June PE and 3.81x P/B.

"If ASTIB meets certain profit targets for 2011 (A$12 million) and 2012 (A$14.2 million), CSE will pay up to an additional 15 million ordinary shares (c.$19.05 million), implying a maximum consideration of approximately $64.7 million, or 4.98x P/E and 2.69x P/B. The purchase is financed through internal resources and bank borrowings at an interest rate of 5%.

"We are positive on this acquisition. Assuming ASTIB meets the stated profit target, this acquisition could add 6% to FY10F. We currently have a target price of $1.45 for CSE implying 15% from current levels. BUY"

[Nick]

Thank you Egghead and Hongonn for your input.

Looking forward to FY result and dividend announcement in the coming 2 months !

[Nick]

SENIOR MANAGEMENT APPOINTMENTS ANNOUNCEMENT

With effect from 4 January 2011, Mr Alan Stubbs, Group Chief Operating Officer, will be promoted as the Group Managing Director, and also be appointed as a member of the Board of Director of the Company. As Group Managing Director, Mr Alan Stubbs will take over the roles and responsibilities of Mr Tan Mok Koon, who will be appointed as the Executive Deputy Chairman of the Company on the same date.

As Executive Deputy Chairman, Mr Tan Mok Koon will take on a more strategic role in assisting Mr Alan Stubbs in the growth of the business through acquisitions and new business development. Mr Tan Mok Koon has been with the company since 1986. Having led a team of management staff to execute a management buy-in in 1997, he successfully listed the company in 1999. Under his astute leadership, the company has grown from strength to strength, and has developed into a truly global organisation. Mr Tan intends to take a one-year sabbatical leave towards the end of 2011.

All other positions within the Group remain unchanged.


Good to see Management succession plans being carried out. Mr Alan Stubbs have been working in CSE for over the past decade so I don't expect any major shift in the company's strategic direction.

On another note, DBSV released another research report today focusing on the rising oil prices, its other business divisions (namely infrastructure, mining and healthcare) and the latest acquisition. http://www.remisiers.org/cms_images/Rese...y_DBSV.pdf

(Vested)

[egghead]

Note "As Executive Deputy Chairman, Mr Tan Mok Koon will take on a more strategic role in assisting Mr Alan Stubbs in the growth of the business through acquisitions and new business development."

More upside catalysts coming?

[Nick]

I stumbled upon this news article and it gives plenty of insights about the recent ASTIB acquisition from a different perspective.


Local telco sells for $50m
4-January-11 by Natalie Gerritsen
WA Business News

Privately-owned telecommunication services firm ASTIB Group has been sold to Singapore-based CSE Global in a deal worth up to $49.6 million.

CSE's local arm will acquire ASTIB for an initial consideration of $30 million cash and 5 million CSE shares, with a further payment of 15 million shares to follow provided certain profit targets are met over the next two years.

ASTIB was started in 1995 by Robert and Wendy Sofoulis, and currently employs 91 staff at offices in Perth, Darwin and Cairns.

Last financial year the company had revenue of $30.6 million and an after-tax profit of $4.4 million.

The company provides tailored telecommunication solutions encompassing design, engineering, installation and support services to clients such as BHP Billiton, Woodside and Multiplex.

Business sales firm Mergers & Acquisitions brokered the sale, having established a relationship with ASTIB's owners after aiding the company in acquiring Memo Communications a few years back.

Senior consultant Todd Grover handled the deal, and said he received two written and one verbal offer for the company, with the unsuccessful bids coming from Australian and US-based firms.

He said that ASTIB had attracted global attention due to its high reputation and specialized work.

"ASTIB is pretty much the premier business of its type in Australia, and even in Asia-Pacific," Mr Grover said.

"It's a clear market leader in what it does, there's nobody else doing the radio communications the way they do, and they also have exclusive arrangements with some very heavyweight international suppliers."

Mr Grover said that ASTIB and its member companies, including Memo Communications and Comsource International, were entering a period of rapid growth that was beyond the means of the current owners.

"Basically, the business was owned by Bob and Wendy and it's not able to fund its growth opportunities, so that was the driver for the sale," he said.

"We needed to have a big brother with deep pockets, a listed company to enable them to roll out their growth plan."

Mr Sofoulis is planning to stay with the company as managing director for the next couple of years, with Mrs Sofoulis planning to step back from the business' operations.

Mr Gorvoer said that it was still undecided as to what name ASTIB would trade under, as CSE and ASTIB had strong brands, with ASTIB being a major sponsor of the Perth Wildcats.

CSE estimated the initial price to earnings ratio for the financial year to June 30, 2010 as being 7.35 times, and is counting on an eventual ratio of 4.98 times if the 2012 profit goals are met.

URL: http://www.wabusinessnews.com.au/en-stor...ls-for-50m

[egghead]

Nick, thanks for sharing. Base on the reported PE, this acquisition should be earning accretive since CSE PE is about 12-13 times. It should also complement their existing telecommunication business which serves mainly the oil and gas sector.

[egghead]

Singapore (5 January 2011) - CSE Global Ltd (CSE) today announced that Transtel Engineering and W-Industries, its fully-owned subsidiaries, have recently won two contracts worth a total of US$11 million in the PNG and West Africa.

The first contract is awarded by a major Japanese-based EPC contractor for the turnkey development of a telecommunication network infrastructure for the PNG LNG plant. The second contract is awarded by a US-based oil company for an E-house electrical and control systems for an oil field in West Africa.

These projects will have a positive impact on CSE's profit for the current financial year.

[Nick]

Alan Stubbs, recently promoted to MD, issued a press release to this newspaper to discuss his plans to bring CSE forward and increase shareholder's value. Quite an interesting read though nothing material was revealed.

Stubbs targets growth as CSE Global MD

Last updated: Fri 7th January, 2011 | Time: 09:20am

Alan Stubbs, the managing director of Sheffield-based CSE Global (UK), has been promoted to the role of group managing director of CSE Global, the Singapore-headquartered international technology business. Stubbs told Insider he was working on rebranding the business while pursuing an ambitious expansion strategy through organic growth and, in particular, acquisitions.

In his new role, Stubbs, who will continue to be based in South Yorkshire, will be responsible for CSE Global’s 38 offices spanning 26 countries and employing more than 1,400 people worldwide.

Working with three UK managing directors, Stubbs' role at CSE Global (UK) will be more of an operational one, contributing to the global business.

CSE Global, which recently acquired Australian business Astib, has a turnover in excess of £200m. Stubbs said he hoped to double profitability every three years and was aiming to turn over £400m by 2014.

"We're actively seeking more acquisitions around the world," he said.

The acquisition of a Middle-East business is on Stubbs' agenda and he said: "We're working with various financial organisations to find us an appropriate company."

He added: "We have a vision of where we want to go. We asked: 'What is CSE Global?'. To our shareholders it looked like quite a disjointed company. Together with our marketing team, I'm working on a rebranding exercise. CSE Global is an automation business, a telecoms business, a healthcare business and an environmental business. My goal is to enable those companies to grow and operate as units across the globe and expand."

Stubbs, who joined CSE in 1984 and has been managing director of the UK division for more than ten years, said his target was to grow and cross-fertilise these units into a more coherent whole.

"We have to present ourselves to our shareholders with a clear distinct message about what we are, what we intend to be and where we are going, so we can really drive that shareholder value. We also have to cross-fertilise the strength that we hold into a company that the larger companies would want to work with."

By combining the various elements of the business, Stubbs was aiming for CSE Global to display the scale and strength that will allow it to increase its workload with multinational corporations like BP, Chevron and Mobil.

URL: http://www.insidermedia.com/insider/york...se-global/

(Vested)