CSE Global

[Nick]

CSE AGM Presentation Slides:

http://info.sgx.com/webcoranncatth.nsf/V...800178907/$file/CSE-AGM20APR2011.pdf?openelement

I have taken the liberty to extract the business outlook slides comments found towards the end.


Our World is a mixed and diverse economy and our strength is in focused diversity:

H Healthcare
E Environmental
A Automation
T Telecommunications

A record opening order bank of S$394.2M and together with a steady flow of brown field business will enable the group to deliver a good performance in 2011

Despite TPP being favorite to win the ASCC Framework, which was not built into our forecast, the Healthcare business will continue to perform well in 2011 as a function of a strong order book, combined with a positive expectation for Mental Health Trusts wins in the Northern Clusters. In March 2011, we received our first UK Acute Healthcare order

In 2011 we are expecting an increase in our Thermal Engineering business because of the increased bid activity in Molybdenum and activated carbon opportunities

Over 60% of our business is derived from Oil & Gas and the dollar price of Brent Crude is currently USD121, which makes investment activity high

In Australia the recovery from a dip caused by the threat of a mining ‘super tax’ continues and the future opportunities for the LNG and the CSG projects remain encouraging

We continue to search for an Automation business to augment CSE Global Australia to tap into this growth potential

The floods in the Queensland region of Australia and the earthquake in Japan have had no material impact on our business

Whilst the Middle East continues to be a key market for CSE, our planned acquisition and growth in the region has slowed our progress. In addition, we expect that our planned acquisition of an Automation business in the region will be delayed

Our US operation which operates in the Gulf of Mexico will continue at similar sustainable levels

The acquisition of ASTIB in January 2011 will have a positive contribution in 2011

We continue our focus on operation discipline with a focus on cost control and cash management to achieve our desired financial performance

Hopefully more clarity about the Mid East situation, the forex volatility and new order wins will emerge in the upcoming results.

(Vested)

[Nick]

CSE Global (CSE SP, $1.20, NOT RATED) – An extremely successful spin-off from Singapore Technologies, CSE Global was listed in 1999 at a split-adjusted price of $0.28. Today, 10 years later, it is one of the most global of Singapore companies, providing industrial automation solutions for the oil and gas and healthcare industries. Having grown profits by a CAGR of 26% in the past 10 years, it is targeting $100m in the next three years.

1 page report - http://www.remisiers.org/cms_images/ssu21042011ke.pdf

(Vested)

[Nick]

http://info.sgx.com/webcoranncatth.nsf/V...E00380E1C/$file/CSE-1Q2011_Results.pdf?openelement [SGX Announcement]

http://info.sgx.com/webcoranncatth.nsf/V...F001067F0/$file/CSE-1Q2011_Results_Briefing.pdf?openelement [PPT Slides]

A decent set of results with slight growth in revenue and 10% growth in NPAT. $104.9 million worth of new orders were clinched in 1Q 2011 which is down from $151.4 million in the previous quarter. Management expects its telecommunication business unit in Mid East to be adversely impacted by the recent troubles but it remains bullish of its remaining divisions - UK healthcare, O&G in the Gulf and mining + telco in Australia. Forex risk continues to be a problem. The outstanding orderbook is $391 million. Net gearing increased to 14.3% (as compared to the previous quarter) due to the Astib acquisition in Jan 2011.

(Vested)

[egghead]

I am actually a little disappointed with the results as I was expecting about 15% increase for PAT. Hopefully they can catch up in the coming quarters.

[Musicwhiz]

Results look OK. Cash flows were interesting though - a large cash outflow was for M&A, otherwise capex was very small compared to OCF generated.

Also, any idea why the Company went from net cash to net debt? Was it to finance an M&A?

Following from this, are finance costs expected to rise significantly? Would be good to find out what is their borrowing cost.

Thanks!

[egghead]

Yes, CSE just managed to get into a position of net zero debt by end of FY2010 but the acquisition of Astib earlier this year means increased borrowing.

As a service company, I'm not sure if CSE is able to get a good rates as most borrowing is unsecured. Wondering what is the smartest way to borrow since the strong SGD is having quite an impact on its profitability.

[Nick]

The alternative is to fix their reporting currency at USD but in reality it makes virtually no difference. I believe the company revenue and expenses are matched to a singular currency for each business division and region. The forex losses/gains only come when the results are translated into SGD.

The company used debt financing to acquire Astib earlier this year hence raising its gearing.

I think it will be difficult to match FY 2010 record earnings unless they ramp up their orderbook in 2H 2011. I think healthcare segment with Rio in the acute market might be a potential growth driver this year.

[egghead]

Actually, the net debt position of S$30 mil is not such a large gearing if you look at the cash generation capability of the business (cash generation was S$57 mil in FY2010).

The Astib acquisition was actually done with debt and share. There will be potentially another small dilution of 5,000,000 new share if Astib meets the financial performance.

[Nick]

Actually, the net debt position of S$30 mil is not such a large gearing if you look at the cash generation capability of the business (cash generation was S$57 mil in FY2010).

The Astib acquisition was actually done with debt and share. There will be potentially another small dilution of 5,000,000 new share if Astib meets the financial performance.

If they meet the financial performance (especially the A$12 million PBT) target, I am more than willing to suffer the tiny dilution !

[Nick]

CSE SECURES TWO MAJOR TELECOMMUNICATIONS PROJECTS TOTALING US$69 MILLION IN THE MIDDLE EAST

http://info.sgx.com/webcorannc.nsf/Annou...endocument [Announcement]

CSE Global closed at $1.04 giving rise to a historical PER of 9.9 and dividend yield of 3.8%. Its order-book as of 31 March 2011 stood at $391 mil.

(Not Vested)