A sharp rise in orderbook in 1Q will provide resilience to 2Q performance. But some negative impact, particularly relating to order intake in 2Q, is being felt. Key takeaways from an investor briefing this week, following the release of strong 1Q revenue and profit figures, are: 1. Essential services: Most of CSE's operations in Singapore, Australia, New Zealand and USA have been allowed to continue during lockdowns as they are essential services. And, thankfully, no work site has been hit by Covid infections. 2. No material cancellation or delay: CSE's orderbook is populated with maintenance work for on-going projects, and there has been no material cancellation or delay. 3. Strong customers: While oil prices have fallen sharply in 2Q, CSE's oil & gas customers are major players and so there has been no material collection issues for CSE's trade receivables. |
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| What's CSE's "flow" biz? |
| CSE’s O&G business can be separated into: 1) “Flow” business, and 2) Large contracts. Its flow business, accounting for more than 90% of revenue, is mainly the provision of maintenance and services to its existing installed customer base. The flow business is resilient and less susceptible to short term volatilities in the O&G market. "Large contracts" are new project wins. There are no "large project" win in its 1Q2020 intake. |
Reflecting "minimal impact" of Covid-19 outbreak, CSE Global’s 1Q2020 revenue was 56.0% higher y-o-y at S$131.8 million.
This was boosted by higher revenues achieved in the Americas and the Asia Pacific regions.
The growth came from strong "flow" revenues and new acquisitions (RCS Telecommunications of Australia and Volta of USA).
Supported by stable gross margins, CSE recorded net profit grew 23.1% y-o-y to S$7.1 million.
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$17.3 m cashflow |
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Notably, in 1Q2020, CSE generated strong operating cash flow of S$17.3 million, which enabled CSE to lower its net debt to S$32.7 million from S$44.5 million in 4Q19.
(The net debt came about from borrowings to fund the US$25.1 million acquisition of Volta in 2019).
Net gearing has been reduced to only 0.18x.
Order intake in 1Q2020 surged 46.6% y-o-y to S$127.2 million, driven by new orders from greenfield and brownfield projects, and supported by stable "flow" orders.
CSE ended 1Q2020 with a robust order book of S$302.7 million, which was 66.9% higher y-o-y.
However, 2Q2020 will be weaker, especially because of a low oil price environment where some of the new work (specifically, from shale oil producers in the US) that is yet to be awarded is now being delayed by several months or so, or even cancelled.
"Expect fewer opportunities and lower prices in new orders," says CSE.
 Mr. Lim Boon Kheng (file photo), Group MD of CSE, said, “We are pleased to report a commendable set of results on the back of the growth in our key markets. However, the current market environment still presents numerous uncertainties going forward: COVID19 pandemic, low oil & gas prices and weak global economic outlook. "Though CSE expects to be negatively impacted in the coming months, the magnitude of the impact cannot be accurately determined at this point of time.” |
