• A good month. Our portfolio performed well in April, with most stocks (with the exception of developers) notching up gains. Most notables were the banks, which delivered 8-12% gains in April (OCBC +8% and DBS +12%). Sheng Siong, which was added in early-April, also delivered a strong 10% return.
• Adding newly-initiated CSE and removing Sheng Siong. We take profit on Sheng Siong given its strong 10% return in April, which resulted in a downgrade in our rating to HOLD. In its place, we add in newly-initiated CSE, which looks like an excellent proxy to the recovering oil prices with a sustainable dividend yield of 6.7%.
CSE Global – BUY (Nicholas Leow/Edison Chen)
• We initiated coverage on CSE Global with a BUY and PE-based target price of S$0.58/share. This is based on a peer average PE of 15x, which suggests an upside of 41% for CSE.
• Solid proxy to recovering oil prices. CSE is a good proxy to the recovering oil prices as two-thirds of its existing orderbook of S$175m is derived from the O&G sector. In addition, the stock offers a sustainable dividend yield of more than 6%.
• High entry barriers. The group has a 32 year track record in a business with high entry barriers. CSE is one of the few qualified system integrators in the region for O&S and communication infrastructure industries.
• Potential synergies from new shareholder. Serba Dinamik, a Malaysia-listed company, recently bought a 25% stake in CSE at S$0.45/share. We see potential synergies as it could open up new markets for CSE such as Malaysia and the Middle East.
• Event: New contract wins and recovery in earnings.
• Timeline: 6-12 months (Read Report)
Source : UOB KayHian Research