Good to Mediocre

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CSE was established as a engineering division of Chartered Electronics, the electronic arm of Singapore Technologies. The division was 'buy-out' in 1997 and listed in SGX on Feb-1999. The company has more than 1,400 employees operating in 45 offices across in Americas, Asia Pacific, Europe, Middle East and Africa.

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Portfolio & Business Segment

• Process Control Systems: Process control, safety shutdown, SCADA, fire & Gas detection, wellhead control, subsea control, process skid, electrical driver & high-medium voltage, electrical protection & control, real-time information, intelligent transport, I&E construction, multiple hearth furnace, fluid bed incinerator, carbon & energy recovery and rotary kiln incinerator. 

• Communication & Security: VSAT satellite communication networks, fibre optic, microwave radio, conventional & trunked radio, public address & general alarm, CCTV, access control & FIDS, telephone networks, LAN/WAN networks, IP-based networks and SCADA & telemetry networks. 

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Business are segmented by geography into Americas, Asia Pacific and Europe / Middle East. 

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Business

A cyclical industry, profitability was stable up to 2010 on consistent margin across segments. From 2011, Europe earning turned volatile and continued to weaken as of FY21.

Asia Pacific revenue trended up from FY19 on range-bound margin.

Americas margin weakened from FY11 but revenue staged a recovery from FY17, resulting in overall improvement in earning from FY17 to FY20. 

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The earning decline in FY21 was due to continue weakness in Europe and sharp fall in Americas because of fewer large projects and 'lower time & material revenue' impacted by Covid-19 and energy prices. 

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Lower order-book from 2H20 imply possible revenue headwind into FY22. 

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Opinion

Business gross margin had been relatively stable the past 8 years. Immediate challenge for the firm is to rein-in administrative expenses. 2005~2014 average was 18.2% versus 22.8% in FY21. In absolute dollar, it has exploded from $74M average (2005~2014) to $109M in FY21. 

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However hard CSE Global tries to boost top-line growth, the burgeoning overhead will continue to impede earning progress.