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UOB Kay Hian upgrades CSE Global to 'buy' on Radio One Group acquisition

Felicia Tan
Felicia Tan • 2 min read
UOB Kay Hian upgrades CSE Global to 'buy' on Radio One Group acquisition
CSE Global's CEO Lim Boon Kheng. Photo: Albert Chua/The Edge Singapore
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UOB Kay Hian analysts John Cheong and Heidi Mo have upgraded CSE Global to “buy” after the acquisition of Radio One Group on Jan 31.

The US radio communication group was acquired for US$11 million ($14.4 million). This is the second such acquisition in two months following the group’s acquisition of a group of wireless communications businesses for NZ$25 million ($21.3 million).

To Cheong and Ho, the acquisition is a positive move as the valuation appears “attractive”. The acquisition is also seen as “highly accretive” as it could lift CSE’s earnings by around 20% in the FY2023 assuming Radio One Group’s 2022 earnings can be sustained.

CSE’s recent winning of two major contracts worth $87.3 million in the US and Singapore is also seen as a plus. The announcement was made on Jan 30.

On this, the analysts expect the group to achieve a record order win of over $700 million for FY2022. The group’s order intake for the 9MFY2022 was already up by 77% y-o-y to $587 million, exceeding that of the orders seen in the FY2021, the analysts point out.

Furthermore, the analysts see the easing of supply chain disruptions, which will allow for the normalisation of project delivery.

See also: UOB Kay Hian sees Civmec's bid to shift domicile to Australia a positive move

In their report dated Feb 1, Cheong and Ho have raised their target price by 22% to 45 cents from 37 cents previously.

The analysts have also increased their earnings forecast for the FY2023 to FY2024 by 12% and 7% to $19.6 million and $21.2 million respectively. This is after increasing their revenue forecasts for FY2023 to FY2024 by 10% and 3% to $676 million and $696 million to factor in CSE’s latest acquisition.

“However, we are taking a more conservative view in our FY2023 earnings estimate for the acquisition for now, pending the delivery of earnings from the new acquisition in 1HFY2023,” they write.

See also: UOBKH keeps ‘buy’ and TP unchanged on BRC Asia, sees bullish medium-term outlook

The analysts’ latest target price is now pegged to the group’s FY2023 P/E of 14x, up from 13x previously. This is as the PE band has increased due to the reduction in forward earnings estimates. The new target price implies a dividend yield of 5% for the FY2023, assuming CSE maintains its full-year dividend of 2.75 cents per share.

Shares in CSE Global closed 0.5 cent lower or 1.27% down at 39 cents on Feb 3.

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