SINGAPORE (Mar 5): IT systems integrator CSE Global, which operates in the oil and gas (O&G), infrastructure and mining industries, says criticisms from its shareholder Quarz Capital Management are unwarranted. Responding to queries from The Edge Singapore via email, the board and management of CSE say the company has executed several measures to improve its performance in recent years. These include layoffs, new business development and acquisitions.

On Feb 26, activist investor Quarz Capital issued an open letter to the management and board of CSE. Quarz says the stock is greatly undervalued because its board and management lack “strategic direction” to leverage new growth drivers despite the company’s engineering expertise. It also alleges that the company lacks “operational and cash discipline” and has a “misalignment in interests” among the board, management and shareholders.

In its letter, Quarz offers five recommendations. It wants the company to distribute $18 million of its $48 million in net cash. CSE has a market capitalisation of $193.5 million, which means the payout would amount to a yield of about 9%. Quarz also suggests that CSE commit to a dividend payout of 80% of its earnings, with a payout floor of $12.5 million. This would translate into a yield of about 7%. It recommends management target a return on equity of more than 10%; seize growth opportunities in structural growth areas such as Australia’s 15-year Infrastructure Plan and Singapore’s Smart Nation initiative; and increase the alignment of board, management and shareholder interests.

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