CSE Global's 3Q profits plunged 44.1%

Oil & gas segment dragged earnings again.

CSE Global Limited's (CSE) 3Q16 core PATMI declined 44.1% YoY to S$4.8m on the back of a 21.6% plunge in revenue to S$81.0m due to lower contributions across all geographic regions, particularly in the oil & gas (O&G) industry on lack of large greenfield projects.

OCBC Investment Research maintains soft outlook to persist on volatile oil prices.

3Q16 gross margins improved 0.2ppt YoY to 29.1% due to better margins achieved from increased sales of higher margin infrastructure projects.

For 9M16, PATMI from continuing operations fell 35.0% YoY to S$15.0m.

New orders received in 9M16 and outstanding orders as at end-9M16 fell 18.3% and 19.4% YoY to S$229.0m and S$179.0m, respectively.

CSE also recorded strong operating cash inflow of S$14.9m in 3Q16 on higher billings and collections, which resulted in a strong net cash position of S$73.3m (including quoted investments).

Looking ahead, OCBC Investment Research expect orders from CSE's O&G customers to continue to taper, and believes the growth in higher margin infrastructure projects (19%/32% of 9M16 revenue/EBIT) ahead will unlikely be able to offset the O&G segment decline.

"In addition, we do not expect the number of greenfield projects to recover until oil prices have stabilized. Hence, we believe the slowdown in spending within the O&G industry will persist until oil majors see reasonable stability in oil prices, impacting CSE's new orders outlook," it said.

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