UOB KayHian started CSE Global at Buy with a target price of S$0.58, calling it a safe proxy to the oil recovery.
“While CSE experienced challenging years in 2015-17 given the slowdown in the offshore O&G business, they were still able to continue their track-record of profitability by diversifying into the high-margin infrastructure space and the onshore O&G business,” UOB KayHian said in a note on Wednesday.
“With oil prices stabilising and offshore O&G looking profitable, we believe that CSE is well-positioned and will be able to pounce on opportunities in the recovering sector and add to its bottom line,” it said.
It noted CSE is one of the few qualified system integrators in the region for the oil and gas and communications-infrastructure industries, which have high entry barriers.
“Due to the nature of its work which makes it difficult for new entrants to enter, CSE has close working relationships with blue-chip customers such as Shell, Exxon Mobil and enjoys superior pricing dynamics,” it said.
Additionally, UOB KayHian expected that due to CSE’s U.S. exposure, it would likely be a beneficiary of the U.S. tax cut, with a potential for a tax savings of almost S$1 million a year.
The shares also offer an “attractive” dividend yield of 6.6 percent, it noted.
The stock ended Thursday up 2.44 percent at S$0.42.