ISDN Holdings

[Elty]

Positive Profit Guidance:
ISDN is expected to record an increase in net profit of more than 50% for 1H2020 compared to 1H2019.

The increase is driven by:
• Strong growth in ISDN’s core business order book;
• Growth in construction revenue from ISDN’s energy business as it makes further commercial progress on its mini-hydropower plants; and
• Gains from a reduction of operating expenses as the Group undertook cost efficiency initiatives in 1H2020.

https://links.sgx.com/FileOpen/ISDN-Ann-...eID=625401

[Squirrel]

This is very good results indeed. Just to add on my 2 cents worth...

This results is in line with the theme of increasing industrial automation in China. Year on year, in Jun 2020, there has been an increase of 29.2% in production in industrial robots in China.

近日国家统计局发布了2020年6月工业机器人统计数据。数据显示，6月份，全国规模以上工业企业的工业机器人产量20761套，同比增长29.2%，较5月的16.9%大幅回升12.3%；1-6月全国规模以上工业企业的工业机器人产量为93794套，累计增长10.3%，较1-5月的6.7%回升3.6%

http://article.cechina.cn/20/0722/07/20200722074058.htm

Of course, ISDN is not the top player in China. However a rising tide raises all boats. What's attractive for ISDN is how undervalued it is compared to others that are involved with industrial automation. According to the report that it will record an increase in net profit of more than 50%, profit attributable to equity holders of the Company would likely be about $8.4m thereabouts. That's 6.26x PE on an annualized basis (notwithstanding seasonality).

Leading companies like

Fanuc       61x PE
Yaskawa    68x PE
Schneider   22x PE
ABB           50x PE
Rockwell     28x PE

are trading at much higher multiples. This just leaves ISDN with a lot of room for growth.

This is probably what I would view as a major shift in business trends towards Industrial Automation that Covid has brought about. Much like how Covid has benefited Ecommerce, Technologies for remote working and medical supplies, I expect this company to be re-rated and experience a drive in how its valued. If you are a business owner in China, you would be thinking of all ways possible to reduce reliance on humans, won't you?

Some other articles providing some background in the drive in IA in China.

https://www.bloomberg.com/graphics/2019-...utomation/
https://www.cnbc.com/2020/07/11/5g-spurs...onomy.html

[Squirrel]

So, since the posting before market hours on 29th Jul, ISDN has staged an impressive rally of 51% over the course of the week.

The next question in mind for some is "Do I take profit and try to get back in at a lower price?"

As per my mantra, my belief is to hold this for the long term and stomach the volatility. Any mismanagement in timing, we could have missed the spike in prices over the past week.

"So is it fairly valued/overvalued?"

At $158.9m market cap at $0.37, this represents a FY2020 estimated PE of about 9.5 (annualising the first 6 months). Some might say that sounds about right, but i would say its really cheap at the moment with the following reasons

- A shift and acceleration in trend towards Industrial Automation. This is a permanent and definitive shift that occurs during a once in a lifetime event.
- Having an active investor, Novo Tellus, on board. Look at what their track record was with AEM! AEM, being a customer of ISDN, had a stellar performance over the last few years. I would venture a guess that this was where Novo Tellus first got to know ISDN. It would be interesting to see the outcome of the restructuring of the company.
- The mini hydro powerstations and disinfectant business holds potential towards contributing materially to the company (even though at the moment I would prefer the company to focus on their core business)

The growth in business is not a direct first thought of an outcome for Covid19, but is a sure and progressive one to unfold in these few years. This is especially so with increasing minimum wage in China (to be fair some provinces has slowed down the increase in the last two years though there has been great strides in the last 10). There is a need to reduce cost of manufacturing in their Made in China 2025 vision. The next few years will be an interesting period to hold this company. Good luck to all vested shareholders.

https://www.scmp.com/economy/china-econo...ring-costs

[Squirrel]

Coverage by KGI with TP of $0.42

https://www.nextinsight.net/images/stori...0806_2.pdf

I do believe though that their estimates for FY20 and FY21 profits are very conservative, and hence their target price is likely to revise up once those estimates are revised. $11.7m profits for FY2020 when 1H profits is already circa $8.4m? That's how equity analysts always play catch up to rising prices.

[leeeta]

Coverage by KGI with TP of $0.42

https://www.nextinsight.net/images/stori...0806_2.pdf

I do believe though that their estimates for FY20 and FY21 profits are very conservative, and hence their target price is likely to revise up once those estimates are revised. $11.7m profits for FY2020 when 1H profits is already circa $8.4m? That's how equity analysts always play catch up to rising prices.

$ISDN(I07.SI) https://links.sgx.com/FileOpen/ISDN-PR-1H20_ENG.ashx?App=Announcement&...  


ISDN Holdings reports 72.5% growth in earnings to S$9.6 million 1H2020 • 1H2020 revenue surged 13.8% year-on-year (“YoY”) to S$167.2 million, driven by solid performance in both ISDN’s core industrial automation business and emerging hydropower business. • ISDN delivered revenue growth while reducing operational expenses and increasing its share of profit of associates, resulting in a 72.5% YoY increase in profit attributable to shareholders for 1H2020 • ISDN remains confident in its long-term growth strategy of ascending the industrial automation value chain and maintaining positive group diversification while ensuring the health and safety of all employees. Singapore, 7 August 2020 – ISDN Holdings Limited (“ISDN”, and with its subsidiaries, the “Group”), a leading industrial automation firm, today announced its financial results for the six months ended 30 June 2020 (“1H2020”).

[Elty]

ISDN 1H2020 Results:

Business Updates

1) ISDN’s core industrial automation business delivered solid growth despite an extended lockdown period in the PRC. COVID-19 has also accelerated the pace of cloud-based solutions in Asia, giving rise to greater adoption of advanced and automated processes for factory automation, boding well for the Group’s core industrial automation business in the long term.

2) In May 2020, the Group partnered German company ERST Project GmbH to deliver effective disinfectant solutions to aid in the fight against COVID-19 in Asia. ISDN has since secured major deals with Centurion Corporation, The Science Park, and the Public Transport Company, with multiple disinfecting projects with cleaning companies across the city-state.

3) The Group’s hydropower plant business have witnessed some disruptions and the completion dates of our two hydropower plant projects have been extended.

https://links.sgx.com/FileOpen/ISDN-PR-1...eID=626839

[Squirrel]

Coverage by KGI with TP of $0.42

https://www.nextinsight.net/images/stori...0806_2.pdf

I do believe though that their estimates for FY20 and FY21 profits are very conservative, and hence their target price is likely to revise up once those estimates are revised. $11.7m profits for FY2020 when 1H profits is already circa $8.4m? That's how equity analysts always play catch up to rising prices.

$ISDN(I07.SI) https://links.sgx.com/FileOpen/ISDN-PR-1H20_ENG.ashx?App=Announcement&...  


ISDN Holdings reports 72.5% growth in earnings to S$9.6 million 1H2020 • 1H2020 revenue surged 13.8% year-on-year (“YoY”) to S$167.2 million, driven by solid performance in both ISDN’s core industrial automation business and emerging hydropower business. • ISDN delivered revenue growth while reducing operational expenses and increasing its share of profit of associates, resulting in a 72.5% YoY increase in profit attributable to shareholders for 1H2020 • ISDN remains confident in its long-term growth strategy of ascending the industrial automation value chain and maintaining positive group diversification while ensuring the health and safety of all employees. Singapore, 7 August 2020 – ISDN Holdings Limited (“ISDN”, and with its subsidiaries, the “Group”), a leading industrial automation firm, today announced its financial results for the six months ended 30 June 2020 (“1H2020”).

So it turns out that ISDN was not being exact when they mentioned the increase is “more than 50%”. This represents another surprise on top of the guidance. With 1H2020 profits being already $9.6m, how is the KGI analyst going to react to this new piece of input? The TP is based on profit estimates of $11.7m and $12.5m for FY2020 and FY2021 (measure is based on 14x 2021 estimates). So what’s going to happen next? $9.7m out of $11.7m has already being achieved in FY2020 alone.

For simplicity sake, let’s assume that the second half performs the same as the first (even though there is no extended Chinese holiday lockdown). The company lands with $19.4m profits for the year and again for simplicity sake, assuming the profit stays flat in 2021 as well. 14x earnings of $19.4m divided by 429.6m shares would give $0.63 as a TP. This is conservative for the assumptions above. Be interesting to see whether there will be any revision to KGI TP by Monday.

Is it cheap at the $0.395 close on Friday? Definitely from my point of view.

[leeeta]

Coverage by KGI with TP of $0.42

https://www.nextinsight.net/images/stori...0806_2.pdf

I do believe though that their estimates for FY20 and FY21 profits are very conservative, and hence their target price is likely to revise up once those estimates are revised. $11.7m profits for FY2020 when 1H profits is already circa $8.4m? That's how equity analysts always play catch up to rising prices.

$ISDN(I07.SI) https://links.sgx.com/FileOpen/ISDN-PR-1H20_ENG.ashx?App=Announcement&...  


ISDN Holdings reports 72.5% growth in earnings to S$9.6 million 1H2020 • 1H2020 revenue surged 13.8% year-on-year (“YoY”) to S$167.2 million, driven by solid performance in both ISDN’s core industrial automation business and emerging hydropower business. • ISDN delivered revenue growth while reducing operational expenses and increasing its share of profit of associates, resulting in a 72.5% YoY increase in profit attributable to shareholders for 1H2020 • ISDN remains confident in its long-term growth strategy of ascending the industrial automation value chain and maintaining positive group diversification while ensuring the health and safety of all employees. Singapore, 7 August 2020 – ISDN Holdings Limited (“ISDN”, and with its subsidiaries, the “Group”), a leading industrial automation firm, today announced its financial results for the six months ended 30 June 2020 (“1H2020”).

So it turns out that ISDN was not being exact when they mentioned the increase is “more than 50%”. This represents another surprise on top of the guidance. With 1H2020 profits being already $9.6m, how is the KGI analyst going to react to this new piece of input? The TP is based on profit estimates of $11.7m and $12.5m for FY2020 and FY2021 (measure is based on 14x 2021 estimates). So what’s going to happen next? $9.7m out of $11.7m has already being achieved in FY2020 alone.

For simplicity sake, let’s assume that the second half performs the same as the first (even though there is no extended Chinese holiday lockdown). The company lands with $19.4m profits for the year and again for simplicity sake, assuming the profit stays flat in 2021 as well. 14x earnings of $19.4m divided by 429.6m shares would give $0.63 as a TP. This is conservative for the assumptions above. Be interesting to see whether there will be any revision to KGI TP by Monday.

Is it cheap at the $0.395 close on Friday? Definitely from my point of view.

and dont forget due to covid19, 1st Qtr performance was bad. 2nd Qtr recovered all the losses made on the 1st Qtr and performed even better. 
Also they didnt include sales from coatings into the mix in the last reporting. So performance for 2nd half should be be better.

[Squirrel]

Coverage by KGI with TP of $0.42

https://www.nextinsight.net/images/stori...0806_2.pdf

I do believe though that their estimates for FY20 and FY21 profits are very conservative, and hence their target price is likely to revise up once those estimates are revised. $11.7m profits for FY2020 when 1H profits is already circa $8.4m? That's how equity analysts always play catch up to rising prices.

$ISDN(I07.SI) https://links.sgx.com/FileOpen/ISDN-PR-1H20_ENG.ashx?App=Announcement&...  


ISDN Holdings reports 72.5% growth in earnings to S$9.6 million 1H2020 • 1H2020 revenue surged 13.8% year-on-year (“YoY”) to S$167.2 million, driven by solid performance in both ISDN’s core industrial automation business and emerging hydropower business. • ISDN delivered revenue growth while reducing operational expenses and increasing its share of profit of associates, resulting in a 72.5% YoY increase in profit attributable to shareholders for 1H2020 • ISDN remains confident in its long-term growth strategy of ascending the industrial automation value chain and maintaining positive group diversification while ensuring the health and safety of all employees. Singapore, 7 August 2020 – ISDN Holdings Limited (“ISDN”, and with its subsidiaries, the “Group”), a leading industrial automation firm, today announced its financial results for the six months ended 30 June 2020 (“1H2020”).

So it turns out that ISDN was not being exact when they mentioned the increase is “more than 50%”. This represents another surprise on top of the guidance. With 1H2020 profits being already $9.6m, how is the KGI analyst going to react to this new piece of input? The TP is based on profit estimates of $11.7m and $12.5m for FY2020 and FY2021 (measure is based on 14x 2021 estimates). So what’s going to happen next? $9.7m out of $11.7m has already being achieved in FY2020 alone.

For simplicity sake, let’s assume that the second half performs the same as the first (even though there is no extended Chinese holiday lockdown). The company lands with $19.4m profits for the year and again for simplicity sake, assuming the profit stays flat in 2021 as well. 14x earnings of $19.4m divided by 429.6m shares would give $0.63 as a TP. This is conservative for the assumptions above. Be interesting to see whether there will be any revision to KGI TP by Monday.

Is it cheap at the $0.395 close on Friday? Definitely from my point of view.

and dont forget due to covid19, 1st Qtr performance was bad. 2nd Qtr recovered all the losses made on the 1st Qtr and performed even better. 
Also they didnt include sales from coatings into the mix in the last reporting. So performance for 2nd half should be be better.

That’s a good point. Although I am not sure whether it was represented as part of the contributions from subsidiaries. They did just post an announcement that the JV is complete.

https://repository.shareinvestor.com/sgx...3PGL.1.pdf

So yes, I would agree with you that the disinfectant business is not yet included in the results. Looking forward to seeing that as contribution to FY2020!

[Squirrel]

Coverage by KGI with TP of $0.42

https://www.nextinsight.net/images/stori...0806_2.pdf

I do believe though that their estimates for FY20 and FY21 profits are very conservative, and hence their target price is likely to revise up once those estimates are revised. $11.7m profits for FY2020 when 1H profits is already circa $8.4m? That's how equity analysts always play catch up to rising prices.

$ISDN(I07.SI) https://links.sgx.com/FileOpen/ISDN-PR-1H20_ENG.ashx?App=Announcement&...  


ISDN Holdings reports 72.5% growth in earnings to S$9.6 million 1H2020 • 1H2020 revenue surged 13.8% year-on-year (“YoY”) to S$167.2 million, driven by solid performance in both ISDN’s core industrial automation business and emerging hydropower business. • ISDN delivered revenue growth while reducing operational expenses and increasing its share of profit of associates, resulting in a 72.5% YoY increase in profit attributable to shareholders for 1H2020 • ISDN remains confident in its long-term growth strategy of ascending the industrial automation value chain and maintaining positive group diversification while ensuring the health and safety of all employees. Singapore, 7 August 2020 – ISDN Holdings Limited (“ISDN”, and with its subsidiaries, the “Group”), a leading industrial automation firm, today announced its financial results for the six months ended 30 June 2020 (“1H2020”).

So it turns out that ISDN was not being exact when they mentioned the increase is “more than 50%”. This represents another surprise on top of the guidance. With 1H2020 profits being already $9.6m, how is the KGI analyst going to react to this new piece of input? The TP is based on profit estimates of $11.7m and $12.5m for FY2020 and FY2021 (measure is based on 14x 2021 estimates). So what’s going to happen next? $9.7m out of $11.7m has already being achieved in FY2020 alone.

For simplicity sake, let’s assume that the second half performs the same as the first (even though there is no extended Chinese holiday lockdown). The company lands with $19.4m profits for the year and again for simplicity sake, assuming the profit stays flat in 2021 as well. 14x earnings of $19.4m divided by 429.6m shares would give $0.63 as a TP. This is conservative for the assumptions above. Be interesting to see whether there will be any revision to KGI TP by Monday.

Is it cheap at the $0.395 close on Friday? Definitely from my point of view.

I guess Mr Leong has been reading Valuebuddies.

https://www.nextinsight.net/story-archiv...1h-results

Excerpt from the passage

"So how will the KGI analyst revise his target price, which he had derived from 14X FY2021 forecast earnings?
As a base case, we can annualise the $9.7 million profit and assume (for simplicity) no growth in 2021.Then the KGI target would be: 14 x $19.4 million = $272 million market cap, or the equivalent of 63 cents share price.

Of course, the PE multiple may be adjusted up or down for various reasons, and other assumptions may be factored in."

Unfortunately, if you noticed, I made a mistake above stating the profits to be $9.7m after the first statement of factoring it at $9.6m. All thanks to typing on the move. Its not material though and still arrives at a 63 cents TP.

Mr Leong, apologies for that. You might want to update your article accordingly for accuracy sake.