ISDN Holdings

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#51
By now I am really curious about the number of Valuebuddies holding ISDN. This company has progressed pretty nicely along with the share price but seems to have failed to generate much interest in this forum. Any show of hands who's vested? If you are not interested in investing in this company, then why is that so? Part of the reason I like to post here is because there are generally robust discussions that really helps in my thinking process. But the ISDN thread really isn't that active, unlike Penguin and Best World threads previously.

Should I be happy that this is still considered "under the radar"? Or should I be thinking about why nobody is interested in the company?

Please do your own due diligence. Any reliance on my posts is at your own risk.
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#52
(17-09-2020, 08:37 AM)Squirrel Wrote: By now I am really curious about the number of Valuebuddies holding ISDN. This company has progressed pretty nicely along with the share price but seems to have failed to generate much interest in this forum. Any show of hands who's vested? If you are not interested in investing in this company, then why is that so? Part of the reason I like to post here is because there are generally robust discussions that really helps in my thinking process. But the ISDN thread really isn't that active, unlike Penguin and Best World threads previously.

Should I be happy that this is still considered "under the radar"? Or should I be thinking about why nobody is interested in the company?

Some counters don't have a lot of discussion too. 
Look at Azeus.
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#53
(17-09-2020, 10:58 PM)Elty Wrote:
(17-09-2020, 08:37 AM)Squirrel Wrote: By now I am really curious about the number of Valuebuddies holding ISDN. This company has progressed pretty nicely along with the share price but seems to have failed to generate much interest in this forum. Any show of hands who's vested? If you are not interested in investing in this company, then why is that so? Part of the reason I like to post here is because there are generally robust discussions that really helps in my thinking process. But the ISDN thread really isn't that active, unlike Penguin and Best World threads previously.

Should I be happy that this is still considered "under the radar"? Or should I be thinking about why nobody is interested in the company?

Some counters don't have a lot of discussion too. 
Look at Azeus.

vested but prefer to chat in whatsapp group. wanna join?
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#54
(18-09-2020, 07:20 PM)leeeta Wrote:
(17-09-2020, 10:58 PM)Elty Wrote:
(17-09-2020, 08:37 AM)Squirrel Wrote: By now I am really curious about the number of Valuebuddies holding ISDN. This company has progressed pretty nicely along with the share price but seems to have failed to generate much interest in this forum. Any show of hands who's vested? If you are not interested in investing in this company, then why is that so? Part of the reason I like to post here is because there are generally robust discussions that really helps in my thinking process. But the ISDN thread really isn't that active, unlike Penguin and Best World threads previously.

Should I be happy that this is still considered "under the radar"? Or should I be thinking about why nobody is interested in the company?

Some counters don't have a lot of discussion too. 
Look at Azeus.

vested but prefer to chat in whatsapp group. wanna join?

I see so that’s where the discussions have shifted to. Thanks but I will have to respectfully decline.

Please do your own due diligence. Any reliance on my posts is at your own risk.
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#55
For me, not just whatsapp but the very exciting Telegram too  Smile

Stay home and stay healthy, valuebuddies.
Heart
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#56
(16-09-2020, 09:36 AM)Squirrel Wrote: The gem is not in the disinfectant business. That's a bonus. The gem is in the Industrial Automation Solutions.

I agree with you and I believe this is the key interest in Novo's investment decision.

Thanks for extensively sharing your views and also answering my questions in the post (I now have a better understanding). However, I am still in the midst of digesting all the info.

I also discovered the website https://www.servo.com.sg/ which provides a better understanding of ISDN's industrial offerings(compared to https://www.isdnholdings.com/ ).
 
Running thru' the numbers for industrial automation from the various years' ARs(under segment results) :

Year / Revenue / %Change: 2019/220m/-6%, 2018/236m/+6%, 2017/223m/+8%, 2016/206m/+12%, 2015/184m

I noted that there is no clear upward trend of its revenue over the years. The recent 1H2020 results could be due to the process improvements which ISDN has worked with Novo.

Challenges
These results are achieved in the midst of China being the top market for industrial robots since 2013*, Made In China 2025 was started in May 2015.
* thanks for the article u shared in one of the posts.

I think the reason why ISDN has always sought to branch out into new income streams(e.g. blockchain, energy storage, Emmett Capital Fund mentioned in AR2018) is in part due to the challenges in being able to grow its industrial business substantially.

In fact, one challenge could be its ability to pass any increment in cost of sales to its customers. It has stated that over 99% of its total cost of sales were components and parts for the engineering solutions. This could mean its pricing power / ability to increase its profit margin is somewhat curtailed.

Furthermore, only about 20% of ISDN’s sales are recurring in nature, this means the company need to regularly have new orders coming in.

While it is heartening to know ISDN is one of the top 4 providers of motion control in China(Query 22 of FY2019 AGM Q&A), when asked about its competitive advantage, the company stated points like experience, scale (Query 20 of AGM Q&A). Unfortunately, these do not address concerns such as, are chinese competitors able to catch-up and if so, lead time from their standards, how much pricing power does ISDN have ?

I am not as optimistic as I once was on whether the same AEM "spectacular magic" can be replicated. ISDN has stated one of its risk factor as it may lose competitive advantage as it does not perform state-of-the-art research on the products. I believe the amazing results AEM has achieved was on the back of R&D collaboration project with its major customer. What then cld be the catalyst/driver for ISDN ?

Valuation
In terms of valuation, it may be possible that other exchanges(e.g. HKEX, Nasdaq) offer better valuation than SGX, and it's somewhat beyond ISDN's control. Instead, what is more likely to trigger ISDN to be a good multi-bagger would be its ability to achieve a substantial jump and a sustainable upward trend in its motion control revenue.

Note : ISDN's revenue trajectory was asked in AGM Q&A Query 24.

It may also be worth noting that Novo disposed of 2.8m shares on 25 Aug 2020, likely at $0.40 and above. At the same time on 27 Aug 2020, Novo received 0.79m shares as script dividend. Being private equity, I feel Novo wld have a superb valuation methodology. I find it puzzling for Novo to take some profit when the company’s prospects are very likely to be very positive.

Finally, like Squirrel, I also hope more buddies can join in this discussion !  Smile
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#57
CIMB posted a new research note

https://s3-ap-southeast-1.amazonaws.com/...1600736931

What needs to be emphasized on is the following

"Management noted opportunities in China for semiconductor-related production as the country accelerates efforts to build up its own semiconductor supply chain, and also in Vietnam as companies relocate production there given the US tariffs on China-made products. ISDN reported a 1H20 net profit margin of 7.7%and management hopes that in the coming years, this can improve to 10.0% as the group offers better solutions and increase the software content (higher margin) offered in such solutions."

The report has finally picked up on the improving margins that Chairman CK Teo was unwilling to comment on. I believe the Chairman was been conservative and did not want to commit to an improving profit margin going forward. I have highlighted in my previous post that this is a probably catalyst for a high share price.

And a few words on revenue trends. Revenue to me is on an obvious upwards trend with a drop in 2019. This is the trend that is changing at the moment from my perspective due to the pandemic. Lower costs, less reliance on humans and availability of 5G to realise industrial 4.0 are all reasons that there is going to be a paradigm shift to automation. soon every new factory set up will be set up with those in mind. When you say recurring revenue, this is a different kind of recurring revenue in terms of capex. Capex will forever be there, it just depends on how much of the market ISDN can capture. And the growth in the next few year imho will outstrip most people's expectations. This is where I try to pick up a multi bagger before the hockey stick uptick in profits. My modulus operandi is to look for companies protected to the downside by the Balance Sheet, and expecting explosive growth to the upside so that its safe to hold and easier to sleep at night.

Lastly on Novo Tellus's sale of shares. Depending on the fund's offering memorandum, there could be any kind of investment rules that might have resulted in a need for them to reduce holdings on ISDN. It could be a required dividend payout on the fund at certain points in time. It could be to fulfill a redemption. It could be a concentration limit. It could be a host of many other reasons. As long as they are still holding onto the majority of their shares, there really isn't any reason to be worried. There are certain forumers speculating that Novo is attempting to pressure the price and collect on the cheap. I honestly think that's not the case in point. They are much better off concentrating on their activist role in investing.

Please do your own due diligence. Any reliance on my posts is at your own risk.
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#58
Thanks Squirrel for pointing out my oversight - revenue has indeed been increasing for the past 5 years except for a drop in 2019.

As a shareholder, I am hoping for a multi-bagger in this stock.

Taking a simplistic view by focussing on purely the automation segment's revenue as the main driver(i.e. putting aside improved margins, cost efficiency initiatives, hydro plants, better valuation, etc), I wld think the revenue needs to massively increase to see a corresponding increase in share price : For the period of $200m+/- yearly revenue, the share price had been languishing at around $0.2x for the past few years. To get to a sustainable > $1.0 share price, we may need to see its core bizness revenue(and corresponding profit) at least doubling. How long will it take is anybody's guess. But as an investor, I think this can provide a good case study on how a company can massively increase its revenue/profit(albeit via the help of a private equity firm).

I am actually keen to know how does ISDN actually fare agst the other top 3 players in the China mkt. I agree there will be good mkt opportunities given the industrial trends but how effectively will ISDN be able to capitalize on these to increase their core bizness order book ? Or for that matter, what makes companies choose ISDN instead of other providers, is ISDN/Servo a "top of mind" / "go-to" brand ?

It cld be a bias opinion due to personal work experience but I always had the impression that product manufacturers are generally the ones who are able to command better margins compared to solution providers, and that it is not easy for solution/service providers to improve their margins.

I am of the same view on the Novo collecting cheap theory. If they wanted to collect cheap, they had many chances to do so in the past, before the share price run up. I wld think as professional private equity, before even investing, they wld have drawn up concrete plans to improve the business(e.g. streamlining/cost efficiencies, business contacts), run various simulations and perhaps even expect at least some short term improvements in the financial results from potential initiatives to be undertaken. Nonetheless, I will be monitoring if Novo sells more shares whenever the share price hit $0.4x and beyond.

There are various reasons why insiders buy their own company's shares or conduct company share buybacks. But if ISDN is really on the brink of a "breakthough", logically at the upper $0.3x price range, there shd be instances of :
- insider buying and not to mention selling(of crse, there cld be various reasons for Novo as pointed out). In fact, I think the last time Boss Teo bought back was 315,000 shares on 16 Mar 2020, and that was only at a really low price(and low valuation) of $0.15.
- notable share buybacks. The company has ample cash resources and the motion control segment, though the highest margin, does not seem to require high capex. So is the company conserving cash for more initiatives like ERST / power generation or the shares are not deemed to be significantly undervalued enuff ? (Sidenote : Query 21 of AGM Q&A addresses the qn of focussing on core bizness)

Other than the recent good results, I do wonder at times whether the recent share price run up is partly due to it being viewed as a "covid play"(disinfectant initiative).

Looking at the EPS history, as well as the CIMB report on projected EPS :  Year/EPS(cents) : 2015/2.46 , 2016/1.45, 2017/2.41 , 2018/2.77, 2019/1.68 , 2020/4.4 (CIMB Est), 2021/5.0 (CIMB Est), 2022/5.4(CIMB Est)

If I subscribe to a 15x P/E valuation, it wld take beyond 2022 to reach $1 in share price.

While I am optimistic abt the company's prospects, my point is it could be a long wait before shareholders are significantly rewarded, in terms of share price appreciation(of crse, I hope to be proven wrong).
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#59
Novo Tellus bought more shares through a married deal...

https://links.sgx.com/FileOpen/_eFORM1V2...eID=635344

About $300k worth of shares at $0.37 per share.

Please do your own due diligence. Any reliance on my posts is at your own risk.
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#60
First piece of good news, establishing a green lane travel arrangement with Indonesia.

"Singapore and Indonesia announced the setting up of a reciprocal green lane on Monday, with applications to begin from Oct 26 and travel to start soon after.

This is also for official and business travel."

https://www.channelnewsasia.com/news/sin...s-13271974

With this, the last mile requirement for starting up the hydro projects should be completed soon. As per mentioned by Chairman CK Teo in the last results briefing, the hydro projects is only waiting for the final testing by the engineers which is hindered by the travel restrictions.

Second piece of good news

"从产品产量看,前三季度,载货汽车,挖掘、铲土运输机械,工业机器人,集成电路产量同比分别增长23.4%、20.2%、18.2%、14.7%。"

https://finance.sina.com.cn/china/gncj/2...3218.shtml

The growth in industrial robots has been pulled up to 18.2% growth on the first three quarters compared to 13.9% for first 8 months. That begs the question. How much was the growth in Sep alone? The answer is a staggering 51.4% as per the following article.

https://finance.sina.com.cn/china/gncj/2...0928.shtml

This has completely blown out the expectations and forecasts I have made in the previous analysis. At this juncture, I am going to just sit tight and wait for the updates from the company itself, before re-calibrating expectations. Hopefully they will follow what they did prior in making a voluntary update. $0.395, is that cheap? You tell me.

Please do your own due diligence. Any reliance on my posts is at your own risk.
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