ISDN Holdings

[Squirrel]

I would think everyone is looking forward to the upcoming results release in the next few weeks. Would like to share my thoughts on how ISDN is going to fare for 2021 1H. The estimation is probably on the high side compared to analysts covering the name but I am sticking to what my calculations show me.

https://www.thesquirrelsdrey.com/post/is...1h-results

[Squirrel]

The profit guidance has come in.

What we do know is that the profit guidance tends to be conservative in nature thus the actual earnings will likely be more than the guided amount.

“The Board of Directors (the “Board”) of ISDN wishes to inform the Company’s shareholders (the ‘‘Shareholders’’) and potential investors that, based on the latest available information and a preliminary review of the unaudited financial results, the Group is expected to record an increase in profit after tax of more than 50% for the six months ended 30 June 2021, as compared to the profit after tax for the six months ended 30 June 2020, which was driven by continued strong growth from ISDN’s core industrial automation business.”

https://links.sgx.com/FileOpen/ISDN-Ann-...eID=676182

[dreamybear]

I would think everyone is looking forward to the upcoming results release in the next few weeks. Would like to share my thoughts on how ISDN is going to fare for 2021 1H. The estimation is probably on the high side compared to analysts covering the name but I am sticking to what my calculations show me.

https://www.thesquirrelsdrey.com/post/is...1h-results

Thanks for sharing your write up. Yes, I had opted for and submitted the scrip dividend form electronically.

Based on the co's announcement today(> 50% profit increase), the figure seems to be close to your estimation of $14m ! 

I do hope the eventual 1H profit figure announced excludes any recovery of debts(for issues stated in the FY2020 results) and is generated purely by the strength of its business.

The hydro plants shd be in operation this year(hopefully & finally) and start contributing another $3m+ yearly as estimated in your post #45.

Excerpts from AR2020 (emphasis mine) :
- concluded our business reorganisation project to pool our strongest engineering proficiencies to deliver a full suite of end-to-end solutions linking software to hardware for the wider Industrial 4.0 opportunities globally
- By building capabilities to serve both hardware and software, we are moving up the value chain and growing alongside customers on their Industry 4.0 journey.

Recapping AGM Q&A responses (emphasis mine) : 
- ISDN to benefit from the multi-year tailwind in semiconductor expansion in China
- US-China strategic competition benefits ISDN
- Ongoing shift towards advanced, heterogeneous IC manufacturing & packaging should benefit ISDN
- shifts in Industrial Automation create opportunity for more recurring revenue 
- Indoor farming automation opportunity

It does look like ISDN's earnings are poised for more good years ahead.

-------------------------

1H2020 results - profit $9.57m(shareholders) / $12.88m (total) : https://links.sgx.com/FileOpen/ISDN-Ann-...eID=626834

FY2020 results pg13 - impairment/litigation :  https://links.sgx.com/FileOpen/ISDN-FY20...eID=650548

AR2020 : https://www.isdnholdings.com/download/IS...%20ENG.pdf

Responses to AGM : https://links.sgx.com/FileOpen/ISDN-Ann-...eID=664142

[leeeta]

I would think everyone is looking forward to the upcoming results release in the next few weeks. Would like to share my thoughts on how ISDN is going to fare for 2021 1H. The estimation is probably on the high side compared to analysts covering the name but I am sticking to what my calculations show me.

https://www.thesquirrelsdrey.com/post/is...1h-results

Thanks for sharing your write up. Yes, I had opted for and submitted the scrip dividend form electronically.

Based on the co's announcement today(> 50% profit increase), the figure seems to be close to your estimation of $14m ! 

I do hope the eventual 1H profit figure announced excludes any recovery of debts(for issues stated in the FY2020 results) and is generated purely by the strength of its business.

The hydro plants shd be in operation this quarter(hopefully & finally) and start contributing another $3m+ yearly as estimated in your post #45.

Excerpts from AR2020 (emphasis mine) :
- concluded our business reorganisation project to pool our strongest engineering proficiencies to deliver a full suite of end-to-end solutions linking software to hardware for the wider Industrial 4.0 opportunities globally
- By building capabilities to serve both hardware and software, we are moving up the value chain and growing alongside customers on their Industry 4.0 journey.

Recapping AGM Q&A responses (emphasis mine) : 
- ISDN to benefit from the multi-year tailwind in semiconductor expansion in China
- US-China strategic competition benefits ISDN
- Ongoing shift towards advanced, heterogeneous IC manufacturing & packaging should benefit ISDN
- shifts in Industrial Automation create opportunity for more recurring revenue 
- Indoor farming automation opportunity

It does look like ISDN's earnings are poised for more good years ahead.

-------------------------

1H2020 results - profit $9.57m(shareholders) / $12.88m (total) : https://links.sgx.com/FileOpen/ISDN-Ann-...eID=626834

FY2020 results pg13 - impairment/litigation :  https://links.sgx.com/FileOpen/ISDN-FY20...eID=650548

AR2020 : https://www.isdnholdings.com/download/IS...%20ENG.pdf

Responses to AGM : https://links.sgx.com/FileOpen/ISDN-Ann-...eID=664142

the three hydro plants should contribute 9-10m$ PAT/year once they turn online...
For FY2021, the first two plants if they turn online in August, should generate 3-4m$ profit.

[leeeta]

Is anyone signing up for the Teleconference?

https://www.nextinsight.net/story-archiv...s-briefing

ISDN equity for the 3 plants have risen to 56% each. please check SGX announcements.

[dreamybear]

Although somewhat disappointed by 2Q2021 performance given prior expectations built in from earlier releases, I am still hopeful ISDN is on track for sustainable earnings growth for its core bizness - working with an improved operating structure to capture a growing total addressable market. With its rich experience via a 10,000 customer base, it is really up to how much additional bizness ISDN will be able to capture during this "golden period" in the run-up to initiatives like "Made in China 2025". My earnings estimates for ISDN are on par with CIMB's forecast for the next 2 years, although mine is higher for Dec-FY23. At the same time, I am also inclined to think that NT, as private equity, wld have expected much higher returns from its investments(NT has been vested into ISDN for more than 2 years now). Although we can take reference of NT's track records in AEM and Grand Ventures, investors shd take note of the different business and structure of NT's involvement. 

Much as I am not as optimistic/enthusiastic for its hydro & disinfectant biznesses, I am heartened by the fact that NT is working closely with ISDN on M&A, hopefully moving fwd, future M&A will relate more to the core bizness*. Indeed, on pg34 of 1H2021 results announcement, a ISDN subsidiary has ventured into corporate training bizness, hopefully it is synergic to ISDN's software bizness.( https://www.isdnsoftware.com/ )

-------------------------------------------
Profit Attributable to Shareholders for 1H2021 : $12m
1H2021 Press Release : https://links.sgx.com/FileOpen/ISDN-1H20...eID=678509
1H2021 FS : https://links.sgx.com/FileOpen/ISDN-1H20...eID=678505
Financial Highlight : https://links.sgx.com/FileOpen/ISDN-1H20...eID=678507

Response to SGX queries (20 Aug 2021) : https://links.sgx.com/FileOpen/ISDN-Ann-...eID=679753

Notes from ISDN 1H2021 results conference call (17 August 2021)
https://www.investingnote.com/posts/2308151

*ISDN: What Novo Tellus has been working on with company
https://nextinsight.net/story-archive-ma...th-company

CIMB ISDN Report (16 Aug 2021)
https://rfs.cgs-cimb.com/api/download?fi...25E48CE7E7

Novo Tellus subscribes for 6.4% stake in ISDN at S$0.20 per share (  UPDATED THU, FEB 28, 2019 - 9:50 AM)
https://www.businesstimes.com.sg/compani...-per-share

-------------------------------------------
came across this video - I think ISDN's automation resides on the lower levels of the pyramid.

What is the Automation Pyramid?
https://www.youtube.com/watch?v=IAhxYsMi4e8&t=1s

[Squirrel]

A set of stellar 3Q report. Lifting from the presentation.

“Profit before tax, profit after tax and profit to shareholders also recorded new all-time highs YTD. On a quarterly basis, ISDN delivered the most profitable quarter in its history.”


https://links.sgx.com/FileOpen/ISDN_3Q21...eID=690556

[dreamybear]

According to my own notes, what was particularly interesting to me was Keith(NT)'s comments - ISDN's diversified 10,000 customer base provides a glimpse into the possible upcoming trends, when they engage with ISDN on their automation requirements, e.g. new projects. I can't help but wonder that other than for financial reasons, NT's investment could be of a strategic intent as well, given that NT is very much in the technology space.

One of ISDN's strengths lies in its ability to listen to its customers' needs and it has the capabilities to then develop/customize solutions to meet their requirements(the diversified customer base probably contributes to the advantage). The new projects & life cycle maintenance/upgrade provide a stable source of revenue/income. However, this probably means that there is unlikely to be a rapid scale-up of profits (compared to for e.g. maybe Apple launching a new blockbuster pdt), also considering that an integrated solution provider does not seem to be able to command a high margin and are somewhat labour intensive(i.e. you need a pool of engineers to design and implement).

However, as long as technological upgrade is in high demand, particularly in China, ISDN's revenue/earnings wld likely continue to grow in the foreseeable future. My wish list would be an aggressive sales force to capitalize on this "golden period" of the "Made In China 2025" policy so that we don't have to wait too long to see 15,000 customers (I first noticed the mention of 10,000 in AR2018 - ".... our diversified base of more than 10,000 corporate customers ...."). One of the tell-tale signs of the business demand is the planning for a new building(see results briefing notes below). At the same time, hopefully, ISDN is also able to increase its contributions from other Asian markets(6 hr flight zone radius, except for Japan/Korea where boss feels ISDN does not have the muscle to "fight" there). 

Per share stats :
Year      /   EPS*(SG cents)  / Tangible BV***
2016     /      1.45               /       0.31
2017     /      2.41               /       0.32
2018     /      2.77              /        0.33
2019     /      1.68              /        0.33
2020     /      3.51             /         0.36
3Q2021** /  4.77 

Ref : *AR2020 ;  **3Q2021 announcement - $20.771m/435.337m shares ; ***SGX Stk Screener

-----------------------------
ISDN: 3Q21 most profitable quarter in its history, next catalyst is .... (15 Nov 2021)
https://nextinsight.net/story-archive-ma...ts-history
Full report : https://rfs.cgs-cimb.com/api/download?fi...b04e376b14

-----------------------------
Notes from ISDN 3Q2021 results briefing (18 Nov 2021)
https://www.investingnote.com/posts/2359442

-----------------------------
HRnet NDR highlights  (CIMB 19 Nov 2021)
https://rfs.cgs-cimb.com/api/download?fi...4af06eab03
"....In China, the job market has recovered quickly since Apr 21. Notable sectors seeing hiring demand include F&B, robotics & automation, and digital marketing...."

-----------------------------
I find one of the better website to understd automation for layman is : https://www.boschrexroth.com/en/xc/indus...tartpage-4 . Hope one day ISDN will have a similar website with interactive features, etc.

[dreamybear]

Summary of ISDN's FY2021 results

Financials :
- record revenues & profit
- GPM / NPM : 27.4% / 8.9%
- EPS / DPS : 5.84 / 1.45  (cents)

Positive Results from its long term strategy* :
- Diversified revenue growth
- Growing technology capability pillars
- Growing operational productivity
- Sustainable industry

References :
*PR : https://links.sgx.com/FileOpen/ISDN-FY20...eID=703948
FS : https://links.sgx.com/FileOpen/ISDN-FY20...eID=703944
Presentation : https://links.sgx.com/FileOpen/ISDN-FY20...eID=703946

I view this set of results as more or less in line with CIMB's forecast.
https://www.isdnholdings.com/analyst-reports-1

I believe the following somewhat supports the optimism surrounding ISDN's growth in the coming years :
1. Renewal of CCT with Maxon
The annual caps have been revised upwards quite significantly compared to the historical amounts. Although it may not be 1-to-1 relationship with ISDN's overall revenue/profit numbers, it nevertheless show the relentless business demand.
https://links.sgx.com/FileOpen/ISDN-Ann-...eID=695795

2. Appt of CTO
3. Construction of a new building to meet demand
4. Yaskawa also posted gd 3Q results(11 Jan 2022) 
https://www.yaskawa-global.com/wp-conten...ifu_en.pdf

In addition, the commercialization of mini hydro (hopefully soon, sigh...) will contribute to its revenue.

Some Concerns / Issues ....
1. capital allocation i.e. more capital outlay for more hydro plants - going by the experiences of the 1st batch of plants, I am not sure whether this is a wise decision. furthermore, building more plants mean cash from next few years' profits will need to be utilized and unlikely flow to shareholders ...
2. profit margins seem a bit low
3. hope to see share buyback or insider share purchase since the prospects seem so good
4. too many disparate(my view) small biz e.g. stakes in training, disinfectant ...  
5. earlier dividend payment date (AGM Apr, payment Aug - why ???)
6. renewal of independent directors (think a few > 15 yrs)
7. local Chinese competitors catch up with high end automation
8. semi-conductor cycle
9. Controlling shareholder relocate to China for next few years to maximize opportunities during this perhaps once-in-a-lifetime golden period for automation (personal wish haha)
........

Further reading :
1. ISDN Holdings : Powering Asia's Industrial Future
https://industrial-services-apac.themanu...id-41.html
2. China unveils 5-year plan for robotics, smart manufacturing amid global race
https://www.globaltimes.cn/page/202112/1243614.shtml
3. The Made in China Plan Is Back, and It’s Better
https://www.bloomberg.com/opinion/articl...automation

[Squirrel]

It has been a long time since I have posted about ISDN. The latest figures coming out from China does seem to bode well for the company along with the commercialization of its hydropower plants. More discussions as follows.

https://www.thesquirrelsdrey.com/post/th...ary-review