KGI Research Singapore

Singapore's leading broker offering Futures, FX, Equities and Wealth Management.

ISDN Holdings (ISDN SP)

Company Update: 5 July 2021

Unfrazzled by Covid-19 and emerging stronger in 2021
  • 2020 – Strong results despite Covid-19 woes. ISDN reported top line growth of 24.4% YoY while the bottom line more than doubled from FY19, mainly due to a significant increase in gross profit, coupled with prudent cost controls and increase in other income.
  • 1Q21 – Latest financials remain strong. 1Q21sales rose 23.4% YoY and PATMI almost doubled YoY, mainly contributed by the strong rebound in PRC’s sales.
  • Sales momentum to continue. Sales to PRC is expected to grow in light of Sino-US tensions. Coupled with the growing trend in industrial automation, we expect a continued boost to ISDN’s top line.
  • Super Wifi. ISDN embarked on a strategic partnership with Whizpace in 2021 to penetrate into wide-area industries and offer automated industrial solutions.
  • Maintain OUTPERFORM with new TP of S$0.85, a 15.1% upside from Friday’s close. We update cost estimates and our hydropower business forecast and raise revenue growth forecasts for ISDN’s side businesses.

FY2020 financial review

ISDN reported an increase in revenue from S$291.0mn in FY19 to S$361.9mn in FY20, representing a 24.4% jump. PATMI increased by 115% YoY, from S$7.0mn in FY19 to S$15.1mn in FY20, mainly due to the growth in gross profit of 23.4%.  Comparing YoY, basic and diluted EPS grew from 1.68 Sing cents to 3.51 Sing cents, and dividends increased from 0.4 Sing cents to 0.8 Sing cents. Overall, FY20 results are fairly in line with our estimates and would have beaten our estimates if not for the one-off impairments.

1Q2021 financials update

Comparing YoY, revenue increased by 23.4%, from S$79.8mn in 1Q20 to S$98.4mn in 1Q21. Gross profit grew by an outstanding 52.7%, due to improved margins from 21.8% to 27.0%, contributed by accelerated sales growth in the Motion Control segment. Bottom line remained strong with a 95.4% increase YoY, from S$3.1mn in 1Q20 to S$6.0mn in 1Q21, which was achieved not only by solid gross profit results in 1Q21, but also by substantially decreasing distribution costs and administrative expenses.

Geographical revenue spread – PRC spearheading growth

The group’s Motion Control segment remains as the main revenue driver for FY20, accounting for over 70.2% of revenue, whereas geographically, PRC remains as the predominant revenue contributor at 67.6%. In contrast to other businesses, the Covid-19 pandemic proved to be a stimulus for ISDN, as the increasing demands from factories created opportunities for the group, through delivering effective industrial automation solutions and reconfiguration of the global industrial supply chain.

Delivery of Industry 4.0 to wide-area industries

The group announced in June 2021 that it will be embarking on a global strategic partnership with Whizpace Pte Ltd to deliver wide-area Industry 4.0 and internet of things (IoT) solutions to industries such as agriculture, utilities, oil & gas, and transportation via Super-Wifi.


Major forecast adjustments pertain to hydropower plants, where we estimate 4Q21 tariff revenue for Sisira and Anggoci upon expected completion. For FY22, we estimate tariff revenue from Lau Biang plant in 2H22 assuming completion in 1H22, as well as full year tariffs from Sisira and Anggoci. Upon completion of all 3 plants by end FY22, full tariff revenue is expected to be recognised in FY23.

Valuation & Action

At 14x P/E, our updated 12M TP is now S$0.85, a 15.1% upside from Friday’s close price. We maintain our OUTPERFORM recommendation. Further upside catalysts to come from the growth in Motion Control sales which is spearheaded by semiconductor growth in PRC, as well as from the collaboration with Whizspace for Super-Wifi.


Further delays on hydropower projects, order book delays, trade receivable write-downs, FX losses.

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