Excerpts from UOB Kay Hian report

Analyst: Edison Chen

ISDN Holdings (ISDN SP) Outstanding 2Q17 Results Ahead 
TeoCherKoon11.18aTeo Cher Koon, President and MD of ISDN Holdings.
(NextInsight photo)
In its upcoming 2Q17 results announcement, ISDN will likely deliver outstanding results as key customers such as Foxconn and AEM are either reporting a >80% yoy surge in revenue or a 20% mom jump in sales order.

We believe a rosy outlook lies ahead as PMI in both China and Singapore climbed higher in June.

ISDN’s formal 25% dividend payout policy will also give investors greater assurance and clarity


ISDN

Share price:
23 c

Target: 
35 c

Reiterate BUY with an unchanged target price of S$0.35, pending release of results. 


WHAT’S NEW
Outstanding 2Q17 results given key customers’ terrific performance.

Foxconn, AEM as key customers…

edisonchen1.16As key contributors of ISDN’s revenue, we believe that this terrific performance by Foxconn and AEM (and possibly the rest of ISDN’s customers) would translate to an outstanding set of 2Q17 results for ISDN.
-- Edison Chen (photo)

Two of ISDN’s top customers are expecting exceptional 2Q17 results ahead.

FIH Mobile (better known as Foxconn) is expecting a turnover of US$4.2b-4.5b for 1H17 (+82-84% yoy) while AEM Holdings has announced it received S$182m of sales order as at the end of May 17, an increase of S$30m from 18 Apr 17. 

Rosy outlook as China and Singapore’s PMIs climbed higher in June.
Expanding for the 11th straight month, China’s official June PMI was 51.7, expanding at the quickest pace in three months, buoyed by strong production and new orders.

Stock price 

23.5 c

52-week range

17.5 – 27.5 c

PE (ttm)

9.7

Market cap

S$88.8 m

Shares outstanding

395 m

Dividend
yield
(ttm)

1.3%

Year-to-date return

4.4%

Source: Bloomberg

Production surged to 54.4, marking a strong 1ppt jump from May. New orders in the month also rose to 53.1 from May's 52.3, with export orders surging by 1.3ppt to 52.0, suggesting external demand picked up.

Singapore’s PMI also saw its 10th month of expansion as it rose to 50.9, exceeding economists’ expectations (Bloomberg poll indicated 50.5 or 50.6).

25% dividend policy formally announced.
As discussed previously in our initiation report on 15 Jun 17 “"Made in China 2025" and "Belt and Road" To Power Growth”, we opined that ISDN should offer some form of dividend upside given the size of its net cash balance (2017F: S$25.9m or 29.2% of its market cap of S$88.8m) and increasingly positive prospects.

On 20 Jun 17, ISDN formally announced a 25% dividend payout ratio (2016: 16.4%), which has seen dividends increase from 0.3 S cents/share in 2016 to an expected 0.66 S cents/share in 2017 or a 2017F yield of 2.9%.

Quarter ended 31 March (S$ '000) 1QFY2017 1QFY2016 yoy chg
Revenue 67,662 60,651 11.6%
Profit before tax 3,688 2,727 35.2%
Profit attributable to equity holders 1,721 653 n.m.

Source: Company data


Full report here. 


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