Excerpts from CGS-CIMB report

Analyst: William Tng, CFA

More could be done to unlock value

■ We hosted a lunch NDR for ISDN on 28 Jun 2019 that was attended by seven institutional clients.


Share price: 
23.5 c

32 c

■ The session focused on understanding ISDN’s business model.

■ We have an Add call on ISDN, with a TP of S$0.32.

Core business is motion control solutions
● ISDN’s core business is motion control solutions.

TeoCherKoon MD619Teo Cher Koon, President and MD of ISDN. NextInsight file photoThe company adds value by offering solutions that incorporate its principals’ motors to customers, rather than selling them the motors on a standalone basis.

The company does not compete in the mass market, price-competitive motor space.

● ISDN has a strong partnership with Maxon Motor AG (unlisted). In Dec 2018, ISDN expanded this partnership with a joint venture company to market Maxon’s products in Southeast Asia.

● Headquartered in Switzerland, Maxon supplies high-precision drive systems to more than 55 countries. ISDN’s other key motor principal is Yasakawa Electric Corporation (6506 JP, Not Rated).

Software offers opportunities

● Given that ISDN has more than 30 years’ experience in serving over 10,000 customers’ motion control requirements, we opine that ISDN could improve its profit margins and provide Industrial 4.0 solutions by offering a master software solution that would enable its customers to monitor their machinery remotely.

● We read its 8 May 2019 announcement on the incorporation of a wholly-owned subsidiary, ISDN Software Business Pte Ltd, as corroboration of our view.

No earnings drag from renewable energy business

williamtng4.14Given the funding requirements, we think ISDN’s options for this business are: a) spinoff of the renewable energy business, or b) achieving a trade sale for this business.”

-- William Tng, CFA (photo),

CGS-CIMB analyst

● The renewable energy business (hydropower plants in Indonesia) contributed S$1.9m to 1Q19 revenue.

● As at end Mar-2019, ISDN’s hydropower business is recognised on the balance sheet as service concession receivables amounting to S$31.9m.

● ISDN’s three mini-hydropower plants (phase 1) have a combined capacity of 24.2 megawatts of power and are scheduled to start commercial operations this year and next.

The group plans to develop a further 60 megawatts of capacity once phase 1 is completed.

US-China Trade war is a concern

● The ongoing US-China trade war is a concern to the company due to its impact on global economic growth and influence on corporate spending.

● We forecast ISDN to report 2Q19 net profit of S$4.3m (+2.3% qoq, -10.4% yoy). ISDN is scheduled to report its 2Q19 results on 7 Aug 2019.

● We have an Add rating on ISDN, with a TP of S$0.32. Potential catalysts include the streamlining of its organisation structure and earnings contribution from the hydropower business.

Risks are prolonged US-China trade war and operational missteps in its hydropower pants.

Full report here.

You may also be interested in:

You have no rights to post comments

Counter NameLastChange
AEM Holdings2.760-0.020
Avi-Tech Electronics0.250-0.005
Best World1.790-0.020
Broadway Ind0.0890.005
China Sunsine0.385-0.005
Delfi Limited1.030-0.020
Food Empire1.410-0.040
Fortress Minerals0.260-
Geo Energy Res0.410-0.005
GSS Energy0.029-
Hong Leong Finance2.540-
Hongkong Land (USD)3.3500.090
ISDN Holdings0.3500.005
IX Biopharma0.043-
Jiutian Chemical0.025-0.001
KSH Holdings0.240-
Leader Env0.053-
Medtecs Intl0.141-
Nordic Group0.350-
Oxley Holdings0.092-0.001
REX International0.127-
Sinostar PEC0.140-
Southern Alliance Mining0.585-
Straco Corp.0.510-0.005
Sunpower Group0.210-
The Trendlines0.086-
Totm Technologies0.027-
Uni-Asia Group0.875-0.025
Wilmar Intl3.2900.050
Yangzijiang Shipbldg1.670-0.020

We have 2181 guests and one member online

rss_2 NextInsight - Latest News