ISDN HOLDINGS LIMITED (SGX:I07)
ISDN Holdings - Strong April Rebound
ISDN's 1Q20 performance above expectations
- On 27 May, ISDN (SGX:I07) provided a voluntary update on its performance. 1Q20 revenue/net profit of S$79.8m/S$3.1m were above our expectations. 1Q20 revenue (27% of our FY20F) grew 5.7% y-o-y despite disruptions from the Covid-19 outbreak which led to an extended lockdown period for ISDN’s China operations.
- ISDN's 1Q20 net profit (37% of our FY20F) fell 26.2% y-o-y. Other than revenue and net profit, no other line items for the income statement were provided.
Strong recovery in April
- By mid-Mar, ISDN had resumed its China operations. In 4M20, ISDN's revenue grew 12.1% y-o-y to S$112.2 while net profit grew 31.4% y-o-y to S$6.7m.
- For the month of Apr, ISDN generated revenue of S$32.4m and net profit of $3.6m. The recovery was due to a broad-based pickup in business in ISDN’s key markets of Singapore, China and Vietnam. 4M20 net profit accounted for 80.4% of our FY20F net profit.
- ISDN also disclosed that orders received year-to-date amounted to S$95m.
Introducing anti-Covid-19 products
- ISDN recently partnered with Germany-based ERST Project GmbH to introduce two disinfectant technologies designed to aid the transition to a post-pandemic environment. These are
- Waterliq, a safe, water-based disinfectant capable of deployment through humidifiers in human-safe fine droplets, and is able to kill 99.99% of pathogens; and
- Erstotizer, a state-of-the-art disinfecting coating that can keep surfaces virus-free for 6-24 months.
- Since announcing these two products, ISDN has already secured two commercial deployments, one at major dormitory provider Centurion Corp (SGX:OU8) and another at First Sight International Pte Ltd, an interior designer.
Reiterate ADD; higher S$0.28 target price
- Given the lack of detailed financials, we assume gross margin improvement as the primary reason for the better-than-expected 1Q20 performance. With our revised gross margin expectations, our FY20-22F net profit forecasts for ISDN increase by 49.2%/20.1%/11.3%.
- At an unchanged CY21F P/E of 10x (c.57% discount to its global peers), our target price rises to S$0.28 (S$0.23 previously).
- See ISDN Share Price; ISDN Target Price; ISDN Analyst Reports; ISDN Dividend History; ISDN Announcements; ISDN Latest News.
- Potential re-rating catalysts for the stock could come from stronger-than-expected sales orders for its mainstay motion-control business and profit contribution from its clean energy segment.
- Key downside risks are order delays, cost overruns in its energy business, further escalation in the US-China trade war, and worsening of the Covid-19 outbreak.
William TNG CFA
CGS-CIMB Research
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https://www.cgs-cimb.com
2020-05-29
SGX Stock
Analyst Report
0.28
UP
0.230
