SINGAPORE (June 21): ISDN Holdings, the integrated engineering solutions provider, has been in the business for more than 30 years and currently also owns a factory in China that makes products such as hinges and locks, precision gearboxes and other industrial hardware.
In an unrated report on Wednesday, CGS-CIMB Research analyst William Tng says, “ISDN adds value by offering modules to meet its customers’ needs, rather than selling them individual components.”
In its core motion control business, which contributed to 87% of its FY17 revenue, the group works with Switzerland-based Maxon Motor AG to supply high-precision drive systems solutions, as well as German-based Eisele Antriebstechnik to supply precision gearboxes solutions.
The group has also explored opportunities in corporate finance with its investment in Emmett Capital earlier on Mar 3, 2017. Emmett hopes to offer comprehensive financing solutions to small-and medium-sized enterprises (SMEs) in infrastructure/renewable energy.
In addition, the group on May 25, 2017 also announced a framework agreement with SEHK Mainboard-listed Comtec Solar Systems Group for the development, design, construction and operation of solar power generation station projects.
See: ISDN Holdings enters strategic partnership with Hong Kong-listed solar manufacturer
The analyst also likes ISDN for its strong balance sheet.
As at end March 2018, the group’s net cash per share was 5.3 cents or 25% of its share price on Jun 19, 2018.
The group on Jun 20, 2017, announced that it will be adopting a 25% dividend payout policy.
For the past five years, the group has been paying out dividends, while continuing to be both profitable at net profit level and has maintained a net cash position.
“Management is positive on the long-term earnings outlook for the company’s core motion control business, highlighting that the industry is moving forward with Industry 4.0, Internet of Things and collaborative robots that require its solutions,” says Tng.
Currently, the demand for high-tech precision control systems remains strong from the medical devices, semiconductor, transportation, oil & gas and railway industries.
Meanwhile, the group saw its 1Q18 earnings treble to $5.3 million, representing 55% of its FY17 net profit.
See: ISDN sees 1Q earnings treble to $5.2 mil
The analyst also says that the stock is trading below its book value at a historical FY17 price-to-book ratio of 0.55 times, compared to its regional peers that are trading at 4.9 times book value.
As at 11.47am, shares in ISDN are trading at 21 cents with a FY17 dividend yield of 2.86%.
