CGS-CIMB Research analyst William Tng has upgraded ISDN to “add” from “hold” as the firm’s core industrial automation business continues to do well.
ISDN’s FY2020 earnings of $15.1 million came in above the brokerage’s expectations at 104% of full-year forecasts. Though FY2020 net profit was negatively impacted by impairment and unrealised foreign exchange losses, core net profit would have been in line with CGS-CIMB’s estimates sans impairment charges.
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Macro trends have also been favourable for the group, as it remains positive on the outlook for its core industrial automation business.
While Tng has raised his earnings per share (EPS) estimates for FY2021 and FY2022 by 1.3% and 0.1% respectively, he has kept his target price estimate the same at 72 cents, “still based on unchanged 12 times FY2022 earnings”, which is at a 50% discount to peer average.
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“Potential re-rating catalysts could come from stronger-than-expected sales orders for its mainstay industrial automation business and profit contribution from its hydropower segment. Downside risks are order delays, cost overruns in its hydropower business and a prolonged Covid-19 outbreak,” he says.
As at 4.59pm, shares in ISDN are trading flat at 61 cents.
