KGI Research has kept its “outperform” call on ISDN Holdings as the business remains unaffected by the Covid-19 pandemic and is emerging stronger in the FY2021.
As such, analysts Megan Choo and Kenny Tan have upped their target price estimate on the counter to 85 cents from 60 cents previously.
The new target price is at 14 times ISDN’s price-to-earnings (P/E) and a 15.1% upside from ISDN’s share price of 74 cents at close on July 2.
ISDN, in the FY2020, reported strong results, including revenue growth of 24.4% y-o-y.
The group’s bottom line more than doubled y-o-y from FY2019, mainly due to a significant increase in gross profit, along with prudent cost controls and an increase in other income.
During the 1QFY2021, ISDN saw sales increase by 23.4% y-o-y and PATMI nearly doubling y-o-y.
This was mainly contributed to the rebound in sales in China, note Choo and Tan.
In light of the ongoing US-China tensions, Choo and Tan expect the group’s sales momentum in China to keep growing.
“Coupled with the growing trend in industrial automation, we expect a continued boost to ISDN’s top line,” they write.
The group’s Motion Control segment remains its key revenue driver, accounting for over 70.2% of revenue in the FY2020.
Geographically speaking, China remains the group’s main revenue contributor at 67.6%.
The Covid-19 pandemic has also proved to be a stimulus for ISDN’s business due to the increasing demands from factories.
On June 18, ISDN announced that it was collaborating with Whizpace to deliver Industry 4.0 to wide-area industries and Internet of Things (IoT) solutions to industries including agriculture and oil and gas via Super-Wifi.
On this, Choo and Tan have upped their revenue growth forecasts for ISDN’s side businesses.
“Further upside catalysts to come from the growth in Motion Control sales which is spearheaded by semiconductor growth in PRC, as well as from the collaboration with Whizspace for Super-Wifi,” they write.
Downsides to the counter, on the other hand, include further delays on hydropower projects, order book delays, trade receivable write-downs, foreign exchange (forex) losses.
Shares in ISDN closed flat at 73 cents on July 5.
