SINGAPORE (June 15): NRA Capital is maintaining its “overweight” rating on ISDN Holdings with a fair value estimate of 32 cents.
According to analyst Liu Jinshu in a Thursday report, ISDN’s outlook remains positive for 2Q17 as it clocked in a strong y-o-y revenue growth of 11.6% to $67.7 million.
Liu finds it interesting that the net profit attributable to shareholders increased to $1.72 million in 1Q17 from $0.65 million last year, as higher economies of scale led to more gross profit gains to flow to the bottom line.
The analyst points out that if not for $0.4 million of professional expenses incurred from its secondary listing in Hong Kong, the group would have seen even higher profitability.
“We continue to see ISDN as a beneficiary of strong growth in the semiconductor equipment industry, higher investment in industrial automation and higher infrastructure spending,” says Liu.
“Net cash per share remained at 26% of ISDN’s market capitalisation as higher working capital requirements negated cash obtained from its HKSE listing. However, we reckon that ISDN may either commit to or raise dividends with the improved profitability in 2017,” he adds.
For FY17, NRA maintains its forecasts of $281.6 million in revenue and $8.6 million of PATMI, which translates to growth of 9% and 65% respectively.
The group’s profitability is also expected to further improve in 2Q17 due to the absence of listing costs and fewer working days in 1Q17.
ISDN announced in May that it had entered into a strategic cooperation framework agreement with Contec Solar Systems Group for the development, design, construction and operation of solar power generation station projects.
The collaboration allows ISDN to extend its renewable energy business to include solar power projects in Indonesia or China, as it has traditionally been investing in the two countries’ markets, says Liu.
Concurrently, the analyst foresees that ISDN may also become more active in merger and acquisition (M&A) and investment activity following its recent venture into corporate finance with Emmett Capital.
Assuming a 20% payout ratio, the group’s dividend per share is expected to rise to 0.44 cents in 2017.
As at 12.30pm, shares of ISDN are trading at 24 cents.
