Weighed down by pandemic-related disruptions in China, ISDN Holdings has reported lower earnings and revenue for FY2022.
However, the company believes it is well poised to capture the recovery riding on further industrialisation in China.
For the year ended Dec 31 2022, ISDN, which is also quoted in Hong Kong dollars, reported earnings of $14.6 million, down 42.6% over FY2021. Revenue in the same period was down 15.8% to $370.8 million.
“Despite the cyclical impact in 2022, the group believes that structural shifts in the China market over the past year have strengthened longer-term growth fundamentals for ISDN,” the company says.
It adds that pandemic restrictions have eased, allowing economic activity to resume. The on-going trade war between US and China will force companies operating in China to push ahead with industrial automation.
“ISDN remains well-positioned to benefit from this ongoing thematic growth in China,” the company says.
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Furthermore, it expects its long-gestating hydro-energy business in Indonesia to contribute in a more meaningful manner this current FY2023. It expects to book recurring earnings of $2 million a year for 25 years.
ISDN notes that hydropower companies that are traded are valued at 30x earnings on average. This suggests that ISDN sees its hydro business worth around $60 million or more, equivalent to around 13.7 cents per share.
“ISDN believes 2023 is an historic year for its clean energies business as it has transitioned into providing significant, recurring profits for the group,” says ISDN.
Teo Cher Koon, ISDN’s managing director and president, calls FY2022 a “difficult” year which ISDN is not immune from. “We’ve continued to build our business for long-term growth and we’re reaffirming our convictions in our strategy and our long-term prospects.”
“Despite the industrial downcycle in China, we’ve continued to build our earnings by commercialising the first of 3 hydropower plants, and are close to commercialising 2 additional plants.
“Our clean energy businesses provide stable, recurring earnings into our business portfolio, and have strong intrinsic value as clean energy businesses have enjoyed strong market value in Indonesia,” says Teo.
Teo sees positive structural shifts in China. “The country has emerged successfully from COVID-19 easing, economic activity is recovering, industrial utilisation is increasing, and national policy has strengthened support for advanced industry and industrial automation.”
“All of these factors point to continued long-term prospects from ISDN as we benefit from both the secular growth of industrial automation in our core business, and the welcome addition of growing recurring profits in our clean energy business as our hydropower plants commercialise,” says Teo.
ISDN shares closed Feb 24 at 59 cents.
