Lim Hui Jie Published on Wed, Jul 14, 2021

ISDN Holdings, better known as a manufacturer of industrial automation components, has partnered with equipment maker Whizpace to tap the under-utilised TV white space and offer what the partners dubbed the “Super WiFi” solution.

In contrast to the limited, localised “WiFi” most people are familiar with, the coverage of Super WIFi extends to as much as 10km and the more powerful signals can penetrate through obstacles at a fraction of the cost of existing technologies.

Teo Cher Koon, ISDN’s managing director and president, claims that customers can set it up 90% faster and 90% cheaper compared to other WiFi solutions. “It offers a lot of benefits to enable remote areas to be connected through the internet,” says Teo in an interview with The Edge Singapore.

TV white space refers to unused radio spectrum in the TV broadcast bands that could potentially be used for alternative wireless broadband communications. These bands were once used to carry analogue signals used in broadcasting, like free to air TV channels. Once a tightly regulated national asset, the bands were freed up when digital broadcasting replaced analogue broadcasting here in 2019.

It is now possible for new users to deploy their own wireless networks that control plants, machinery, and other equipment more efficiently, as part of the so-called Internet of Things (IoT) or Industry 4.0 trend where communication between equipment is essential.

“Also, factories that want to link up machines to machines or sensors to sensors can deploy that much faster with TV white space instead of using other WiFi solutions,” adds Teo.

Teo says the concept of Industry 4.0 is also not limited to the four walls of the factory but can be applied in industries like plantations, agriculture or mining where the business activity occupies a large area.

“You have all your people moving around, and it is always a challenge for the managers to collect data. No one will ever invest in a [conventional] WiFi network to do that because it’s very, very costly. So TV white space is a very good solution,” he explains.

In a release with ISDN, Whizpace says it has successfully deployed Super WiFi internet access from factories to remote areas such as offshore islands and sprawling palm oil plantations, enabling video surveillance and estate management.

Riding on a lower frequency of 180MHz, the speed at which the Super WiFi can transmit data is naturally lower, compared to the 2.4GHz and 5GHz of home Wi-Fi networks. But Teo says that the Super WiFi solution has a speed of “about 3.5G”, which is fast enough to watch a video.

Furthermore, lower frequency means lower power consumption but “the speed is much faster than a lot of low power wide area networks in the market. A lot of low-power wide area networks or WAN are operating on 5MHz but we are operating at 180MHz and above”, adds Teo.

Whizpace CEO Oh Ser Wah describes this partnership with ISDN as “deeply complementary” to his company, which was founded in 2016. “They bring not just 30 years of deep solutions experience with industrial automation, but also a formidable customer base of over 10,000 enterprises throughout Asia, along with a powerful sales force and access to hundreds of automation technology vendors and components,” says Oh.

A doctorate holder in electrical and electronics engineering from the Nanyang Technological University, Oh spent years as a leading white space researcher with Singapore’s Institute for Infocomm Research.

In his June 23 report on ISDN, CGS-CIMB analyst William Tng notes that some of the most immediate beneficiaries will be people living in rural areas that cannot have affordable access to WiFi with existing technology as well as sparse populations spread out over large areas in remote parts of developing markets such as Africa.

“The most common implementation of Super WiFi networks will be accessed via radio-enabled devices that report their locations to an Internet database. The database will then tell the device which TV white space channels to operate on,” notes Tng.

Diversifying from hydropower

ISDN, which can trace its history to 1986, currently generates the bulk of its business from industrial automation solutions. Under Teo, the company is trying to diversify its revenue streams by investing in hydropower generation in Indonesia. “This country was in great shortage of power and the power cost is extremely high,” explains Teo.

According to a Statista report in 2018, Indonesia generates most of its electricity from oil, at 40%. Teo thinks this dependence can be cut down via renewable energy sources such as hydropower, given that Indonesia has “an abundance of water resources, especially in North Sumatra”.

The company is constructing three hydropower plants in Indonesia, and Tng, in the same June 23 report, highlights that the management is still hopeful that two of these projects could commence commercial operations by end of this year.

As of Dec 31, 2020, ISDN has invested about $76.8 million into the hydropower plants, of which about 64% is equity funded and the balance 36% debt-funded.

However, Teo acknowledges that the Covid- 19 situation in Indonesia is still severe, and while he hopes to get the generators up and running by the end of 2021, he cannot say for sure.

CGS-CIMB’s Tng points out that some potential re-rating catalysts for ISDN could come from stronger-than-expected sales orders for its mainstay industrial automation business and profit contribution from its hydropower segment.

On the other hand, downside risks are order delays, cost overruns in its hydropower business and any disruption to business activities due to the ongoing pandemic.

Broad-based demand growth

As a company linked to the tech boom that is now taking place, ISDN saw steady earnings growth over the past year.

In 1QFY2021 ended March, ISDN reported revenue of $98.4 million, up 23.4% y-o-y, on the back of continued market demand for industrial automation throughout Asia.

The company has always made sure it has a diversified customer base. During the quarter, it enjoyed higher demand from customers that manufacture semiconductors, OLED displays, medical ventilators, repair equipment for robots and automation solutions for welding and the logistics sector.

“These solutions highlight the broad frontier of innovation that ISDN delivers to customers as Asia’s industrial economy advances,” says the company in its earnings commentary.

Furthermore, thanks to higher productivity, ISDN increased gross profit margin to 27% in 1QFY2021 from 21.8% in 1QFY2020. As a result, earnings in 1QFY2021 grew 95.4% y-o-y to $6.1 million.

The 1QFY2021 numbers are a continued growth momentum enjoyed by ISDN since last year. In FY2020, earnings grew 115% to $15.1 million from FY2019. This came on the back of a 24.4% jump in revenue to $361.9 million in the same period as it enjoyed broad-based demand for its products and solutions. The company increased its final dividend for FY2020 to 0.8 cents from 0.4 cents paid for FY2019.

The company, which has a dual-listing in Hong Kong, generates around two-thirds of its revenue from its operations in China. Teo recalls how the company took a hit in the first quarter of 2020 as China went into a Covid-19 lockdown although operations in Southeast Asia, which were not as badly affected, kept it afloat.

The company was also shielded somewhat from the ensuing supply chain crunch that gripped the global economy, as Teo revealed that the company stocked up on components that contained semiconductors, allowing the company to continue its operations with a minimal hiccup.

With the scramble for more semiconductor inventory going on, ISDN sees some of its customers investing more to develop new machines that can help increase the output, thereby giving Teo more business opportunities.

A KGI Securities report on July 5 noted that ISDN’s sales to China are expected to grow even with US-China trade tensions persisting. “Coupled with the growing trend in industrial automation, we expect a continued boost to ISDN’s top line.”

Both KGI and CGS-CIMB are optimistic about the company, giving the company “outperform” and “buy” ratings, with target prices of 85 cents and 84.4 cents respectively.

The company’s share price has shot up in tandem with its profit growth, reaching record levels. As of July 13, the stock was trading at 73.5 cents, close to its all-time high of 81 cents. At this level, the stock is trading at 20.5 times earnings and 1.84 times book value. Teo is happy to deliver the returns to his shareholders. “The resilience of our business gave them the confidence,” he says.

Novo Tellus Capital Partners, which holds 8.53% of the company and is the second-largest shareholder of ISDN, is enjoying gains of about 350%, having spent about $7.6 million to acquire its stake via various transactions.

Teo reveals that the investment firm has been very active in the company’s board and quarterly meetings and their involvement in ISDN has “given the investment community a lot of confidence because they don’t invest in just any company.”

Super WiFi could just be what ISDN needs to boost Novo Tellus’ confidence in the company to the next level.