REITERATEBUY Entry – 0.69 Target –0.85 Stop Loss – 0.62
ISDN is a leading provider of industrial automation solutions throughout Asia. The company has more than 10,000 customers, and 74 offices spanning key Asian growth markets, and has a 35-year history of innovating alongside the growing technology needs of its customers. Today, ISDN’s solutions power advanced industrial sectors including semiconductors, Industry 4.0 manufacturing, medical devices, aerospace, and clean energy. The group generates around 68% of sales from China.
Cyber Monday sale. Shares of ISDN have lost almost 12% from the recent 1 month peak of S$0.785 due to the broad-based sell-off last week over concerns on the new Covid-19 variant. However, we see this as an opportunity to buy quality stocks who are trading at attractive valuations, such as ISDN.
Record revenue and profits in 1H2021. ISDN 1H2021 rose 30% YoY to S$217mn while net profit surged 51% YoY to S$19mn. This was on the back of better gross profit margins which rose 2.1% points to 26.8%.
Growing productivity. ISDN has continued its strategic buildout by expanding its solutions portfolio to include industrial internet-of-things (IoT) connectivity, deepening advanced engineering, growing industrial systems projects, and advancing software and cloud solutions. Covid-19 and geopolitical tensions have reduced global labour mobility and increased employee health risk, leading to an acceleration in labour automation for the group’s customer base.
Fundamental OUTPERFORM and TP to S$0.85. ISDN currently trades at only 6x forward EV/EBITDA, a significant discount to its international peers who are trading at around 10x EV/EBITDA.