- China reopening beneficiary
? We hosted ISDN for a post-1Q22 business update call on Monday, 20 June 2022. The 1Q22 update was released on 10 June 2022.
? Management believes the worst of the Covid-19 lockdowns in China is over.
? Reiterate Add and TP of S$0.70 as business activity resumes with the lifting
of the Covid-19 lockdowns in China.
Key highlights from post-results call
? ISDN has 3 mini-hydropow er projects in Indonesia. Of these, Sisira and Angocci
(according to ISDN) have been in operation since Sep 21. How ever, ISDN has not been
able to bill the customer for the electricity supplied from these pow er plants as there are
certain permits required that are still outstanding, w hich the company is w orking to
resolve.
? Management guided that its third plant (Lau Biang) does not face the permits issue
affecting Sisira and Angocci. How ever, Lau Biang’s construction progress has been
delayed by China’s recent Covid-19 lockdow n. We think possible issues include delivery
delays for equipment required for the operation of the mini-hydropow er plant as a result
of China’s recent port lockdow ns. ISDN hopes that construction of the Lau Biang plant
can be completed by end Sep-22.
? With its strength in the hardw are part of industrial automation (via its product partners),
ISDN is now looking to increase its efforts on the softw are side of the automation
process via offering cloud solutions that provide a comprehensive view of the data that
its customers are able to collect though their automation efforts. Reflecting this
commitment, ISDN appointed Mr. Tay Geok Kee as its Group Chief Technology Officer
on 1 Jan 2022. Mr. Tay brings over 30 years of industrial automation experience to
ISDN, including building automation and softw are cloud solutions for some of the largest
industrial companies in Asia.
? ISDN noted that some customers w ho had urgent orders to fulfill in 1Q22 had to turn to
alternative products during the recent lockdow n in China. How ever, customer inquiries
have returned as the lockdow n situation improves.
Reiterate Add
? We reiterate our Add call on ISDN and TP of S$0.70. This is based on a 10.1x P/E
multiple (1 s.d. above the Jan 17 to May 22 forw ard P/E multiple) on our FY23F EPS
forecast.
? Potential re-rating catalysts include earlier profit contribution from its hydropow er
segment.
? Dow nside risks include a prolonged Covid-19 outbreak, leading to travel restrictions that
could affect ISDN’s ability to service its customers.