CGS-CIMB Group Research analyst William Tng reiterates an “add” call on ISDN Holdings with an unchanged target price of 96 cents.
ISDN president Teo Cher Koon commented in the group’s 2021 annual report released on Mar 28 that he sees continued demand for industrial automation as countries recover from the Covid-19 pandemic and address rising wage costs by stepping up automation efforts.
ISDN also believes that the Asia Pacific factory automation and industrial controls market represents an opportunity of over US$60 billion and could grow at a compound annual growth rate (CAGR) of 10.87% between 2021 and 2026.
Moreover, ISDN announced a partnership with Whizpace, a Singapore-based company that specialises in white-space communications specifically on TV White Space, earlier on Jun 18, 2021 to deliver wide-area Industry 4.0 and Internet of Things (IoT) solutions globally.
This comes at a juncture where the Malaysian government announced that it will deploy TV white space technology to provide high-speed internet connectivity to students and villagers living in rural areas in Malaysia on Mar 5.
In the analyst’s view, the next stage of development for ISDN is to increase the contribution of software solutions in its revenue mix. This is considering how ISDN has incorporated a subsidiary in China in Aug 2021 to offer technical service, technical development, software development, artificial intelligence application software development, network and information development, sales of electronic products and industrial computing solutions as well.
“As software tends to be scalable and offer better margins, we think devoting more effort to the software side could help improve margins,” Tng says.
Some downside risks include a prolonging of the Covid-19 outbreak that could lead to travel restrictions hampering ISDN’s ability to service its customers.
As at 3.43pm, shares in ISDN are trading at 0.5 cents down or 0.79% lower at 62 cents at a FY2022 P/B ratio of 1.26 and dividend yield of 2.72%.
