ISDN, according to Tng, does not have any direct export sales into the US, and imports from the US into China is also negligible for the company.
The company has a two-pronged strategy in place. First, it will continue to focus on its core industrial automation business in Southeast Asia, and has expanded into Malaysia and Taiwan to capture the growth opportunities from the reorganisation of the global supply chain as more manufacturing activity shifts to these markets.
In addition, ISDN is pushing for a bigger presence its hydro-power business. In the last FY2024, the company announced the construction of its fourth and fifth mini-hydropower
plants in Indonesia and that the construction of these two plants is on track for completion in 2026.
"Once operational, these facilities will increase the group’s total hydropower capacity by an additional 20 megawatts (MW) to 44.6 MW with a projected recurring tariff income of
$25 million each year, says Tng, citing ISDN's annual report.
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As ISDN does not provide quarterly updates, its next report card will be for its 1HFY2025 due this August.
Given the uncertainties of the trade war, Tng has turned conservative.
He figures that the valuation multiple for this counter will drop to 8.8x FY2026 earnings, which is the average P/E it fetched in its previous earnings upcycle of between FY2016 and FY2021.
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Tng, in the pre-trade war escalation phase, had previously valued this stock at 12.4x FY2026 earnings, which is 1 s.d. above it the FY2016 to FY2021 average.
According to him, rerating catalysts include higher-than-expected net profit contribution from its hydropower business segment and a faster pace of economic growth as China tries to re-stimulate its economy.
On the other hand, downside risks include weak customer demand if the global economy continues to slow, and the possibility of bad debts as economic conditions worsen.
ISDN Holdings shares changed hands at 32 cents as at 11.55 am, up 1.59%.
