The company's hydropower business in Indonesia generated higher revenue too of $32.5 million from just $5 million in the year earlier 1HFY2024.
In the period, ISDN incurred $5 million of unrealised, non-cash foreign exchange revaluation losses in 1H25 due to the weaker US dollar.
The company, according to Tng, is "cautious on the strength of the cyclical recovery in China but will continue to grow its capabilities, reach, and addressable markets to create long-term growth".
"ISDN believes its core industrial automation business should continue to grow in China and throughout Asia. The group is encouraged by the early progress in Thailand, Malaysia and Taiwan, adding to its core geographies in China, Singapore and Vietnam," says Tng.
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With another two plants to be completed in the coming FY2026, the company's ISDN’s mini-hydropower business should continue to deliver recurring profits and revenue.
Following the most recent 1HFY2025 results, Tng has reduced his FY2025 earnings forecast by 50.5% to take into account the unrealised foreign exchange loss in 1HFY2025.
For the coming FY2026 and FY2027, Tng expects earnings to recover, but, for now he has similarly trimmed his projections by 12.5-20.6% to take into account a bigger proportion of lower margin earnings from hydro-power.
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Nonetheless, Tng has kept his 44 cents price target, which is based on 13.5x P/E, which is the 10-year FY2016 to FY205 average, as the underlying business is experiencing some recovery, and small caps’ valuations have risen from the market boosting measures.
For him, re-rating catalysts include higher-than-expected net profit contribution from its hydropower business segment, faster pace of economic growth in China as it stimulates its economy, and a stronger recovery of the semiconductor sector.
On the other hand, downside risks include weak customer demand if the global economy continues to slow, and greater possibility of bad debts as economic conditions worsen.
ISDN shares closed at 39 cents on Aug 22, unchanged for the day but up 24.19% year to date.
