ISDN Holdings - CGS-CIMB Research 2022-11-16: 3Q22 Better-Than-Expected

ISDN Holdings - 3Q22 Better-Than-Expected

  • ISDN (SGX:I07)'s 3Q22 revenue fell by 10.2% y-o-y and 0.2% q-o-q to S$95.8m, due to headwinds in cyclical industries in China (e.g. electronics, automotive) and weaker RMB to US$/S$ exchange rates. 3Q22 revenue of S$95.8m was 5.0% above our full-year expectation while 9M22 revenue formed 76.2% of our full-year forecast. See ISDN's Announcement dated 15 Nov 2022.
  • Gross profit margin was maintained at 28.6%, similar to 3Q21. Net profit slumped 47.7% y-o-y to S$4.5m in 3Q22, which was 50.0% above our S$3.0m forecast.
  • We think the outperformance was due to smaller than feared unrealised foreign exchange losses (no detailed financials were disclosed).
  • ISDN’s 11.5% y-o-y revenue decline to S$286.5m in 9M22 was attributed to:
    1. inventory stock ups by customers to offset supply chain shortages;
    2. supply and production disruptions in China due to its COVID-19 lockdowns;
    3. cyclical downturn in certain segments of the semiconductor industry, machine tools, and industrial automation; and
    4. renminbi depreciation against the Singapore dollar.
  • ISDN expects stabilising cyclical factors in China as customers have less stock-up activity, coupled with improving component shortages for the automotive industry. ISDN guided that its long-term outlook hinges on China’s COVID-19 lockdown policies and reopening activities which affects factory operations and the supply chain.
  • In its 9M22 business update release, ISDN also commented that it thinks that the renminbi will stem its decline as China opens up its economy in the coming months. ISDN also sees growth in its non-Chinese operations’ revenue which grew 22% y-o-y in 9M22 (no numbers were disclosed).
  • Our target price is still based on 8.6x CY23F P/E, its 5-year average in FY18-22. Given the better-than-expected revenue performance, we raise our FY22-24F revenue forecasts for ISDN by 1.8- 1.9%, leading to a 7.5-7.8% increase in our EPS forecasts. Hence, we lift our target price for ISDN to S$0.42 from S$0.39 previously.
  • We reiterate our HOLD call on ISDN pending greater clarity on the reopening of its key China market (~70% of FY21 revenue).

Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @

William TNG CFA CGS-CIMB Research | Izabella TAN CGS-CIMB Research | 2022-11-16
SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.42 UP 0.390

Previous report by CGS-CIMB:
2022-11-09 ISDN Holdings - 3Q22 Net Profit Likely Fell Y-o-y

Relevant links:
ISDN Analyst Report,
ISDN Target Price,

ISDN Share Price History,
ISDN Announcements,
ISDN Dividends/ Corp Actions,
ISDN News Articles


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