Brokers' take: KGI raises ISDN target price, expects stronger FY2021

KGI Securities has maintained its "outperform" recommendation on ISDN Holdings while raising its target price to S$0.85 from S$0.60, reflecting a 15.1 per cent upside from the mainboard-listed engineering services provider's closing price of 73.5 cents last Friday.

This comes after the research house updated its forecasts for ISDN's hydropower business and raised revenue growth forecasts for the group's side businesses.

KGI's revised estimates for FY2021 now include Q4 FY2021 tariff revenue projections for the group's Sisira and Anggoci hydropower plants upon their expected completion; tariff revenue from the Lau Biang plant from H2 of FY2022 assuming completion in H1; as well as full-year tariffs revenue contributions from Sisira and Anggoci in FY2022.

Full tariff revenue is expected to be recognised in FY2023 after all three plants are completed by end-FY2022.

In a Monday report, KGI's analysts said they like the stock for its strong FY2020 and Q1 FY2021 financials despite the onset of Covid-19.

"In contrast to other businesses, the Covid-19 pandemic proved to be a stimulus for ISDN as the increasing demands from factories created opportunities for the group, through delivering effective industrial automation solutions and reconfiguration of the global industrial supply chain," they opined.

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Highlighting China as the predominant geographical revenue contributor for the group in FY2020, the analysts are expecting the group's sales to grow in light of Sino-US tensions to boost its topline going forward, further supported by a growing trend in industrial automation.

"As ISDN's solutions offer automation and streamlining of operations, we might see a boost in revenue coming from (the semiconductor industry). ISDN should benefit from China's rise in semiconductors and the ongoing shift to advanced IC manufacturing and packaging," they said.

The analysts are also anticipating the group's motion-control segment, its main revenue driver, to contribute to greater topline growth in the future.

Shares of ISDN were trading flat at 73 Singapore cents as at 11.45am on Monday.