Broker: CGS International Securities
Date of Report: August 22, 2025
ISDN Holdings Ltd: Robust Revenue Growth Overshadowed by Foreign Exchange Losses – Key Insights for Investors
ISDN Holdings Ltd: 1H25 Performance Review and Strategic Outlook
ISDN Holdings Ltd, a leading player in industrial automation and mini-hydropower construction across Asia, delivered a mixed set of results for the first half of 2025. While the topline surged, profitability took a hit due to significant unrealised foreign exchange losses. This report, prepared by CGS International Securities, dives deep into the company’s operational highlights, segment performance, financial metrics, and ESG initiatives, offering investors a comprehensive view of ISDN’s current trajectory and future prospects.
Key Highlights: Revenue Growth vs. Profit Pressure
- 1H25 revenue jumped 22% year-on-year to S\$212.9 million, beating expectations and representing 55.4% of the full-year forecast.
- Net profit plunged 66% year-on-year to S\$1.3 million (10.6% of FY25F), mainly due to S\$3.2 million in unrealised foreign exchange losses from the company’s mini-hydropower business.
- Excluding FX losses, net profit would have grown 35.1% year-on-year to S\$4.5 million, though this still fell short of forecasts.
Segment Breakdown: Automation and Hydropower Drive Growth
ISDN’s industrial automation business in China remained resilient, with 1H25 revenue up 3.7% year-on-year, accounting for 64.3% of total group revenue. The hydropower segment saw a dramatic increase, with revenue soaring from S$5.0 million in 1H24 to S$32.5 million in 1H25, driven by S$27.1 million in construction revenue recognition from Lau Biang 2 and Lau Biang 3 projects.
However, currency volatility impacted both segments, as the Singapore dollar strengthened against the US dollar, reducing reported revenue growth. On a constant currency basis, ISDN’s revenue growth would have reached 27% year-on-year.
ISDN’s Strategic Position: Opportunities and Risks Ahead
Management maintains a cautiously optimistic outlook, citing ongoing expansion in Thailand, Malaysia, and Taiwan, alongside core markets in China, Singapore, and Vietnam. The mini-hydropower business is expected to continue delivering recurring revenue, with LB 2 and LB 3 targeted for completion in FY26F.
- Positive Catalysts: Higher-than-expected net profit from hydropower, faster economic recovery in China, and a strong semiconductor upturn.
- Downside Risks: Weak customer demand amid global slowdown, and risk of bad debts as economic conditions deteriorate.
Valuation, Ratings, and Shareholder Overview
- Valuation: ISDN is valued at 13.5x P/E (10-year FY16-25F average), with a target price maintained at S\$0.44, representing a 14.3% upside from the current price of S\$0.385.
- Consensus Ratings: Buy 1, Hold 0, Sell 0.
- Major Shareholders: Teo Cher Koon (32.2%), NTCP SPV VI (8.6%).
Recent Changes to Estimates
- FY25F EPS forecast reduced by 50.5% due to FX losses.
- FY26F and FY27F EPS forecasts reduced by 20.6% and 12.5%, respectively, due to lower gross margins from hydropower construction revenue.
ISDN Holdings Ltd – Financial Summary
| Metric |
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Revenue (S\$m) |
341.8 |
372.4 |
406.8 |
402.1 |
421.0 |
| Net Profit (S\$m) |
4.95 |
8.52 |
6.09 |
11.50 |
14.71 |
| Core EPS (S\$) |
0.011 |
0.019 |
0.014 |
0.026 |
0.033 |
| Core EPS Growth (%) |
(66.7%) |
71.1% |
(28.5%) |
88.8% |
27.9% |
| FD Core P/E (x) |
34.39 |
20.21 |
28.35 |
15.01 |
11.74 |
| Price To Sales (x) |
0.50 |
0.46 |
0.42 |
0.43 |
0.41 |
| DPS (S\$) |
0.003 |
0.047 |
0.003 |
0.006 |
0.008 |
| Dividend Yield (%) |
0.7% |
12.2% |
0.9% |
1.7% |
2.1% |
| EV/EBITDA (x) |
9.06 |
7.83 |
7.77 |
5.61 |
4.66 |
| P/FCFE (x) |
15.30 |
57.85 |
5.39 |
8.21 |
9.67 |
| Net Gearing (%) |
6.5% |
5.5% |
(6.6%) |
(12.9%) |
(17.1%) |
| P/BV (x) |
0.86 |
0.84 |
0.82 |
0.79 |
0.75 |
| ROE (%) |
2.50% |
4.20% |
2.91% |
5.34% |
6.52% |
Peer Comparison: ISDN Holdings vs. Regional Peers
| Company |
Ticker |
Recommendation |
Target Price |
Market Cap (US\$M) |
P/E CY25F |
P/E CY26F |
EPS CAGR (3yr) |
P/BV CY25F |
ROE CY25F |
Dividend Yield CY25F |
| ISDN Holdings Ltd |
ISDN SP |
ADD |
0.44 |
134.2 |
28.3 |
15.0 |
21.5% |
0.82 |
2.8% |
0.9% |
| Hiwin Technologies Corp |
2049 TT |
NR |
NA |
2372.3 |
36.6 |
27.5 |
17.1% |
1.92 |
5.2% |
1.1% |
| Teco Electric and Machinery Co |
1504 TT |
NR |
NA |
4750.1 |
24.5 |
21.7 |
na |
1.79 |
7.5% |
3.4% |
| Simple average |
excluding AEM |
– |
– |
– |
30.5 |
24.6 |
17.1% |
1.86 |
6.4% |
2.3% |
ESG Insights: Sustainability and Corporate Governance
ISDN is committed to sustainability through its integrated precision engineering services and clean energy initiatives. The group operates three mini-hydropower plants in Indonesia, aiming to offset carbon emissions and foster climate resilience, especially in rural areas. Employees are considered the company’s most valuable asset, and ISDN enforces equal opportunity policies and competitive benefits packages across its 78 Asia-Pacific locations.
Notable ESG highlights include:
- Established whistle-blowing policy for transparency and accountability.
- Comprehensive employee benefits including insurance, severance pay, performance-based bonuses, and travel allowances.
- Risks from diverse subsidiary operations, highlighted by a past legal issue with the Beijing subsidiary, underscoring the importance of robust risk controls.
Balance Sheet and Cash Flow: Financial Health Overview
| Metric |
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Total Cash & Equivalents (S\$m) |
60.0 |
56.5 |
87.0 |
105.2 |
119.4 |
| Total Debtors (S\$m) |
110.6 |
122.4 |
115.9 |
114.6 |
119.9 |
| Total Liabilities (S\$m) |
159.8 |
168.7 |
190.9 |
189.8 |
194.3 |
| Shareholders’ Equity (S\$m) |
198.6 |
206.7 |
211.3 |
219.9 |
231.0 |
| Operating EBITDA Margin (%) |
7.24% |
7.54% |
6.15% |
8.03% |
8.77% |
Operational Trends and Key Ratios
- Motion control revenue growth projected at 3–5% for FY25–27.
- Gross profit margin expected to recover from 24.0% in FY25 to 25.8% by FY27.
- ROIC to increase from 6.9% in FY25 to 12.6% in FY27.
- Accounts receivable days, inventory days, and payables days all forecast to improve over the next three years.
Stock Rating Framework
ISDN Holdings Ltd is rated “Add,” indicating the stock’s total return is expected to exceed 10% over the next 12 months, combining price appreciation and forward net dividend yields. Sector and country ratings for ISDN and its peers are based on market cap-weighted recommendations, guiding investors on optimal portfolio positioning.
Conclusion: Outlook for ISDN Holdings Ltd
ISDN Holdings Ltd continues to demonstrate resilience in its core automation business and significant growth in hydropower construction, despite profit volatility from currency fluctuations. With a strong commitment to ESG and a diversified geographic footprint, ISDN is positioned for long-term growth as Asia’s industrial and energy sectors recover. However, investors should remain vigilant regarding FX risks, margin pressures, and evolving macroeconomic conditions.
The company’s valuation, shareholder structure, financial health, and operational trends support a positive outlook, with the potential for re-rating if China’s economy accelerates and hydropower profits outpace expectations. ISDN stands out as a compelling play on Asia’s automation and clean energy trends, backed by a robust strategic roadmap and solid fundamentals.
