Cedric Yang contributed this article to NextInsight

During times of crisis, such as currently, opportunities to scoop amazing companies presents themselves, often hidden under fears and stormy macroeconomic weathers.

ISDN stock price 

47.5 c

52-week range

13.4 – 48 c

PE (ttm) 

7.9

Market cap

S$208 m

Shares outstanding

438.6 m

Dividend 
yield 
(ttm) 

3.1%

One-year return

-35% 

Source: Yahoo!

Of the many excellent companies, I will talk about the investment thesis for these 2 Singapore listed companies, ISDN Holdings (I07) and AEM Singapore (AWX).

For each of the companies, I will talk succinctly on the current challenges facing companies and how these companies are able to overcome them. Additionally, I will include qualitative projections on these stocks.

auto graphic422
ISDN Holdings
 

#1 High inflation and cost pressures

ISDN has strong and stable pricing power and can pass the costs down to the customers. Their gross margin remained stable throughout the years and their productivity improvement driven by the management increased their profit margin year on year.

It is also noteworthy (often understated) that ISDN has been profitable since its listing in 2005 on the Singapore Exchange.

That includes the Global Financial Crisis in 2008, Europe debt crisis in 2012, China economic crisis in 2015, trade war in 2018, and Covid pandemic in 2020.

Oftentimes, companies such as ISDN that is exposed to Europe and China market should be severely affected by events such as trade wars, but ISDN’s huge base of technology partners and diversified base of more than 10,000 customers make it extremely resilient.

As such, it is a fortress in terms of defense. ISDN proved itself to be more than just a defensive fortress by recording historical profitability growth during the pandemic.

A pandemic that figuratively stopped the entire world through lockdowns and apocalyptic infections. If that isn’t proof that ISDN has both strong moat defenses and growth appetite, I do not know what is.

#2 China Zero-covid policies

ISDN earns circa 70% revenue from China.

With the zero-covid policies in China, ISDN will be inevitably affected through sporadic lockdowns while the rest of the world resumes post-pandemic lives.

However, I see this as a silver lining for ISDN.

The zero-covid policy is going to drive greater adoption of automation, robotics, remote monitoring, and data & software analytical management.

Even if China changes its stance on Covid from zero to endemic, such demand will still be present as automation in China is a strong tailwind (See International Federation of Robotics article; and South China Morning Post article.)

#3 High interest rates

Central banks have been increasing the nominal interest rates to combat hot inflation.

This is a wildfire moment across many “tech” stocks which depended on loose monetary policies to borrow money for growth.

As the fire burns through, many of such weak stocks that are lumped wrongly together with cash and profit generating technology and growth stocks crashed to an average of 70-80% from all time high.

ISDN is a cash generating and profitable business, with loans on secured long term interest rates. Even if banks were to force a refinance to higher interest rates, ISDN could easily pay off all its debt obligations with its cash holdings.

I had previously written an article on ISDN Holdings here (ISDN: Why it fulfills all my investing criteria).

The above points reinforces my belief that ISDN will emerge stronger after this storm.

Tomorrow: Part 2 -- AEM

See also: 

You may also be interested in:


You have no rights to post comments

Counter NameLastChange
AEM Holdings1.850-0.010
Best World2.480-0.020
Boustead Singapore0.9550.005
Broadway Ind0.1570.009
China Aviation Oil (S)0.870-
China Sunsine0.400-
ComfortDelGro1.3900.010
Delfi Limited0.875-
Food Empire1.110-
Fortress Minerals0.295-
Geo Energy Res0.305-
Hong Leong Finance2.440-
Hongkong Land (USD)3.450-0.050
InnoTek0.5150.005
ISDN Holdings0.305-
ISOTeam0.049-0.001
IX Biopharma0.0420.002
KSH Holdings0.250-
Leader Env0.049-
Ley Choon0.0560.002
Marco Polo Marine0.0680.001
Mermaid Maritime0.1390.001
Nordic Group0.300-0.005
Oxley Holdings0.0880.001
REX International0.125-0.001
Riverstone0.925-0.005
Southern Alliance Mining0.485-
Straco Corp.0.480-
Sunpower Group0.220-
The Trendlines0.0640.001
Totm Technologies0.019-0.001
Uni-Asia Group0.800-0.010
Wilmar Intl3.1400.010
Yangzijiang Shipbldg1.7500.010
 

We have 1121 guests and no members online

rss_2 NextInsight - Latest News