Fundamentals + TechnicalsFundamentals: Is the worst over?
1) Revenue: 70% from China. Chinese gov is determined to support its economy, launching a fresh set of stimulus earlier this week. Trump 2.0 tariffs may spur the chinese government to improve more on manufacturing capabilities and equipment turnover, and ISDN is likely to benefit.
2) Semicon (SEA): ISDN suffered for past 3 years the downcycle of semicon. Normally semicon cycle is between 18-24 months. Somehow this downcycle is disrupted by the wave of AI chips. However lower end semicon chips are still being used 80% of the time. I believe the downcycle of semicon is in sights. This will help ISDN resume its high margin business.
3) Weak Yuan: A weak yuan vs SGD caused unrealised fx losses in FY 2022 and FY 2023. However yuan has relatively been stable in 2024 albeit minor weakness. Chinese gov loosened it's monetary policy for the first time since 2011. And if we go back to 2011, yuan strengthened against SGD significantly until 2015 when the chinese economy popped. Could we see similar trends? One thing for sure, Trump will not allow yuan to depreciate and may likely find a balanced deal.
4) Re-investments during downcycle for 3 years: ISDN's management has been talking about re-investing in people and capabilities during downcycle. Historically, companies that do that benefits strongly during upcycle of economy. ISDN in its recent "Theedge" article mentioned about building a platform for talents to push for upsides with limited downsides. This business strategy will play out when economy improves.
5) Hydropower plants: This money making machine is churning out cash for the company daily. Due to its stability of cashflows (from PLN) and electricity generation even during dry seasons, these assets open up many possibilities of realising gains, which includes asset sales, equity sales, or listing as mentioned in the annual report. What we can be assured is due to the stability of cashflow, the company is not in the hurry to sell the asset at depressed price, so when the sale does actually come, we know that it will be at least fairly priced.
Technicals (weekly):
ISDN is now at a descending triangle movement. Recently price stability above $0.3 with MACD crossing into positive territory could mean an explosive upside in weeks to come. Daily chart also sees stability above SMA 200 and monthly chart MACD histo crossed positively this month.
I have set a price target of $0.465 and $0.61, representing roughly 50% and 100% gains respectively.
Do your own dd.
