SINGAPORE (Sept 26): NRA Capital is maintaining its “overweight” rating on ISDN Holdings and fair value of 30 cents, following the group’s recent share price recovery by 1.2 cents to 18.3 cents last Friday.

ISDN had on Sept 13, submitted its application to the Hong Kong Stock Exchange for a potential dual listing.

NRA Capital’s analyst Liu Jinshu says in a note on Monday that ISDN currently trades at a 50% discount to its net asset value and adds that current prices “may not have fully factored any earnings recovery in FY17 and any successful dual listing in 4QFY16 or FY17”.

For 1H16, ISDN’s earnings fell by 68.9% to $1.5 million as lower cost pass-through to clients negatively impact gross margin and included a $0.9 million foreign exchange loss.

The brokerage has forecast full-year earnings of $3.6 million – or 1.02 cents earnings per share – for FY16, and full-year earnings of $6.8 million – or 1.92 cents earnings per share – for FY17.

The anticipated earnings growth for FY17 stems from higher orders from smartphone clients as they prepare for their next series of new products; initial contribution from mini hydropower projects; lower financing costs after the group repays its debt post-dual listing and from lower foreign exchange losses.

As of now, Liu believes the submission means that the company has “likely already entered into pre-consultation with exchange officials via its Hong Kong sponsor and indicates a higher chance of success”.

While a dual listing means shareholders can “increase their gains by transferring any SGX listed shares for sale on the HKSE, if prices in HK are higher”, Liu also cautions that ISDN’s FY16 results may just meet HKSE listing criteria and could pose a problem if the listing moves into 2017.

Shares of ISDN are trading 1.1% higher at 18.5 cents.