Excerpts from CGS-CIMB report

Analyst: Ngoh Yi Sin

Singapore’s natural ally
AnthonyKoh8.15ISOTeam CEO Anthony Koh.
NextInsight file photo
Backed by a 20-year track record, ISOTeam is one of Singapore’s most experienced facilities management specialists.

With the Housing Development Board (HDB) expecting over 139k homes to benefit from the home improvement programme (HIP) according to press reports, management sees opportunities for further contract wins given its leading market share in repairs & redecoration (R&R; c.20%) and addition & alteration (A&A; c.30%) of the public landscape, in terms of overall revenue.

 

Stock price 

35.5c

52-week range

32.5 - 38c

Market cap

S$101 m

PE (ttm)

19x

Shares outstanding

 285.1 m

Price-Book

1.7x

Dividend yield

1.8%

Source: SGX StockFacts

Highest order book to-date
After including the S$52.6m order wins announced on 24 May 2018, ISOTeam’s order book increases 62% to S$133m, of which 47% stems from public projects (vs. over 80% historically) and reflects its diversification into the private sector.

The order book is also at its highest over the past three years (average: S$91.5m, see Figure 5). While 9M18 PATMI (-23.5% yoy) suffered from project delays and price competition, management expects a stronger 4QFY18 from larger, higher-margin projects.

NgohYisin3.16Offers c.2% yield and recurring business
Based on Bloomberg consensus, the stock currently trades at 10x 12M forward P/E. It also offers c.2% dividend yield. According to management, ISOTeam operates on a business model that is relatively resilient to economic cycles but dependent on foreign labour and subcontractors.

-- Ngoh Yi Sin (photo), 
analyst, CGS-CIMB

One-off gains to boost FY18F net profit, according to management
The group announced a 34.1% stake sale of its mechanical & electrical (M&E) arm to Japan’s Taisei Oncho (1904 JP, Not rated) in Feb 2018.

Apart from recognising c.S$1m divestment gains, management believes ISOTeam will also be able to leverage their M&E expertise and network for the next phase of growth.

Management estimates a S$2m-3m gain and rental cost savings in 4QFY18F from the completed sale and relocation of corporate headquarters in Mar 2018.

Going green, going regional
ISOTeam’s pursuit of complementary capabilities has helped mitigate the slower R&R project roll-out in recent years, according to management.

It has added solutions for landscaping, odour removal and waterproofing, to tap customers’ preference shifts and national push towards a greener and more ecofriendly environment.

The group also made headway in its overseas ventures, having completed and secured painting and cleaning contracts in Myanmar and Malaysia since 2016.

Full report here


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