• For 2 decades or so, ISOTeam has been a key player in maintaining and upgrading Singapore’s public infrastructure, including HDB facades and hawker centers.
Read more of what Maybank says below... |
Excerpts from Maybank KE report
Analyst: Jarick Seet
| Election play: Drone painting game-changer |
Initiate with a BUY and a TP of SGD0.09
| ISOTeam, a major local painter (30% market share) for government housing projects (HDB), bounced back to profitability in FY24 as older projects with lower margins have all been executed. We believe FY25E will be an inflection point for its profitability and the launch of its AI drone-painting solution on an HDB site in Apr’25 and will be rolled out at more estates if successful. This should enable it to leapfrog competitors with 30-40% lower costs, aligning with the government’s push to reduce manpower. We expect high growth ahead and initiate coverage with BUY and a TP of SGD0.09, based on a blended 8x FY25/26E P/E. |
AI drone painting – a game-changer
ISOTeam’s AI drone painting solution could potentially change the entire landscape.
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ISOTeam is currently the only contractor with this solution locally, which could reduce costs by 30-40%, putting it in a much better position in terms of technology, lower labour use and costs as the Singapore government has long-coveted the application of technology to reduce manpower.
ISOTeam owns the patents and the paints, which have been customised by its shareholder Nippon Paint (4612 TK, CP JPY929, not rated) to suit the density and concentration of drone spray painting.
Profitability and margins to surge
With an orderbook of SGD202.4m as of 6 Sept 2024 and lower margin projects cleared, we expect ISOTeam’s margins and profitability to surge in FY25 (+230% YoY).
Its drone painting solution could boost margins to around 30% from 20% and help secure more contracts.
With a general election in Singapore slated for this year, more government projects will likely come up for grabs, putting ISOTeam in a prime position to benefit.
ISOTeam will not just be a contractor, but a technology leader in drone painting application as well as a maintenance player in an ever growing HDB market.  Jarick Seet, analystWe believe the market will re-rate the company if the testing in Apr’25 is successful. There will also be a 30% dividend payout policy, which represents 4.7% yield for FY25E. We believe the key executives will buy back shares due to their positive outlook for ISOTeam. Risks to our call include labour and raw material costs increase as well as execution issues on its drone project. |
Full report here