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Excerpts from GGS Int'l report
Analysts: Natalie Ong & Lim Siew Khee
■ FY6/25 PATMI of S$5.1m (-21% yoy) was a miss at 77% of our FY25F as delays/timing of revenue recognition resulted in an abnormally weaker 2H.
■ 2H saw slower-than-expected order wins but our outlook remains positive. ■ Reiterate Add on ISO’s recurring business model and profit/margin recovery. |
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| Tapping A&A demand from new sector: worker dormitories |
On 15 Aug 2025, ISO announced a collaboration with Design@Loft Architects (dLOFT, unlisted) to provide upgrading or renovation works for factory converted dormitories (FCDs) in Singapore.
dLOFT will be responsible for the architectural design and regulatory submissions for FCDs while ISO will provide upgrading, renovation and construction works.
During its FY6/25 analyst call, management said it is currently in negotiations with 4-5 potential FCD clients.
Given rising bed rentals due to the shortage of worker accommodations in Singapore and the 2030 deadline for all worker dormitories to meet the more stringent Dormitory Transition Scheme standards, we think ISO could see more alterations & addition (A&A) contract wins from worker dormitories requiring upgrades and employers turning to FCDs.
| Slower contract awards in 2H but outlook remains positive |
ISO’s orderbook stood at S$181m as at end-FY25, lower than S$193m at end-FY24.
We understand that this was due to slower-than-expected contract awards in 2H.
In our view, demand for ISO’s services is well supported by a pipeline of c.100k Housing Development Board (HDB) build-to-order (BTO) units that will be launched in 2022-27F, which will require painting, as well as various national initiatives, such as the Façade Enhancement Programme, Neighbourhood Renewal Programme and Estate Upgrading Programme.
| Lower 2H due to timing of revenue recognition; pushed to 1H26F |
2H25/FY25 revenue fell 20%/8% yoy due to the timing of revenue recognition for certain public sector projects arising from delays in claim certification.
During the analyst briefing, management said customer delays in certifying the work done prevented it from booking the revenue for 2H25 and this will be booked in 1H26F instead.
Revenue from three segments fell yoy - Repairs & Redecorations (-43% yoy), Coating & Painting (-14% yoy) and Others (-10% yoy), with A&A (+25% yoy) the only segment registering higher revenue.
FY25 GPM expanded 0.5% pt to 16% while EBITDA margin was stable yoy at 8.1%. Nonetheless, FY25 core PATMI of S$2.4m was 21% higher yoy.
We reiterate Add for its recurring business model and profit and margin recovery.  Natalie Ong, analystOur TP increases to S$0.102 as we roll over to FY27F EPS, still based on 8x P/E, a 16% discount to local listed peers due to its smaller scale. ISO is trading at an attractive FY27F dividend yield of 4.8%. Key re-rating catalysts: stronger-than-forecast orderbook growth and potential commercialisation of its BuildTech solutions, which could add new asset leasing revenue and geographical diversification opportunities. Downside risks: delays in contract completion and constraints from cost and availability of foreign labour and subcontractors. |
Full report here
