SINGAPORE (May 15): UOB Kay Hian is maintaining its “buy” recommendation on Catalist-listed ISOTeam with a new target price of 54 cents, even as the group missed expectations with its latest 3Q17 results.
To recap, the service provider of repairs, maintenance and estate upgrading works reported a 31.2% decline in 3Q net profit as intensified competition caused contributions from the repairs & redecoration (R&R) segment to dip – leading to a 17.3% drop in group revenue to $16.5 million for the quarter.
In a Monday report, analyst Edison Chen maintains the belief that the R&R segment could still pick up amidst what he observes to be early signs of upturn in the property market, where ISOTeam’s management is expecting new order winds to pick up with benefits starting next year.
As two of the group’s private clients had filed for bankruptcy, Chen estimates that bad debts for the year could rise to as much as $1.7 million.
He also highlights that its renewable energy business, SolarNova, as well as its new subsidiary, Rong Shun, could contribute to the group’s bottom-line in 2H17, with the latter expected to deliver $0.8 million in profit during the period.
Further, the analyst has identified pest removal as a possible new growth area for the group given how six town councils have expressed interest in ISOTeam’s new non-toxic pesticide, which was jointly developed with E-Organic Solutions and recently ended its trial period with Tampines Town Council.
UOB has nonetheless opted to take a more conservative stance to wait for greater certainty, and therefore cut FY17-18 earnings estimates by 26.7% and 19.2% respectively.
As at 11:02am, shares of ISOTeam are trading 1 cent higher at 38 cents.
