SINGAPORE (June 12): ISOTeam, the facilities management specialist, sees itself as a potential beneficiary of refurbishment initiatives, improved property sentiment and national push towards greener environment.
With the Housing Development Board (HDB) expecting more than 139,000 homes to benefit from the home improvement programme (HIP), management sees opportunities for further contract wins given its leading market share in repairs & redecoration (R&R) and addition & alteration (A&A) of the public landscape, in terms of overall revenue.
In an unrated report on Monday, CGS-CIMB Securities analyst Ngoh Yi Sin says, “After including the $52.6 million order wins announced on May 24, ISOTeam’s order book increases 62% to $133 million, of which 47% stems from public projects (vs. over 80% historically) and reflects its diversification into the private sector.”
See: ISOTeam announces $46.6 mil mega-contract win
Although the group’s PATMI suffered from project delays and price competition, management expects a stronger 4Q18 from larger, higher-margin projects.
Earlier in February, the group announced that it was disposing its 34.1% stake in its mechanical & engineering (M&A) arm to Japan’s Taisei Oncho.
See: ISOTeam to sell 34.1% stake in subsidiary to Japan's Taisei Oncho
This led to the group recognising $1 million in divestment gains, while its management believes that it will also be able to leverage their M&E expertise and network for the next phase of growth.
Management estimates a $2-3 million gain and rental cost savings in 4Q18 from the completed sale and relocation of corporate headquarters March this year.
The management also says that the group’s pursuit of complementary capabilities has helped mitigate the slower R&R project roll-out in recent years
“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,” says Ngoh.
In addition, the group says that it operates on a business model that is relatively resilient to economic cycles but dependent on foreign labour and subcontractors.
According to Bloomberg consensus, the stock is currently trading 10 times 12 months forward price-to-earnings, with a dividend yield of 2%.
As at 2.20pm, shares in ISOTeam are trading at 36 cents.
