With the gradual resumption of construction activities after the lockdown, RHB analyst Jarick Seet has maintained his “buy” recommendation on ISOTeam with a lower target price of 21 cents from 24 cents previously on expected profitability to rebound for the building maintenance and estate upgrading services provider.
The company had a tough FY2020 as the circuit breaker and social distancing measures due to the Covid-19 pandemic brought a halt on all construction projects and caused a delay in contract implementation.
Due to the rapid spreading of the virus among workers, their movements were significantly restricted, and works could only be done for the most essential maintenance jobs for almost five months.
“With Singapore currently in Phase 2 of re-opening, ISOTeam has received approval by the relevant authorities to resume activities at all its construction sites and factories. However, the pace of resumption is slow, due to ongoing stringent measures in accordance with safe distancing and other health requirements – such as routine swab tests to be conducted at project sites, and prior clearance at dormitories before the workers can report to worksites,” says Seet.
As at September, ISOTeam had an orderbook of $165.7 million, of which 65% are public sector projects to be delivered over the next two years. Of the total amount, some $53.4 million worth of contracts were secured in June, after the end of the circuit breaker measures implemented from April to June.
“Management is optimistic that the Government will do its best to spur business activity by stepping up public sector projects. It is also anticipating pent-up demand from the private sector, which had put the company’s projects on hold,” notes Seet.
“It has been very encouraged by the projects secured thus far, and will continue to pursue all leads to secure more. As a result, we expect profitability to recover strongly in FY21, followed by an improvement in margins,” he adds.
Seet’s target price of 21 cents is pegged to 11x FY2021F price-to-earnings (P/E).
As at 4.17pm, shares in ISOTeam are trading 0.3 cent lower or 2.0% down at 14.4 cents.
