As sure as the sun rises from the east, the pace of deal flows and money being shifted around steps up when a particular sector looks hotter.

 

In a by-now familiar plot, the local construction industry is set for a bumper year, with official projections of between $47 billion and $53 billion worth of construction demand this year &mdash more than double that of the pandemic trough of $21 billion in 2020.

 

Along with the healthy gains of construction and engineering stocks, there is a noticeable increase in fundraising. After all, there couldn&rsquo t be a better time to tap external capital than now when sentiment is right.

 

The latest to raise funds is ISOTeam. Just a few years ago, the company was seen as a contractor in a niche segment of undertaking painting works for public housing. Not one to stand still, it was forced to adapt because of the labour crunch during the pandemic years which caused unnecessary hits to its bottom line. ISOTeam has been focusing on getting its drone painting technology ready for prime time.

 

On Sept 11, the company announced it is raising $10 million to fund a &ldquo full-fledged drone workforce&rdquo , with the necessary talent to develop and operate what will be a fleet of AI-enabled drones used to wash and to paint building faç ades.

 

The company plans to place 86.2 million new shares at 8.1 cents each, raising $7 million. It will raise another $3 million by issuing a convertible bond of 32.9 million conversion shares that can be converted at 9.1 cents.

 

As ISOTeam indicated, after 2.5 years of research and development (R& D), it is now in the final stage of approval processes and commercial trials for its faç ade painting and washing drones. For this move, it is backed by Nippon Paint (Singapore), which is a key shareholder and presumably supplier of the firm.

 

As reported elsewhere in this issue of The Edge Singapore (see &ldquo KSH to focus on Singapore for next couple years&rdquo ), KSH Holdings, another longtime established contractor, was recently in the market for funds as well. On Aug 21, KSH announced it has placed out nearly 29 million treasury shares at 30.5 cents each, raising net proceeds of $8.67 million for working capital. The shares were taken up by the likes of ICH Capital, GinkoAGT Global Growth Fund and Lion Global Investors.

 

In an interview with The Edge Singapore in March, Gregory See of AGT Partners, which manages the Ginko AGT Global Growth Fund, observes that construction stocks are in a sweet spot as most of them were still suffering from undervaluation from the pandemic years, even as fundamentals have improved.

 

In addition, the $5 billion stock market boost from the government will presumably help the overall mid-cap counters get off the rut of low volume and liquidity. From See&rsquo s point of view, construction companies should use this &ldquo chance of a lifetime&rdquo and take the opportunity to grow.

 

Since the placement, KSH shares have gained to close at 41 cents on Sept 10, which means these investors are already in the money.

 

Similarly, on Sept 2, Ever Glory United announced that it has raised some $17.05 million from the placement of 31 million shares at 55 cents apiece. Net proceeds from the placements will be used for general working capital purposes and to partially repay the balance purchase consideration for the acquisition of Guthrie Engineering.

 

Similar to KSH&rsquo s placement, the investors are ICH Capital, GinkoAGT Global Growth Fund and Lion Global Investors, and also include money managers no strangers to the local market such as Asdew Acquisitions, Azure Capital and Amova Asset Management, the new name of Nikko Asset Management. Ever Glory shares closed at 66 cents on Sept 10. Again, these investors are already in the money.

 

Also in July, water engineering firm Sanli Environmental raised $4 million from placing out 33.3 million shares at 12 cents each. The investors include Lion Global Investors managing on behalf of its clients, and Asdew Acquisitions. Sanli Environmental shares have since surged by around 160% to close at 31 cents on Sept 11.

 

Who&rsquo s next?

 

ISOTeam plans to raise some $10 million to fund the wider deployment of drones. The company plans to place out 86.2 million new shares at 8.1 cents each, raising $7 million.

It will also raise another $3 million by issuing a convertible bond of 32.9 million conversion shares that can be converted at 9.1 cents.

 

SAC Capital is helping with the share placement while SooChow Singapore Capital Markets (Asia) deals with the convertible bonds.

 

Maybank Securities is the sub-placement agent for both placements.

 

ISOTeam made its first foray into drone technology in 2021 through a collaboration with a technology partner that led to the use of AI-enabled drones for faç ade inspection works.

 

In the same year, it signed a memorandum of understanding with Nippon Paint (Singapore), which is a shareholder, to collaborate on the development of AI-driven, autonomous faç ade washing and painting drones.

 

According to ISOTeam, after 2.5 years of R& D, it is now in the final stage of approval processes and commercial trials for its faç ade painting and washing drones.

 

Proceeds from this fund-raising will help set up a " full-fledged drone workforce" .

 

&ldquo What started as a project to resolve manpower supply issues during the Covid-19 pandemic is finally coming to fruition," says executive director and CEO Anthony Koh.

 

" The drones can work quickly and tirelessly with greater accuracy. This will reduce our reliance on foreign workers and result in time and manpower cost savings as well as enhanced work-site safety."

 

Besides deploying the drones for use in its own projects, ISOTeam may potentially lease them to industry peers or help them develop their own drones that can serve their specific needs.

 

After setting aside 60% of the proceeds for drones, the remainder will be used for general working capital needs, which will include corporate

expenses, hiring of drone pilots, software engineers and other related talent.