CGS International (CGSI) Research analysts Natalie Ong and Lim Siew Khee have initiated coverage on ISOTeam, expecting the estate maintenance firm to triple its patmi in the current FY2025 ending June 30 on higher margins. 

 

In an April 15 note, Ong and Lim initiate coverage with &ldquo add&rdquo and a 9.6-cent target price, which represents an upside of around 35%. ISOTeam is trading at an &ldquo attractive&rdquo FY2026 dividend yield of 5.2%, they add. 

 

ISOTeam&rsquo s business is highly recurring, supported by various government initiatives, say the CGSI analysts. Its order book grew 9.8% y-o-y in FY2024, reaching a high of $191.3 million at end-FY2024, with some 75% of contracts coming from the public sector. 

 

As at Feb 7, ISOTeam&rsquo s orderbook stands at $188.7 million.

 

ISOTeam posted earnings of $6.5 million for its FY2024 ended June 30, 2024, 363.1% higher y-o-y. 

 

Ong and Lim expect profit margins to improve, driven by the execution of input cost-adjusted pricing on contracts secured post-Covid-19.

 

Also, ISOTeam is using drones for painting works, which the CGSI analysts estimate could reduce painting-related costs by 30%-40% and increase productivity. 

 

Painting constituted 30% of ISOTeam&rsquo s total work undertaken as at FY2024. While there are several players using facade inspection drones in Singapore, ISOTeam is one of the pioneers to use autonomous facade painting drones and indoor painting robots in Singapore.

 

Ong and Lim forecast gross profit margin (GPM) to be in the range of 18%-20% in FY2025 to FY2027, up from 15.5% in FY2024.

 

ISOTeam&rsquo s facade painting drone and indoor painting robot are likely to be ready for internal deployment in 1HFY2026, or the end of this calendar year, say the analysts. 

 

&ldquo Based on our scenario analysis, GPM could reach 27% assuming 100% painting drone utilisation. We believe ISOTeam&rsquo s more competitive cost structure and improved productivity could enable it to increase its market share, specifically in the coating and painting (C& P) segment,&rdquo they write. 

 

Ong and Lim expect to see core patmi to surge, tripling y-o-y in FY2025 and up 26% y-o-y in FY2026. 

 

Potential new revenue stream

 

ISOTeam&rsquo s artificial intelligence-enabled autonomous facade and indoor painting robots will be the first of its kind in Singapore and the company will own all patents and hardware and software rights. 

 

Ong and Lim see potential for ISOTeam to commercialise its suite of BuildTech solutions and believe this is a rerating catalyst, allowing it to establish a new revenue stream involving asset leasing, which is a scalable model that presents geographical diversification opportunities. 

 

The CGSI analysts believe possible targets are Australia and Japan, which have high labour costs. 

 

ISOTeam&rsquo s foray into BuildTech began in 2021. Through a collaboration with technology partners H3 Dynamics and Acclivis Technologies, ISOTeam developed four BuildTech solutions, which are currently at various stages of testing and deployment. 

 

The four solutions are: a manned facade inspection drone launched in 2022 an autonomous facade washing drone launched in June 2024 an autonomous facade painting drone with an estimated deployment ready date in 1HFY2026 and an autonomous indoor painting robot, with an estimated deployment ready date in 1HFY2026. 

 

Higher dividend hints at positive outlook

 

ISOTeam ceased dividend payments during the pandemic years of FY2020-FY2023. Following that, the company committed to a dividend payout ratio of not less than 25% for FY2024 and not less than 30% for FY2025 onwards. 

 

&ldquo We believe this reflects the management&rsquo s confidence in its business outlook and ability to sustain a higher dividend payout policy,&rdquo says Ong and Lim. &ldquo We forecast FY2025 dividend per share (DPS) of 0.28 cents, 251% higher than the 0.08 cents announced for FY2024 and expect to see FY2026/FY2027 DPS grow 31%/23% y-o-y, bringing FY2027 DPS to FY2019 levels.&rdquo

 

Ong and Lim see &ldquo more room&rdquo for ISOTeam to raise its dividend policy in the mid-term, given their forecast of positive core earnings per share (EPS) growth over FY2025-FY2027 and its strengthening net debt position.   

Between Mar 20 and 21, ISOTeam executive director and CEO Anthony Koh acquired 1.9 million shares at an average price of S$0.076 a share. This increased his total interest from 22.1 per cent to 22.52 per cent.

 

Koh has more than 30 years of experience in ISOTeam&rsquo s core business of building refurbishment and estate upgrading.

 

ISOTeam is structured into four main business segments which include repairs and redecoration (R& R), addition and alteration (A& A), coating and painting, and other services. The latter includes home retrofitting, landscaping, interior design, mechanical and electrical engineering, renewable solutions, vector control services and handyman services.

 

Following a strategic review in December 2022, both the R& R and A& A segments represent ISOTeam&rsquo s core focus across both the public and private sectors. Both segments are also supported by integrated eco-conscious solutions.

 

Koh oversees the group&rsquo s expansion plans, corporate development, marketing, tendering strategies, budget and cost controls, and resource planning. Before co-founding the group in 1998, he was a director at ISO-Build Corporation, managing projects, contracts and budgets. He worked at D& C Builders from 1989 to 1994, progressing from site supervisor to project manager.

 

On Feb 11, ISOTeam reported that its H1 FY2025 (ended Dec 31) revenue increased 4.2 per cent from the year-ago period to S$65.3 million, mainly attributed to the A& A segment. A& A contributed 46 per cent of the total revenue, R& R made up 29 per cent and the remaining two segments brought in 25 per cent. The group highlighted that approximately 80 per cent of revenue comes from the public sector, where payments are made within 60 days, ensuring low payment risk.

 

The group&rsquo s H1 FY2025 attributable profit increased 36.5 per cent to S$1.9 million, supported by improved margins of 15.1 per cent compared to 13.3 per cent the year before.

 

ISOTeam remains cautiously optimistic about market conditions in the construction sector. As at mid-February, the group&rsquo s order book stood at S$188.7 million, and it expects this to be supportive of activities until FY2029. Koh has expressed optimism about securing several tenders and maintaining a robust order book due to upcoming public-sector infrastructure projects and upgrades.

 

ISOTeam has also highlighted that it is incorporating artificial intelligence (AI) to enhance its spray-painting capabilities, allowing it to adapt to complex contours of eaves and ensure comprehensive coverage without leaving any blind spots. A live trial for this AI-driven spray-painting technology is scheduled for Build-To-Order blocks under construction in Singapore in the second quarter of 2025.

 

Koh noted last year that, unlike the fluctuating demand for construction, the need to maintain and upgrade buildings is constant. He said that in Singapore, buildings must be repainted at least once every five years and have their facades inspected every seven years.

 

He added that the market for maintenance and upgrading is growing annually and, even without new buildings, Singapore&rsquo s existing structures are ageing and require work. Koh said this is the advantage that the building refurbishment and estate upgrading industry has over the construction sector.

 

On Feb 24, the group announced a recommendation to distribute at least 30 per cent of its consolidated net profit after tax, excluding non-recurring, one-off and exceptional items, for future financial years ending Jun 30. Following the completion of a capital reduction exercise in December 2024, to better reflect the value of its underlying assets and its financial position, ISOTeam revised its dividend policy.

 

The stock has had a significant increase in its average daily trading turnover this year &ndash from near S$160,000 in 2024 to more than S$538,000 a day this year till Mar 27. ISOTeam was founded in 1998 and listed on the Catalist board in July 2013.

 

16 primary-listed companies conduct buybacks with a total consideration of S$61m from Mar 21 to 27, more than double the S$29.8m for the preceding five sessions

 

[singapore] Over the five trading sessions from Mar 21 to 27, institutions were net sellers of Singapore stocks, with net institutional outflow of S$151 million. This followed S$18 million of net outflow over the preceding five sessions, and brings the net institutional outflow for the 2025 year to Mar 27 to S$1.6 billion.

 

Institutional flows

Over the five trading sessions, the stocks with the highest net institutional outflow were UOB : U11 -0.44%, Singtel : Z74 +0.88%, DBS : D05 -0.24%, OCBC : O39 -0.46%, Singapore Technologies Engineering : S63 +0.89%, Genting Singapore : G13 -0.66%, Venture Corporation : V03 -0.32%, Frasers Centrepoint Trust : J69U 0%, CapitaLand Integrated Commercial Trust : C38U 0% and Singapore Exchange : S68 +0.91%.

 

Meanwhile, Yangzijiang Shipbuilding : BS6 -1.25% led the net institutional inflows, followed by CapitaLand Ascendas Reit : A17U +0.38%, Sembcorp Industries : U96 -0.47%, Paragon Reit : SK6U 0%, ParkwayLife Reit : C2PU -0.72%, ComfortDelGro Corporation : C52 -0.68%, Singapore Airlines : C6L 0%, UOL Group : U14 +0.17%, Yangzijiang Financial Holding : YF8 +1.27%and CapitaLand Investment : 9CI -1.08%.

 

From a sector perspective, Singapore real estate investment trusts and industrials experienced the highest net institutional inflow, while financial services had the most net institutional outflow.

 

Trading activity

Stocks whose trading turnover notched higher included Envictus International Holdings : BQD 0%, SIA Engineering Co : S59 -2.24%, Pacific Century Regional Developments : P15 0%, Mandarin Oriental International : M04 0%, China Sunsine Chemical Holdings : QES +0.93%, DFI Retail Group Holdings : D01 -2.05%, OKH Global : S3N +9.76%, Hong Leong Asia : H22 +4.96%, Keppel Pacific Oak US Reit : CMOU +3.02% and Nam Cheong : 1MZ -1.49%.

 

Mandarin Oriental International&rsquo s share price declined from US$1.77 to US$1.75 over the five sessions. On Mar 5, the hotel investment and management group reported that its FY2024 revenue increased 13 per cent from the year before to US$2.1 billion.

 

Hotel management fees grew 15 per cent in FY2024 due to a strong increase in revenue per available room. Underlying profit after tax was US$75 million, 8 per cent lower than FY2023 due to lower one-off fees. The group highlighted that five new hotels and residences are planned for 2025. Mandarin Oriental International now manages 41 hotels, and aims to double the figure by 2033.

 

Share buybacks

During the five sessions, 16 primary-listed companies conducted buybacks with a total consideration of S$61 million, more than double the S$29.8 million for the preceding five sessions.

 

OCBC again led the consideration tally, with 1.45 million shares bought back at an average price of S$17.87 a share. ESR-Reit : J91U -4% and Stoneweg European Reit : CWCU +0.46% also conducted buybacks over the five sessions. The manager of ESR-Reit bought back 4.3 million shares at S$0.25 a unit, while the manager of Stoneweg European Reit bought back units in both its euro and Singdollar counters.