ISOTeam plans to allocate 40% of the proceeds to buy 60 drones, another 40% for drone-related working capital, including hiring and training people, and 20% for other drone-related development and matters.
"We believe the debut of ISO’s façade painting drone is imminent," state Ong and Lim in their Sept 17 note.
They are projecting 50% drone utilisation for the coming FY2027 and 100% in the following FY2028, which could lift margins.
The analysts estimate that the façade painting drone and indoor painting robots, which the company expects to be deployment-ready in 1HFY2026, will be able to reduce painting-related cost by 30-40%. Painting contracts accounted for around a third of ISOTeam's total work as at FY2025.
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"We believe ISO’s more competitive cost structure (vs peers), improved productivity and workload bandwidth would enable it to increase its market share, specifically in the coating & painting segment."
Besides painting public housing, the drones can be used for commercial and industrial properties as well.
"The Singapore government has been a vocal advocate for the adoption of technology and AI solutions to boost productivity and workplace safety," say Ong and Lim.
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To reflect cost savings from deploying drones, they have raised their gross profit margin estimates, resulting in higher earnings projections. By applying the same 8x earnings multiple, they have derived a new target price of 11 cents.
ISOTeam shares changed hands at 9 cents as at 11.26 am, up 1.12%.
