ISOTeam’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’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.
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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’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.
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ISOTeam’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.
“Based on our scenario analysis, GPM could reach 27% assuming 100% painting drone utilisation. We believe ISOTeam’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,” 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’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.
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ISOTeam’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.
“We believe this reflects the management’s confidence in its business outlook and ability to sustain a higher dividend payout policy,” says Ong and Lim. “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.”
Ong and Lim see “more room” 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.
As at 2.33pm, shares in ISOTeam are trading 0.2 cents higher, or 2.9% up, at 7.1 cents.
