For the half year ended June, ISOTeam, led by CEO Anthony Koh, reported earnings of $5.1 million, down 21% y-o-y, which Ong and Lim attribute to delays in revenue recognition which caused an "abnormally" weak half year.
The company's order book as at June was $181 million, somewhat lower than $193 million recorded as at the end of the preceding year ended June 2024.
Nonetheless, Ong and Lim believe that demand for the company's services will be well supported by a pipeline of some 100,000 new flats that will be launched between 2022 and 2027.
In addition, there are various estate upgrading and enhancement contracts that ISOTeam will presumably bid for.
Ong and Lim note that ISOTeam is moving into a new market segment: upgrading and renovating factory spaces that are being converted into workers' dormitories.
On Aug 15, the company announced a collaboration with Design@Loft Architects to this end, where this partner will be responsible for the architectural design and regulatory submissions while ISOTeam will provide upgrading, renovation and construction works.
ISOTeam is now in talks with 4 to 5 such potential clients, and the analysts think there could be more of such contracts given the shortage of worker accommodations in Singapore, as well as a 2030 deadline for all dorms to meet more stringent requirements.
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They continue to like this stock for its recurring business model and profit and margin recovery and are now applying a valuation multiple of 8x FY2027 earnings, which is a discount of 16% off local listed peers because of its smaller scale, thereby deriving a target price of 10.2 cents.
For them, key re-rating catalysts include stronger-than-forecast orderbook growth and potential commercialisation of its BuildTech solutions, which could add new asset leasing revenue and geographical diversification opportunities.
On the other hand, delays in contract completion and constraints from cost and availability of foreign labour and subcontractors would be downside risks.\
ISOTeam shares changed hands at 8.3 cents as at 1.41 pm, up 2.47% for the day and up 38.33%.
