The company, led by CEO Anthony Koh, attributes this 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 last June.
ISOTeam’s share price fell on Aug 28, the day immediately following the Aug 27 results announcement, trading as low as 8 cents from 9 cents before.
Yet, it has since regained some of the lost ground as investors start to appreciate that, despite the softer-than-expected 2HFY2025 numbers, the company is well poised to capture a bigger order book ahead and that it is moving into new business areas where it can ride on the broader construction boom that is happening right now.
In their Sept 1 note, Natalie Ong and Lim Siew Khee of CGS International have not only maintained their “add” call on the stock, but have also raised their target price from 9.6 cents to 10.2 cents, with a view that the company’s recurring business model will put it in good standing to enjoy profit and margin recovery.
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They expect 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. Additionally, ISOTeam will likely bid for various estate upgrading and enhancement contracts.
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 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 eight times FY2027 earnings. This represents a discount of 16% compared to local listed peers due to its smaller scale, thereby deriving a target price of 10.2 cents.
For them, key re-rating catalysts include stronger-than-forecast order book 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.
In his separate report dated Aug 28, Jarick Seet of Maybank Securities has kept his “buy” call and indicated a target price of 10 cents, which is close to 10.2 cents given by Ong and Lim of CGS International. However, Seet is dialling back slightly on his earlier stance, which was a more bullish 10.4 cents.
Moving beyond 2HFY2025, Seet expects the current 1HFY2026 to “improve significantly” y-o-y as recognition of some projects comes in after earlier delays, which contributed to the lower earnings in FY2025.
Seet remains upbeat on this counter. For one, ISOTeam is likely to see more contract wins, as management expects the pace of project awards to pick up. “[This is] driven by public sector upgrading works to introduce more community spaces and senior-friendly amenities for both public and private estates,” Seet writes in his Aug 28 report.
He adds that ISOTeam has an existing order book of $181.1 million, of which 80% is slated for completion within 18 months. Based on the historical rate, Seet estimates that another $20 million worth of orders will come in this October.
ISOTeam, the only local contractor currently working with drones, is set to test its new artificial intelligence drone painting solution on several build-to-order (BTO) sites by the end of October. If successful, this will be rolled out to more estates.
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The move, which could reduce costs by 30% to 40%, would “position it well in terms of technology, lower labour use and costs as the Singapore government has long-coveted the application of technology to reduce manpower”.
For FY2026, FY2027 and FY2028, Seet has reduced his revenue targets by 16.2%, 14% and 0.8% to $137.4 million, $158.4 million and $182.7 million, respectively.
Seet has also lowered his core net profit estimates for FY2026 and FY2027 by 23.4% and 10.1% to $7 million and $9.5 million, respectively. In FY2028, however, Seet has raised his estimates by 18.5% to $12.5 million. Seet’s new target price of 10 cents is pegged to a blended FY2025/FY2026 P/E of nine times.
