ISOTeam - RHB Invest 2017-02-14: Steady Growth – Painting Block By Block

ISOTeam - RHB Invest 2017-02-14: Steady Growth – Painting Block By Block ISOTEAM LTD. 5WF.SI

ISOTeam - Steady Growth – Painting Block By Block

  • We expect contributions from ISOTeam’s solar renewable projects and Myanmar business venture – coupled with earnings from its recent acquisition – to underpin continued strong results going forward. 
  • It has a solid SGD107.1m orderbook currently and we expect more contract wins in the near term as the results for some tenders are due. 
  • With a positive outlook ahead, we continue to maintain our BUY call and DCF-backed SGD0.59 TP (41% upside) on this stock.


Strong SGD107.1m orderbook. 

  • We are positive on ISOTeam’s outlook ahead. Despite a weaker macroeconomic environment, it continues to steadily win contracts from the public sector. 
  • As of 1HFY17 (Jun), its orderbook stood at a SGD107.1m high.


Accretive acquisition with profit guarantee. 

  • ISOTeam’s recent SGD6.45m acquisition of Rong Shun Engineering & Construction Pte Ltd (Rong Shun) also comes with a PBT guarantee of not < 12% of the existing orderbook. This cannot go below SGD13.1m and works out to a SGD1.6m PBT guarantee. This represents 4x P/E, which would be accretive to the group. 
  • Recall that this acquisition was funded via internal cash flows, with the purchase consideration satisfied by ~ 57% cash and remainder via the issuance of treasury shares in three separate tranches over two years.


Looking forward to contributions from Myanmar. 

  • During our May 2016 visit to Myanmar, we noted that ISOTeam had tendered for a few local projects. We now expect the tender results to be known soon, and believe the group has a high chance of winning some of these projects. 


Maintain BUY, as more contracts are incoming.

  • We expect ISOTeam to continue winning more contracts in the near term. 
  • With a strong orderbook as well as acquisition earnings set to kick in during 2HFY17, we remain positive on its outlook. Thus, we maintain our BUY call and DCF-backed SGD0.59 TP, which implies 13.5x FY17F P/E.




Jarick Seet RHB Invest | http://www.rhbinvest.com.sg/ 2017-02-14
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.590 Same 0.590



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