ISOTeam - RHB Invest 2017-08-28: Tough FY17, A Better Year Ahead

ISOTEAM LTD. 5WF.SI

ISOTeam - Tough FY17, A Better Year Ahead

ISOTeam endured a tough FY17, hit by one-off impairments, delayed revenue recognition for some of its projects and lower R&R projects.
However, management has ventured into a few new projects to enable it to grow further, such as the recently announced SG Bike and cockroach spray.

We expect a better FY18F ahead as we expect the company to win more new contracts in the near term and with a recovering property outlook, as well as contributions from its Solar and Myanmar projects.
Maintain BUY with DCF-based TP of SGD0.50 (43% upside).

We are positive on ISOTeam’s outlook ahead.
Despite a weaker macroeconomic environment, it continues to steadily win contracts from the public sector. As at 18 Aug 2017, its orderbook stood at a SGD95.8m high.

In Apr 2017, ISOTeam completed the purchase of its new premises in Changi, which would house its expanded operations including its corporate headquarters and the offices of its subsidiaries. The group expects to centralise its operations at the new headquarters by the end of this year. It would also likely be selling off its previous office which would enable it to enjoy a one-off gain of about SGD3m.

SG Bike Pte Ltd. (SG Bike), a next generation bike sharing scheme, which is 51% owned by ISOTeam with its partners Mr Sean Tay (27%) and Mr Andy Tay (22%), was launched on 24 Aug 2017.
This new venture would allow the company to broaden its revenue base and generate a new recurring stream of income. However, we do not expect this venture to have a positive impact on its earnings in the near future.

During our May 2016 visit to Myanmar, we noted that ISOTeam had tendered for a few local projects. It has since won a few projects on this front and we expect more revenue contribution on this front for 2018.

We expect a better FY18 ahead as we expect ISOTeam to win more new contracts in the near term with a recovering property outlook, and contributions from its Solar and Myanmar projects.
Management ventured into a few new projects to enable it to grow further, such as the recently announced SG Bike and cockroach spray, which has been fully launched in Singapore. It is also in the midst of bidding for the upgrading project of 12 army camps worth up to SGD30-40m.
We also believe that a better outlook for the Singapore property market would help boost the private jobs market which would in turn benefit the company going forward.
As a result, we maintain BUY with an unchanged DCF-based TP of SGD0.50.

Jarick Seet RHB Invest | http://www.rhbinvest.com.sg/ 2017-08-28

RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.50 Down 0.590