ISOTeam - UOB Kay Hian 2019-08-29: FY19 Results In Line; Safe At Home, Growing Regionally


ISOTeam - FY19 Results In Line; Safe At Home, Growing Regionally

  • ISOTeam announced FY19 core net profit of S$5.8m, in line with expectations. The group saw robust growth across all segments and a recovery in earnings as well as projects.
  • Recent acquisitions are strategic in nature to enhance the group’s home presence, including securing a larger market share in bike sharing and extending into project management works in the region.
  • Maintain BUY with an unchanged PE- based target price of S$0.34.


Results in line, reversing losses from previous year.

  • ISOTEAM LTD. (SGX:5WF) reported FY19 net profit of S$6.8m. 4QFY19 net profit of $2.9m was up compared to a loss making position in 4QFY18. Excluding extraordinary items, core net profit of S$5.8m for FY19 was in line with expectations.
  • Dividend of 0.42 S cents at 20% payout was declared, up from 0.18 S cents in FY18.

Recovery underway with top-line growth.

  • 4QFY19 saw revenue growth of 64% y-o-y, up to S$33.1m. On a full-year basis, revenue was up 63% y-o-y to S$136.6m. All segments saw resounding growth in FY19 with an increase in the number of projects and higher valued projects delivered, such as the new nightclub at Marina Bay Sands.
  • The Addition and Alteration (A&A) segment increased to S$67.7m, up 87% y-o-y while the Repairs & Redecoration (R&R) segment increased to S$27.3m, up 38% y-o-y. Other segments also similarly recorded double-digit growths.

Better gross margins, improving cost control.

  • ISOTeam’s gross margins increased in 4QFY19 to 20.3% (4QFY18: 9.4%), and improved q-o-q (3QFY19: 15.7%). Expenses were also kept in check, with admin expenses up only 16% y-o-y in 4QFY19 along with lower marketing & distribution expenses from lower motor vehicle related expense. The integration at its new headquarters appears to be progressing well and overall net profit margin has improved to 8.9% (3QFY19: 5.6%).


Operations still robust.

  • New order wins for the group are continuing to progress strongly, albeit with a slight dip in FY19. The group is poised to ride on government initiatives such as the Home Improvement Programme (HIP). A new batch of flats will be selected for upgrading under the HIP this year with upgrading works starting in 2020. R&R projects are also poised for a pick-up in volume leading up to an election. Current order book is at S$113.5m.

Acquisition of project management unit to boost earnings going forward.

  • ISOTeam acquired business units of Pure Group, a project and construction management services business in Jul 19. The acquired units have experience in the retail and commercial projects in the region, including Integrated Resorts in Singapore, Vanguard Hotels across Southeast Asia and Swarovski SEA.
    The acquisition also allows ISOTeam to deal with high-value and fast-track regional projects in the private sector, diversifying their expertise and moving up the value chain; this is a positive move to attain better margins. Profit targets for the acquired unit are set for FY20 (S$3m) and FY21 (S$5m), which will be a boost to ISOTeam’s earnings moving forward.

Mobike acquisition increases market share.

  • ISOTeam also recently acquired bicycle assets from Mobike, through its 51% wholly-owned subsidiary SG Bike. SG Bike will purchase 18,000 of Mobike’s street bicycles and 7,000 warehouse bicycles, adding to SG Bike’s current fleet of 3,000. The purchase will be conducted through:
    1. Purchase consideration of S$2.5m comprising the bicycle assets and its license,
    2. Assumed liabilities of S$2.0m repaid via credits deposited in accounts of existing users.
  • While management noted that the current fleet of SG Bike is still unprofitable on a net level, a scale-up in fleet size can help to circumvent fixed costs already in place. Overall, the enhanced fleet will make SG Bike the dominant player in the market.


  • None. Our earnings forecasts are S$9.3m for FY20, S$11.5m for FY21 and S$12.0m for FY22.


Unchanged PE-based target price of S$0.34.

  • This is based on a 12.4x 1-year forward PE, in line with ISOTeam’s mean forward PE (excluding low-base earnings effect in 2018). The group’s growth looks to be intact with recent acquisitions and the prospect of a potential election.


  • Accretive M&As.
  • Contract wins.
  • Margin improvement from new headquarters.

Lucas Teng UOB Kay Hian Research | John Cheong UOB Kay Hian | https://research.uobkayhian.com/ 2019-08-29
SGX Stock Analyst Report BUY MAINTAIN BUY 0.340 SAME 0.340