Company Initiation: ISOTeam Ltd (ISO SP/5WF.SI)
Company Update: 08 May 2025
Leveraging public sector demand and sustainability tailwinds
- Strong profit recovery and margin expansion. ISOTeam posted a robust 1H25, with net profit rising by 36.5% YoY to S$1.9mn. Revenue grew by 4.2% YoY to S$65.4mn, underpinned by stronger contributions from the A&A segment. Gross profit climbed by 18.4% YoY to S$9.9mn, with the margin expanding to 15.1%, up from 13.3%, sustaining healthy pre-pandemic levels.
1H25 performance: Margins and Revenue Boost
ISOTeam delivered a strong performance in 1H25, with revenue rising by 4.2% YoY to S$65.4mn, up from S$62.7mn in 1H24. This growth was driven by higher contributions from its Addition & Alteration (A&A) segment, which saw a 61.6% YoY jump in revenue to S$30.3mn in 1H25, up from S$18.7mn in 1H24. Gross profit rose 18.4% YoY to S$9.9mn in 1H25, reflecting improved margins from projects secured post-COVID-19. Additionally, the company reported a net profit attributable to shareholders of S$1.9mn, a 36.5% increase compared to S$1.4mn in 1H24.
Structural tailwinds underpin multi-year growth visibility
ISOTeam is well-positioned to capitalise on Singapore’s sustained public sector upgrading and green initiatives. Its core Repairs & Redecoration (R&R) and Addition & Alteration (A&A) services align with recurring programmes like the Home Improvement Programme (HIP), Neighbourhood Renewal Programme (NRP) and the planned launch of over 50,000 BTO flats from 2025-2027. These works, typically recurring every five to ten years, underpin long-term revenue visibility. ISOTeam has also expanded into sustainability-linked projects, such as solar installations with Singapore’s 2 GWp by 2030 target. Its Coating & Painting (C&P) segment also supports HDB initiatives to mitigate the Urban Heat Island (UHI) effect through heat-reflective coatings. The Group’s early adoption of robotics, drones, and AI-powered painting solutions enhances productivity and mitigates labour constraints. Backed by its robust order book, ISOTeam offers clear earnings visibility and sustained multi-year growth potential.
Valuation & Action
We initiate coverage on ISOTeam Ltd with an OUTPERFORM rating and a 12-month TP of S$0.100, based on a Discounted Cash Flow (DCF) valuation, assuming a terminal growth rate of 2.0% and a WACC of 7.5%. ISOTeam’s dominant position in public sector upgrading, which contributes over 80% of revenue, coupled with expanding exposure to green projects, underpins resilient cash flows and long-term growth. With a healthy balance sheet, robust project pipeline, and increasing productivity from digitalisation, we expect steady earnings growth and margin expansion over the medium term. Our target price implies a potential upside of 31.8% from current levels.
Risks
Macroeconomic slowdown, margin pressure due to competition and lower-than-expected new order wins.
