CGS International Securities
July 2, 2025

ISOTeam Ltd: Resilient Growth and Margin Recovery Amidst Construction Bottlenecks

Introduction: ISOTeam Positioned for Robust Performance in Singapore’s Construction Sector

ISOTeam Ltd stands out in the Singapore construction sector with its multi-disciplinary capabilities and a focus on recurring, resilient business segments. As the industry faces potential bottlenecks with the award of mega projects like the Marina Bay Sands extension and Changi Terminal 5, ISOTeam’s unique positioning and in-house expertise insulate it from many sector headwinds. This article provides an in-depth analysis of ISOTeam’s business model, financial performance, peer comparison, and ESG initiatives, as detailed by CGS International Securities.

ISOTeam’s Business Model: Multi-Disciplinary Strengths Limit Sub-Contractor Reliance

ISOTeam operates primarily in additions and alterations (A&A), repairs and redecoration (R&R), and coating and painting (C&P). These segments are less exposed to the engineering and heavy-tonnage crane constraints affecting the new-build sector. Key strengths include:

• In-house Capabilities: Architectural, engineering, electrical, and mechanical ventilation solutions are mostly delivered internally, reducing dependency on external service providers.
• Subsidiaries Driving Execution: The group’s main operating arms—Raymond Construction Pte Ltd, ISO-Team Corporation Pte Ltd, and ISOTEAM AET Pte Ltd—deliver a majority of its services.
• Orderbook Stability: As of July 2025, ISOTeam’s orderbook stands at approximately S\$160 million, with contracts secured until March 2029.

Recent Contract Wins and Segment Breakdown

On July 2, 2025, ISOTeam announced S\$21 million in new contracts, reflecting its diversified business model:

• A&A projects: 38%
• Renewable solutions (solar installation): 24%
• Coating and painting (C&P): 18%
• Landscaping: 6%
• Interior design: 3%
• Repairs and redecoration (R&R): 2%

Technological Edge: Painting Drones to Unlock New Opportunities

ISOTeam’s innovative approach is evident through its development of painting drones, aimed at improving efficiency, safety, and market share in C&P. A live demonstration planned for 2QCY25F was delayed due to permit approvals but is expected soon. Management anticipates that, following successful demonstration and approval, painting drones will be deployed in projects from 1HFY6/26F, supporting increased project volumes and competitiveness.

Financial Performance and Outlook

ISOTeam’s financials underscore a strong recovery and growth trajectory. The company’s recurring business model and margin expansion are central to its investment case. Below is a summary of key financial metrics:

Key performance highlights:

• Revenue growth accelerates from 10.5% in FY23 to an estimated 13.1% in FY27.
• Operating EBITDA margin improves from 2.4% to 12.2% over the forecast period.
• Net gearing falls sharply from 158% in FY23 to just 12% by FY27.
• ROE rises significantly, reflecting improved profitability and capital efficiency.

Peer Comparison: ISOTeam vs. Singapore Construction and Building Material Peers

ISOTeam’s valuation and growth prospects compare favorably among listed Singapore construction stocks. The table below summarizes key peer metrics for 2025F and 2026F:

Other notable listed peers in the construction space include Hock Lian Seng, Keong Hong Holdings, Koh Brothers Group, KSH Holdings, Lum Chang Holdings, OKP Holdings, Tiong Seng Holdings, and Wee Hur Holdings. Among building material companies, BRC Asia Ltd, Pan-United Corp Ltd, and Malayan Cement Bhd are highlighted, with P/E ratios in the 10–14x range and healthy dividend yields.

ESG Commitment: Green Innovation and Safety at the Forefront

ISOTeam demonstrates a strong commitment to environmental, social, and governance (ESG) practices:

• Green Product Offerings: Includes renewable energy installations, heat-reflective paints, and flake epoxy coatings as a sustainable alternative to traditional methods.
• Industry Recognition: Recipient of the Green and Gracious Builder Award from 2014–2020 and a member of the Singapore Green Building Council.
• Adoption of AI and Robotics: Use of inspection, washing, and painting drones reduces work-at-height risks and enhances productivity.
• Data-Driven Emissions Tracking: Comprehensive Scope 1 and 2 emission disclosures, with ongoing efforts to expand reporting to Scope 3. In FY6/24, ISO’s Scope 1 and 2 GHG and energy emission intensities rose 8.5% and 28.0% respectively, in line with revenue increases. Water usage also rose 12.8%.
• Solar Adoption: 386 rooftop PV panels at headquarters generated approximately 51,308 kWh, covering 20.8% of ISO’s electricity needs in FY6/24.

Valuation, Risks, and Catalysts

ISOTeam is rated “Add” with a target price of S\$0.10, representing a 24.7% upside from the current price of S\$0.077. The stock offers an attractive forecast FY26F dividend yield of 4.7%. Key re-rating catalysts include:

• Stronger-than-expected orderbook growth
• Commercialization of BuildTech solutions, potentially opening new asset leasing revenue streams and expanding geographic reach

Key risks:

• Delays in contract completion
• Rising costs and availability issues for foreign labor and subcontractors

Shareholder Structure and Trading Metrics

• Market capitalization: S\$54.46 million (US\$42.78 million)
• Free float: 67.6%
• Largest shareholders: ADD Investment Holdings (19.9%), Taisei Oncho Co Ltd (8.8%), Koh Thong Huat (2.6%)
• Average daily turnover: S\$0.41 million

Stock Performance and Analyst Coverage

• 1-Month absolute return: 6.9%
• 3-Month absolute return: 2.7%
• 12-Month absolute return: 26.2%
• Consensus rating: 4 Buy, 0 Hold, 0 Sell

Conclusion: ISOTeam’s Competitive Edge in Singapore Construction

ISOTeam Ltd’s ability to mitigate sector bottlenecks through in-house capabilities, continuous innovation, and a strong ESG orientation places it ahead of many peers in the Singapore construction sector. Backed by a robust orderbook, improving margins, and an attractive dividend outlook, ISOTeam offers investors a compelling blend of growth, resilience, and sustainability for the years ahead.