KGI Securities (Singapore) Pte. Ltd. May 8, 2025
ISOTeam Ltd: Riding Singapore’s Upgrading Wave with Strong Profits and Tech Edge
Initiation: OUTPERFORM with S\$0.100 Target Price
KGI Securities initiates coverage on ISOTeam Ltd (ISO SP/5WF.SI) with an OUTPERFORM recommendation and a 12-month target price of S\$0.100. This valuation is based on a Discounted Cash Flow (DCF) model, assuming a terminal growth rate of 2.0% and a WACC of 7.5%. The target price implies a potential upside of 31.8% from the current price of S\$0.076 as of May 8, 2025, with a total potential upside including dividends of 35.6%.
Robust 1H25 Performance Signals Strong Recovery
ISOTeam demonstrated a solid financial performance in the first half of FY25. Net profit saw a significant increase of 36.5% year-on-year (YoY), reaching S\$1.9 million. Revenue grew by 4.2% YoY to S\$65.4 million, primarily driven by stronger contributions from the Addition & Alteration (A&A) segment. Gross profit climbed by an impressive 18.4% YoY to S\$9.9 million, leading to margin expansion from 13.3% to 15.1%, sustaining healthy pre-pandemic levels. The net profit attributable to shareholders was S\$1.9 million, compared to S\$1.4 million in 1H24.
Strategic Positioning and Diversified Order Book
As of February 2025, ISOTeam boasts a robust outstanding order book of S\$188.7 million, providing clear revenue visibility through FY29. This order book is equivalent to approximately 1.4x FY24 revenue. The Group is well-positioned to capture recurring demand from public sector upgrading, sustainability retrofits, and infrastructure enhancement projects.
Technology-Driven Productivity Gains
ISOTeam is set to enhance efficiency and reduce labour reliance through technology. The company is on track to commercialise autonomous facade cleaning and painting drones by the end of 2025 via ISOTeam BuildTech. With 18 drones targeted (2 mapping, 13 painting, 3 washing) and Civil Aviation Authority of Singapore (CAAS) permits pending, this first-mover advantage is expected to cut painting time by up to 50% and require significantly fewer workers per block compared to traditional methods. This technology has been successfully trialed at Build-to-Order (BTO) sites and has garnered external interest, including from Malaysia. The drone initiative is co-funded in partnership with Nippon Paint. Drone deployment also enhances recurring revenue opportunities for building upgrades required every five to seven years.
Attractive Dividend Prospects
Management has guided for a minimum dividend payout policy of 30% of net profit after tax for FY25, an increase from 25% in FY24. This reflects confidence in sustained earnings recovery and a strong project pipeline. The FY24 final dividend of 0.08 Singapore cents per share underscores the Group’s commitment to enhancing shareholder returns in line with profit growth.
Structural Tailwinds Underpin Multi-Year Growth
ISOTeam is strategically aligned with Singapore’s sustained public sector upgrading and green initiatives. Its core Repairs & Redecoration (R&R) and Addition & Alteration (A&A) services benefit from 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 recur every five to ten years, ensuring long-term revenue visibility.
Expansion into sustainability-linked projects, such as solar installations aligned with Singapore’s 2 GWp by 2030 target, and applying heat-reflective cool coatings under HDB initiatives to mitigate the Urban Heat Island (UHI) effect via its Coating & Painting (C&P) segment, further broadens its market. The early adoption of robotics, drones, and AI-powered painting solutions enhances productivity and mitigates labour constraints in a tight market. Over 80% of ISOTeam’s revenue is derived from public sector upgrading.
Macroeconomic and Industry Outlook
Singapore’s economic outlook for 2025 is cautious, with the MTI downgrading GDP growth forecast to 0%-2%. However, domestic drivers remain strong. Construction demand is projected at S\$47bn-S\$53bn annually in 2025, with a stable pipeline of S\$39bn-S\$46bn from 2026 to 2029, anchored by large-scale projects and public housing/upgrading works.
The Hawker Centres Upgrading Programme 2.0 (HUP 2.0) allocates up to S$1bn over 20-30 years for revamping older centres, alongside five new ones. The acceleration of HDB BTO supply (50,000 flats, 12,000 with shorter waiting times from 2025-2027) will drive downstream demand. Singapore’s push to become a regional carbon services hub, supported by a S$20mn Carbon Project Development Grant, and the solar deployment target (2 GWp by 2030), create demand for eco-retrofitting and sustainable construction.
Despite challenges like labour shortages and elevated material costs, government schemes and digitalisation efforts, including initiatives under Forward Singapore and Green Plan 2030, are expected to sustain long-term demand.
Figure 1: Singapore’s real GDP growth
Source: Ministry of trade and industry (MTI) Singapore, KGI Research
(Graph showing YoY change and Full-year growth from 1Q24 to 1Q25 and 2022 to 2025F)
Figure 2: Construction demand and output
Source: Building and Construction Authority (BCA), KGI Research
(Graph showing Construction demand and output in S$’b from 2020 to 2025F and 2026F-2029F)
Company Outlook and Competitive Advantages
ISOTeam is positioned to capitalise on public sector upgrading, sustainability projects, and estate rejuvenation. The S\$188.7mn order book provides visibility into FY29. HUP 2.0 and the BTO ramp-up present a long-term flow of projects. The S\$20mn Carbon Project Development Grant enhances prospects for green retrofitting and solar solutions.
Under the Green Towns Programme, ISOTeam has applied cool coatings at Tampines HDB blocks, with an estimated S$60mn additional funding allocated to expand this across all estates by 2030. Complementary works like rooftop solar installations also align with ISOTeam’s expertise.
Key competitive advantages include:
- Strong public sector clientele (HDB, NEA, town councils, statutory boards)
- High barriers to entry (BCA certifications, licensing, reputation)
- Diversification into sustainability (solar, cool coatings, eco-friendly upgrades)
- Healthy S\$188.7mn order book
Strategic Transformation
To address rising manpower costs and labour shortages (projected 40,000-50,000 worker shortfall in 2025), ISOTeam is transforming through:
- Investing in automation, drones, and robotics.
- Deploying smart project management tools.
- Expanding into complementary, high-value, less labour-intensive services.
This pivot aims to sustain margins and position ISOTeam in a digitalised, sustainable built environment.
Figure 3: 1H25 segmental revenue
Source: Company, KGI Research
(Pie chart showing R&R 29%, A&A 46%, C&P 12%, Others 13%)
Figure 4: Revenue and NPAT trend
Source: Company, KGI Research
(Graph showing Revenue and NPAT trend from FY20 to 1H25)
Political Tailwinds: General Elections as a Catalyst
Singapore’s 2025 General Elections (GE2025) could act as a near-term catalyst, potentially accelerating municipal upgrading and infrastructure projects. Post-election cycles often see increased ward-level enhancements, including lift upgrading, hawker centre revitalisation, and community amenities, aligning well with ISOTeam’s competencies.
Investment Thesis Summary
- Resilient structural demand: Anchored by Singapore’s long-term estate rejuvenation and infrastructure upgrading policies, with over 80% revenue from government-linked entities, ensuring stable contract flows and payment security.
- Digitalisation and robotics unlocking margin expansions: Investments in drones, autonomous robots, and BIM are expected to boost efficiency, reduce labour reliance, and structurally expand operating margins. ISOTeam BuildTech could potentially offer managed robotics services externally.
- Tapping into Singapore’s green economy: Positioned to capitalise on sustainability push with expertise in solar installations, eco-retrofitting, and cool coatings, aligning with national targets and grants like the S\$20mn Carbon Project Development Grant.
- Profit improvement and strong order book: Impressive 80% YoY profitability growth in 1H25 (Note: The document states 36.5% net profit growth in 1H25. The 80% figure appears to refer to a different metric or period not explicitly detailed as such, but the overall profit improvement is highlighted), driven by improved execution and higher-margin projects. The S\$188.7mn order book provides earnings visibility and a foundation for sustained growth.
Figure 5: Order book as of 31 December 2024
Source: Company, KGI Research
(Graph showing New projects secured and Remaining order book from 1H17 to 1H25)
Valuations and Peer Comparison
The S\$0.100 target price is based on a DCF model with a cost of equity of 7.5% and a terminal growth rate of 2.0%, reflecting ISOTeam’s earnings visibility, strengthened balance sheet, and sustainability exposure. Key valuation drivers include sustained public sector demand, accelerating growth from green solutions, and productivity uplift through digitalisation.
Figure 6: Valuation
Source: KGI Research
| S$ ‘000 (YE Dec) |
2025F |
2026F |
2027F |
2028F |
2029F |
| Valuation |
| Unlevered Free Cash Flow |
Y1 |
Y2 |
Y3 |
Y4 |
Y5 |
| EBIT |
10,454 |
10,768 |
11,473 |
12,206 |
12,928 |
| Tax Rate |
17% |
17% |
17% |
17% |
17% |
| EBIT * (1-t) |
8,677 |
8,937 |
9,523 |
10,131 |
10,730 |
| Add: Depreciation & Amortisation |
2,880 |
2,341 |
2,021 |
2,310 |
1,775 |
| Less: Increase in working capital |
(859) |
(3,936) |
(2,901) |
(2,909) |
(5,057) |
| Less: Capex |
(1,758) |
(2,891) |
(2,858) |
(3,174) |
(3,392) |
| Unlevered Free Cash Flow (Free cashflow to debt and equity holders) |
8,940 |
4,451 |
5,784 |
6,359 |
4,056 |
| Terminal Value |
|
74,660 |
| Discounted Value |
8,313 |
4,139 |
5,378 |
5,913 |
73,196 |
| Total Enterprise Value |
96,939 |
| FY 2024 Debt |
37,972 |
| FY 2024 Cash |
10,911 |
| Equity Value / Market Capitalisation |
69,878 |
| Target share price |
0.100 |
| Current Share price |
0.076 |
| Upside/(Downside) % |
31.8% |
Key Risks
- Execution risk: Dependent on timely project completion and cost control; delays or mismanagement could compress margins.
- Labour availability and cost pressures: Persistent manpower shortages in the construction sector could raise project costs and squeeze margins.
- Tendering competition: Intense competition for public sector contracts may pressure tender pricing and contract win rates.
- Macroeconomic and policy risks: A weaker economy could delay public sector project rollouts and reduce private spending. Global trade tensions could impact green initiatives.
- Client concentration risk: High reliance on government/public sector contracts (80-90% of revenue); shifts in policy, project delays, or reduced funding could impact pipeline and revenue.
Financial Summary
| FYE 30 June |
2023 |
2024 |
2025F |
2026F |
2027F |
| INCOME STATEMENT (SGD’ 000) |
| Revenues |
110,400 |
130,168 |
135,963 |
146,628 |
156,023 |
| Cost of sales |
(99,338) |
(109,996) |
(114,889) |
(123,901) |
(131,529) |
| Gross profit |
11,062 |
20,172 |
21,074 |
22,727 |
24,494 |
| Other income |
4,627 |
5,732 |
5,843 |
6,301 |
6,760 |
| Marketing and distribution expenses |
(814) |
(733) |
(1,052) |
(1,014) |
(1,055) |
| General and administrative expenses |
(11,071) |
(13,169) |
(13,695) |
(15,396) |
(16,538) |
| Finance costs |
(2,297) |
(2,494) |
(2,386) |
(2,573) |
(2,532) |
| Impairment loss on receivables and contract assets |
(775) |
(1,723) |
(1,330) |
(1,434) |
(1,705) |
| Other expenses |
(244) |
(470) |
(387) |
(417) |
(482) |
| Profit before income tax |
488 |
7,315 |
8,068 |
8,195 |
8,941 |
| Income tax expense |
657 |
(711) |
(1,372) |
(1,393) |
(1,520) |
| Profit |
1,145 |
6,604 |
6,697 |
6,802 |
7,421 |
| BALANCE SHEET (SGD’ 000) |
| Cash and cash equivalents |
6,799 |
10,911 |
19,189 |
24,504 |
28,187 |
| Other current assets |
66,245 |
70,127 |
73,205 |
78,947 |
84,005 |
| Total current assets |
73,044 |
81,038 |
92,393 |
103,451 |
112,192 |
| Property, plant and equipment |
21,525 |
19,990 |
18,868 |
19,418 |
20,255 |
| Other non-current assets |
6,437 |
7,276 |
7,276 |
7,276 |
7,276 |
| Total non-current assets |
27,962 |
27,266 |
26,144 |
26,694 |
27,531 |
| Total assets |
101,006 |
108,304 |
118,537 |
130,145 |
139,723 |
| Trade and other payables |
24,337 |
25,433 |
26,897 |
28,561 |
30,551 |
| Contract liabilities |
2,265 |
1,635 |
2,389 |
2,532 |
2,698 |
| Other current liabilities |
31,780 |
25,583 |
28,583 |
26,583 |
26,583 |
| Total current liabilities |
58,382 |
52,651 |
57,869 |
57,675 |
59,832 |
| Lease liabilities |
3,305 |
2,622 |
2,622 |
2,622 |
2,622 |
| Other non-current liabilities |
13,648 |
10,156 |
11,156 |
16,156 |
16,156 |
| Total non-current liabilities |
16,953 |
12,778 |
13,778 |
18,778 |
18,778 |
| Total liabilities |
75,335 |
65,429 |
71,647 |
76,453 |
78,610 |
| Share capital |
43,743 |
54,321 |
34,322 |
34,322 |
34,322 |
| Accumulated profits/(losses) |
(10,557) |
(4,044) |
19,970 |
26,772 |
34,193 |
| Other reserves |
(7,386) |
(7,365) |
(7,365) |
(7,365) |
(7,365) |
| Equity attributable to equity holders of the company |
25,800 |
42,912 |
46,927 |
53,729 |
61,150 |
| Non-controlling interests |
(129) |
(37) |
(37) |
(37) |
(37) |
| Total equity |
25,671 |
42,875 |
46,890 |
53,692 |
61,113 |
| Total liabilities and equity |
101,006 |
108,304 |
118,537 |
130,145 |
139,723 |
| CASH FLOW STATEMENT (SGD’ 000) |
| Profit before tax |
488 |
7,315 |
8,068 |
8,195 |
8,941 |
| Adjustments |
3,865 |
2,804 |
5,265 |
4,914 |
4,553 |
| Operating cash flows before WC changes |
4,353 |
10,119 |
13,334 |
13,109 |
13,494 |
| Change in working capital |
(14,808) |
(3,954) |
(859) |
(3,936) |
(2,901) |
| Interest received |
116 |
261 |
– |
– |
– |
| Tax paid |
(3) |
(28) |
(1,372) |
(1,393) |
(1,520) |
| Cash flows from operations |
(10,342) |
6,398 |
11,103 |
7,780 |
9,073 |
| Capital expenditure |
(1,101) |
(1,170) |
(1,758) |
(2,891) |
(2,858) |
| Others |
15 |
120 |
– |
– |
– |
| Cash flows from investing |
(1,086) |
(1,050) |
(1,758) |
(2,891) |
(2,858) |
| Proceeds from issuance of ordinary shares |
– |
10,415 |
– |
– |
– |
| Interest paid |
(1,823) |
(2,194) |
(2,386) |
(2,573) |
(2,532) |
| Other financing cashflow |
(1,094) |
(7,759) |
1,318 |
3,000 |
– |
| Cash flows from financing |
(2,917) |
462 |
(1,068) |
427 |
(2,532) |
| Net increase/(decrease) in cash |
(14,345) |
5,810 |
8,278 |
5,316 |
3,682 |
| Beginning Cash |
16,111 |
1,766 |
10,911 |
19,189 |
24,504 |
| Ending cash |
1,766 |
7,576 |
19,189 |
24,504 |
28,187 |
| KEY RATIOS |
| DPS (SGD cents) |
– |
0.08 |
0.29 |
0.29 |
0.32 |
| Dividend yield (%) |
– |
1.3 |
4.0 |
4.1 |
4.4 |
| NAV per share (SGD cents) |
7.4 |
6.1 |
6.7 |
7.7 |
8.8 |
| Price/NAV (x) |
0.51 |
1.02 |
1.07 |
0.94 |
0.82 |
| Profitability |
| EBITDA Margin (%) |
6.5 |
11.3 |
9.8 |
8.9 |
8.6 |
| Net Margin (%) |
1.0 |
5.1 |
4.9 |
4.6 |
4.8 |
| ROE (%) |
4.5 |
15.4 |
14.3 |
12.7 |
12.1 |
| ROA (%) |
1.1 |
6.1 |
5.6 |
5.2 |
5.3 |
| Financial Structure |
| Interest Coverage Ratio (x) |
1.2 |
3.9 |
4.4 |
4.2 |
4.5 |
| Gearing Ratio (x) |
1.9 |
0.9 |
0.9 |
0.8 |
0.7 |
Company Background
ISOTeam Ltd is a Singapore-listed building maintenance and estate upgrading specialist with over two decades of experience in public and private sectors. Incorporated in 1998 and listed on the Catalist board in 2013, it is a key contractor for HDB and Town Councils. Core operations are anchored in Singapore, with significant revenue from public sector projects.
Business segments:
- Repair & Redecoration (R&R): Cyclical maintenance of public housing estates.
- Addition & Alteration (A&A): Structural modifications and improvements for public infrastructure (lift upgrading, neighbourhood renewal, home improvement).
- Coating & Painting (C&P): Specialist coatings, waterproofing, and painting, including eco-friendly coatings.
- Others (Including Green Solutions): M&E works, interior design/fit-out, landscaping, solar installations, energy-efficient retrofitting, aligned with Singapore’s Green Plan 2030.
ISOTeam has integrated drone technology since 2021 for inspections and is expanding to painting/washing, expecting to deploy 18 drones by end-FY26 after securing permits.
