RHB Bank Singapore analyst Alfie Yeo has raised his target price for ISOTeam to 7 cents from 4.8 cents previously, on a stronger-than-expected recovery delivered by the group.
Yeo has also kept his “buy” call on ISOTeam, stating that he remains positive on the group’s earnings outlook.
The group’s FY2024 ended Sept 31 earnings of $6 million has “markedly outperformed” his estimate of $3 million.
Revenue was in line at $130 million, led by broad-based growth from the repairs & redecoration (R&R), addition & alteration and coating & painting (C&P) segments.
Even though other segments saw a 39% y-o-y decline to $17 million, gross margins improved by 5.5 percentage points to 15.5%, above the analysts’ 14% expectations.
“This has also resulted in better-than-expected ebit of $12 million and ebit margin of 8.9%. FY2024 saw a marked reversal of project margins from FY2023. With projects tendered at better margins in FY2024, it reversed FY2023’s low-margin projects, which previously experienced cost overruns,” Yeo says.
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He raised his FY2025 - FY2026 patmi by 63% and 62% after the group’s FY2024 earnings outpaced his expectations on better margins.
The analyst also raises his revenue assumption by 10% and 9% to account for a strong order book and project traction, and bumps his operating margin projections to 9% on better operating efficiency.
As at Sept 6, the group’s orderbook stood at $202.4 million, notes Yeo. With elections slated no later than the end of 2025, the analyst expects the government to carry out more development and upgrading works ahead of the polls.
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“These bode well for ISOTeam, as it is a leading player in carrying out upgrading and development works for public projects. These include facade enhancement and home improvement programmes, repainting and upgrading works at Housing & Development Board flats, town councils, neighbourhoods, hawker centres, parks, and government buildings,” he says.
Some downside risks Yeo anticipates include a continuing rise in raw material and labour costs.
As at 3.07pm, shares in ISOTeam are trading 0.2 cents higher or 3.509% up at 5.9 cents.
