SINGAPORE (Feb 13): UOB Kay Hian is maintaining its “buy” recommendation on ISOTeam on expectations the group should see a catchup in revenue in 2H18.
This comes even as the group’s latest 2Q set of results failed to meet UOB’s expectations given its lower net profit, revenue, and margins over the quarter.
See: ISOTeam posts 39% decline in 2Q earnings to $1.9 mil
In a Tuesday report, analyst Edison Chen notes that the lower-than-expected revenue was largely due to weaker revenue recognition from the repairs & redecoration (R&R) as well as coating & painting (C&P) segments, which more than offset stronger revenue from addition & alteration (A&A) segment.
Chen nonetheless continues to like ISOTeam for its healthy order book of $87.2 million as at end-Jan, and believes its core segments will continue to be supported by government-led estate rejuvenation schemes.
“While ISOTeam has underperformed this quarter, we believe it can still catch up in 2H18,” says the analyst.
“Other than the public sector, ISOTeam’s also completed a high-profile multi-million-dollar private A&A project, involving the change of use of a restaurant on level 57 of Sands Skypark Tower 1. Along with its work at Resort World Sentosa, ISOTeam has established a track record of retrofitting high-end restaurants, opening more doors in the F&B market,” adds Chen.
“Through its participation in HDB’s floating wetland systems pilot project at Punggol Waterways, ISOTeam is optimistic of securing more large eco-projects in the future as HDB plans to introduce such systems at lakes and quarry parks.”
UOB has a target price of 45 cents, implying 10.4 times FY18 earnings.
As at 11.38am, shares in ISOTeam are trading 1 cent lower at 34 cents, or 1.4 times FY18 book.
