SAC Capital analysts Daniel Ng Ming Ci and Matthias Chan have initiated “buy” on ISOTeam with a target price of 7.3 cents.
The company’s growth drivers include the improvement in Singapore’s construction demand — which is set to be between $31 billion and $38 billion from 2025 to 2028 — with the public sector contributing about 60% of total demand.
Ng and Chan note that the Housing and Development Board (HDB) upgrading cycles and neighbourhood renewal programmes provide a steady stream of income for companies like ISOTeam. “Additionally, the backlog of projects from disruptions caused by the Covid-19 pandemic and the expected increase in infrastructure upgrades ahead of the upcoming Singapore general elections present further opportunities,” they point out.
The analysts also highlight that ISOTeam is currently at the forefront of technological advancement in its sector and is expected to gain more market share and improve its margins.
A pioneer in technological advancements, ISOTeam has started deploying drones for conducting suitable types of facade work, Ng and Chan note. This approach reduces setup time and costs associated with erecting gondolas and other heavy equipment, as well as speeding up project delivery and enhancing worker safety, among others.
Building on the success of the facade inspection drones, ISOTeam is in the late stages of developing AI autonomous painting drones, which has shown promising progress, say Ng and Chan.
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They point out August 2023, ISOTeam was awarded the Enterprise Development Grant, which supports part of the qualifying expenses for the development. The following month, the company received the operator permit from the Civil Aviation Authority of Singapore, enabling the painting drone to take flight.
SAC Capital’s target price of 7.3 cents is based on ISOTeam’s forward earnings per share against the average P/E ratio of 6.3x of its peers, resulting in a 24.5% upside from current levels.
As at 12.04pm, shares in SAC Capital are trading at an unchanged 5.9 cents.
