RHB raised its target price for building maintenance company ISOTeam to S$0.07 from S$0.048, while maintaining its “buy” call on the counter.
This comes as the research house maintains its positive earnings outlook for ISOTeam, given its strong order book performance and higher-than-expected earnings for FY2024.
RHB believes the group’s order book, which stood at S$202.4 million as at Sep 6, could be further boosted by more government projects ahead of parliamentary elections.
In a Thursday (Oct 24) report, RHB analyst Alfie Yeo said the government is expected to carry out more development and upgrading works ahead of the polls.
“The stock should benefit and ride on more government projects ahead of parliamentary elections due by the end of 2025,” he said.
“These bode well for ISOTeam, as it is a leading player in carrying out upgrading and development works for public projects.”
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Such projects could include repainting and upgrading works at Housing and Development Board flats, town councils, neighbourhoods, hawker centres, parks and government buildings.
As ISOTeam’s S$6 million earnings for FY2024 “markedly outperformed” RHB’s S$3 million estimate, the research house also raised forecasts for the group’s FY2025 and FY2026 performance.
Its higher-than-expected earnings came as revenue climbed 18 per cent year on year to S$130 million for FY2024, driven by growth from various segments.
The repairs and redecoration segment grew 42 per cent, the addition and alteration segment rose 35 per cent, and the coating and painting segment climbed 32 per cent. The others segment declined 39 per cent.
The group’s gross margin improved to 15.5 per cent, above RHB’s 14 per cent expectation, resulting in better-than-expected earnings before interest and taxes (Ebit) of S$12 million and Ebit margin of 8.9 per cent, Yeo said.
“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.”
With a stronger earnings base for FY2024, the research house has thus raised its forecast earnings for FY2025 by 63 per cent to S$8 million, and for FY2026 by 62 per cent to S$9 million.
It has also raised its forecasts for revenue assumption by 10 per cent for FY2025 and 9 per cent for FY2026 “to account for a strong order book and project traction”.
Shares of ISOTeam were trading flat at S$0.057 as at 11.15 am on Friday.
