Evaluating ISOTeam Limited

Founded in 1998 and listed on Catalist of the Singapore Exchange Securities Trading Limited ("SGX-ST") on 12 July 2013, ISOTeam Limited ("ISOTeam") is an established player in Singapore's building maintenance and estate upgrading industry with 20 years of Repairs & Redecoration (“R&R”) and Addition & Alteration (“A&A”) experience.

ISOTeam has successfully undertaken more than 400 refurbishment and upgrading projects for well over 4,000 buildings and counting since its inception. ISOTeam also offers specialist Coating & Painting (“C&P”) services as well as complementary niche services through its specialist waterproofing, commercial interior design and home retrofitting, landscaping, access equipment leasing, green solutions, mechanical & electrical engineering works and handyman service subsidiaries.

Evaluating ISOTeam Limited Using 4 Financial Metrics

Revenue & Net Profit

ISOTeam’s revenue for FY2019 has surged by 63% year-on-year to S$136.6 million. The sharp rise in revenue can be seen across all business segment, particularly its A&A and C&P business segment. The revenue from Additional and Alteration (A&A) business segment surged by 86% year-on-year to S$67.7 million and remain the biggest revenue contributor to ISOTeam while the revenue from C&P segment - provides complete solution for painting and coating needs, risen by 45% year-on-year to S$14.4 million.

With the huge jump in revenue, ISOTeam’s FY2019 profit after tax has surged by more than 700% to S$6.3 million.

For ISOTeam’s trailing 12 month performance, its revenue has suffered a slight dip of 6.8% to S$127.2 million due to lower revenue contribution from its A&A business segment while it was offset by the revenue growth in Repairs and Redecorations (R&R) business segment.

With a lower cost to revenue, ISOTeam’s trailing 12-month profit after tax was up 6.3% to S$6.7 million.

Leverage Ratio

With the huge rise in profit after tax, ISOTeam's interest coverage ratio has jumped from 1.3 times to 7.5 times in FY2019, signifying that the company has enough profit on hand to meet its interest obligations on its debts and does not have risk of insolvency.

However, with ISOTeam taking on more debts in FY2019 to finance and expand its business operations, its net debt to equity ratio has risen by more than 100% to 0.54 times as compared to FY2018 of 0.26 times.

Ownership

The largest shareholder for ISOTeam belongs to Add Investment Holding Private Limited, which has a 34.4% stake in ISOTeam. The ultimate beneficiaries to the stakes are Mr. Ng Cheng Lian, Executive Chairman of ISOTeam, Mr. Koh Thong Huat, Executive Director and Chief Executive Officer and Mr. Foo Joon Lye, Executive Director of ISOTeam.

The second largest shareholder belongs to Taisei Oncho Company Limited, which has a 17.9% stake in ISOTeam. Taisei Oncho is a Tokyo-Listed Company, which specialise in mechanical and electrical engineering.

Dividend

After a sharp fall in dividend in FY2018 due to subdued earnings, dividend for FY2019 has surged by more than 130% to 0.42 Singapore cents due to improved earnings. However, it is still below the dividend rate of 0.68 Singapore cents in FY2017.

ISOTeam’s dividend payout ratio stands at 17.7% for FY2019 and this could indicate that the management team is keen on keeping bulk of the profit to expand and maintain the business operations.

Conclusion and Prospects

ISOTeam has achieved a strong growth in revenue for FY2019. However, due to COVID-19, the company has seen a slowdown in its financial when compared against its trailing 12 month performance. Despite that, ISOTeam has seen an improvement in terms of its interest coverage ratio. Finally, with a big vested interest from the management, ISOTeam should be able to emerge from this crisis stronger.

In its latest announcement dated 27th August 2020, ISOTeam has secured 3 contracts that are worth S$20.88 million. Executive Director and Chief Executive Officer, Mr. Anthony Koh said: “Despite all the business disruptions caused by COVID-19, we are feeling a little bit more encouraged about FY2021 with the easing of some measures that have allowed us to gradually, and safely, restart work on some of our existing projects. We are hopeful that potential projects that had been put on hold because of the pandemic will also now resume. We will be pursuing every possible lead to seek revenue growth despite the ailing economy.”