ISO Team

ISO Team: CIMB has an unrated note on the counter, where the house notes that ISO team is backed by favourable regulatory requirements, and the group is in a prime position to leverage on upgrading initiatives by the government and earn recurring building repainting revenue. Yet, a low profit margin and lack of longer term scalability may point towards inorganic expansion to streamline operations and expand into new markets. ISOTeam benefits from a constant stream of revenue for its repairs and redecoration business (R&R) due to regulatory requirements for building maintenance every five years. This segment contributed 54.7% of the total revenue and 59.0% of the total profit in FY13. In addition, the business will also benefit from various upgrading initiatives by the government and increasing demand for upgrading projects. This has resulted in a strong order book of $86m. ISOTeam’s status as the exclusive applicator of paint works for both SKK and Nippon Paint in the Singapore public housing sector should also ensure that a sizeable amount of R&R projects is captured. In its listing documents, ISOTeam had indicated interest in obtaining vertical and horizontal skillsets through inorganic growth. The house believe the company is exploring some potential targets and any acquisition could involve cash, share placement or an issue of shares. Such a move may help achieve greater cost efficiency and penetration into more lucrative businesses.