ISO Team

ISO Team: OSKDMG initiates coverage with Buy call and TP of $0.515 which results in a 20% potential upside. ISOTeam is a market leader in the Repairs & Redecoration (R&R) and Addition & Alteration (A&A) segments in public sector projects in Singapore. The R&R business boasts defensive, recurrent qualities while the A&A business complements the former, with both riding on government initiatives. Solid, defensive qualities. Demand for R&R services is inelastic, protected by legislation requiring external walls of buildings to be repainted at least once every five years. Business also enjoys low counterparty credit risks in public sector projects, as counterparties are government-related entities and statutory boards. With an exclusive license to apply paint works for SKK and Nippon Paint Singapore in the public sector, ISOTeam’s market position is further entrenched. Favourable macro environment; beneficiary of government initiatives and a rising demand pool. Huge supply completions of public and private housing units over 2014-2018 raise the demand pool for R&R services. ISOTeam is also slated to ride on initiatives such as the construction of new hawker centres, a SGD330m plan to expand the network of sheltered linkways and the plan to increase population. Ongoing estate renewal and rejuvenation programmes also provide steady demand for ISOTeam’s services. 3-year CAGR for revenue and core EPS at c.24% and c.42% respectively from FY13 till FY16F. We expect revenue to grow to SGD90.9m in FY2016F from SGD48.2 in FY2013, mainly led by the R&R segment (c.32% CAGR) which is also the largest contributor of revenues in FY13. The house expect ISOTeam to drive growth through raising market share in the public housing sector and increasing its exposure in the private housing market.