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Company write-up: ISOTeam reported record results [2 Oct 2015]

Company write-up: ISOTeam reported record results [2 Oct 2015]

ISOTeam reported its FY15 results on 28 Aug 2015 before market. FY15 revenue and net profit surged 17% and 34% respectively to S$81.7m and S$8.1m respectively. Please see Table 1 for a summary of its results for the past five financial years.

Table 1: ISOTeam’s past five financial year performance


Source: Company

Highlights of FY15 results

  1. Once off expenses amounting to a total of S$1.8m

In FY15, ISOTeam recorded some once off depreciation expenses amounting to S$1.5m. In addition, it also incurred professional fees due to legal costs and acquisitions of new subsidiaries amounting to S$0.3m. These S$1.8m expenses are unlikely to be incurred in FY16F.

  1. Record order book

Based on Table 2 below, ISOTeam is sitting on a record order book amounting to S$84.7m. It is currently the lowest tenderer for five projects pending tender award confirmation, worth S$14.4m.

Table 2: ISOTeam’s order book trend

Source: Company

  1. Gross margins surged to 24.7% in FY15

With reference to Table 1 above, ISOTeam’s gross margins have surged to 24.7%, a record high for the past five financial years. This was achieved due to economies of scale and completion of higher margin R&R projects. Nevertheless, management believes that such high gross margins of 24.7% are unlikely to be sustainable. Management targets to maintain gross margins >=20%.

  1. Burgeoning cash pile of S$32.3m

As on 30 Jun 2015, ISOTeam has a burgeoning cash pile of S$32.3m from its recent placements and positive cash flow from operations. Its market capitalization is around S$81.5m. Net cash is around S$28m or S$0.196 / share. In other words after stripping off its burgeoning cash, ISOTeam trades at 6.8x reported FY15 earnings.

  1. Proposed 1-1 bonus share

Management is cognizant of the illiquidity of its share price and has proposed a 1-1 bonus issue, subject to the approval from the shareholders at the EGM to be held on 27 Oct 2015. In my opinion, this bonus issue is positive as it increases the liquidity and (hopefully) will spur more trading interest in ISOTeam.

Chart analysis

With reference to Chart 1 below, ISOTeam fell to an intraday low of S$0.485 on 24 Aug, Mon but closed at $0.585 on 2 Oct 2015. Indicators such as RSI and MACD are strengthening. Against the backdrop of a low ADX, ISOTeam is likely to trade within the range 0.555 – 0.655.

Near term supports: 0.580 / 0.555 – 0.570

Near term resistances: $0.600 / 0.655

Chart 1: Indicators such as RSI and MACD are strengthening

Source: CIMB chart as of 2 Oct 2015

Conclusion

ISOTeam continues to be in a sweet spot (possible election play) as demand is likely to stay robust for its R&R and A&A activities in view of the ongoing initiatives by the Singapore government to renew and rejuvenate mature and middle aged estates. Both UOB and DMG cover ISOTeam. If ISOTeam can continue to deliver on its results, it is likely to attract more analysts to take a closer look at them.

Readers can also read my previous write-up on ISOTeam here.

Disclaimer
Please refer to the disclaimer http://ernest15percent.com/index.php/disclaimer/.

 
Ernest Lim
Ernest Lim

Ernest is an avid investor, trader cum remisier. He is a Chartered Financial Analyst® charterholder, as well as, a Chartered Accountant of Singapore. He has published articles on a wide range of topics on finance and investment on his blog http://ernest15percent.com/, ranging from market / sector outlook, technical analysis and fundamental analysis etc. His writeups and comments have been featured in various online and mainstream media such as Bloomberg, Business Times, Lianhe Zaobao, Sharesinvestment, Nextinsight etc.

He has worked at GIC Special Investment and was with Legacy Capital Group Pte Ltd, a boutique asset management and private equity firm, as an investment manager for high net worth clients, after which he went to work as an investment manager before embracing his lifelong passion as a remisier.